UK EMIR notifications and exemptions

Notifications and applications under UK EMIR fall into certain categories. Read more about these notifications and applications in the UK EMIR regulations and the relevant technical standards.

On 30 October, we published an update on the process for existing intragroup exemptions from margin between UK and third country group entities.

On 30 November, we published an update on the process for existing intragroup exemptions from margin between UK and EEA group entities following the Treasury’s equivalence direction. We also published an update on the process to follow when submitting notifications relating to the clearing thresholds for FCs and NFCs.

For more information, please visit the EMIR news page.

 

Firms should consider in advance whether they will need to make notifications or apply for an exemption from certain obligations under EMIR.

Find information on:

Reporting disputes between counterparties

This section explains more about the dispute resolution requirements.

Since 15 September 2013, counterparties have been required to report any disputes between counterparties about:

  • an OTC contract
  • the valuation of an OTC derivative contract 
  • the exchange of collateral between counterparties

You must notify us when a dispute is for an amount or value higher than €15 million and outstanding for at least 15 business days. Firms may continue to use EUR as the relevant currency under UK EMIR when assessing against these thresholds.

When to report a dispute

You must make sure that you notify us, by the 15th of each month, of any outstanding disputes, or any disputes that have been closed, in the previous month.

A nil return is not required if there are no disputes to report in any particular month.

How to submit a dispute notification 

You must be registered on our Connect system to submit a dispute notification. The information required will include:

  • name of the other counterparty to the dispute, plus their Legal Entity Identifier (if available) and their country of establishment
  • details of the dispute: amount in €m and the basis on which it has been calculated (trade-by-trade, or portfolio) along with the reasons that caused the dispute
  • the date the dispute was identified and when it was resolved (if and when it is resolved)

You must submit a new notification via Connect each month a dispute is to be updated, or closed. The amount or value of outstanding disputes should be calculated and reported on a trade-by-trade basis whenever possible. However, you may use a portfolio basis if the disputed valuation or collateral, for example initial margin, is calculated at the portfolio level.

For more information on dispute notifications, please refer to the UK EMIR Regulation and the relevant technical standards.

Find out more about how to register on Connect.

Non-financial counterparties: exceeding the clearing threshold

This section explains more about calculating the clearing threshold for non-financial counterparties.

A non-financial counterparty that enters into positions in over-the-counter (OTC) derivatives contracts that exceed the clearing thresholds specified in UK EMIR, must notify us under Article 10 of UK EMIR.

Under UK EMIR REFIT, the clearing threshold notifications have been amended for non-financial counterparties. If you are a non-financial counterparty, and you choose to calculate your aggregate month-end average position in OTC derivatives in each asset class for the previous 12 months and you determine that it exceed one or more of the clearing thresholds for a particular asset class of derivatives (EUR 1bn for credit and equity, EUR 3bn for interest, FX and commodities), you only need to clear all future OTC derivative contracts (whether hedging or non-hedging) in that specific asset class(es) for as long as they are over the clearing threshold.

If you are a non-financial counterparty, even if you are not subject to the clearing obligation, you may be subject to the risk mitigation obligations, including the margin requirements.

If you are a non-financial counterparty who chooses not to calculate your position, you are required to clear all of your OTC derivatives subject to the clearing obligation (whether or not they exceed the clearing threshold). Non-financial counterparties who calculate their positions are not required to clear the OTC derivative contracts in the asset class(es) where they do not exceed the clearing threshold.

If you are a non-financial counterparty established in the UK, you must notify us if you have exceeded, the clearing threshold.  If you choose not to calculate your position, you must notify us if you have positions in OTC derivatives classes that are subject to the clearing obligation.  In both cases, you will become subject to the clearing obligation 4 months later.

Non-financial counterparties who stop exceeding the clearing threshold in a particular OTC derivatives class must notify us that they are no longer required to clear.

How to submit a notification

If you’re a non-financial counterparty, you must be enrolled (and create a profile) on our Connect system to submit any UK EMIR notifications. 

This notification must be submitted using the clearing threshold notification form found on Connect. This section of the UK EMIR notifications can be used to submit notifications relating to both the FC and NFC clearing thresholds.

For more information on the clearing regime, please visit our clearing obligation webpage and our non-financial counterparties webpage. Find out more about how to register on Connect.

Small financial counterparties: exceeding the clearing thresholds

This section explains more about calculating the clearing threshold for small financial counterparties that intend to benefit from the clearing exemption introduced under UK EMIR REFIT.

Under UK EMIR REFIT, a new category of financial counterparties has been created, commonly referred to as 'small financial counterparties'. These are financial counterparties whose derivatives activity is below each of the asset class-specific clearing thresholds currently applicable to non-financial counterparties under UK EMIR.

If you’re a small financial counterparty, you are exempt from the clearing obligation, but you remain subject to the risk mitigation obligations, including the margin requirements.

To determine whether you are small or large, you may calculate your aggregate month-end average group position in OTC derivatives in each asset class for the previous 12 months and compare them to set clearing thresholds (EUR 1bn for credit and equity, EUR 3bn for interest, FX and commodities).

  • If you are below all the relevant thresholds, and hence deemed to be small, you don’t need to clear your OTC derivatives trades.
  • If you exceed one or more of the clearing thresholds, you must clear all your OTC derivatives trades and must notify us before becoming subject to the clearing obligation 4 months later.
  • If you choose not to calculate your group position of OTC derivatives, you must also notify us before becoming subject to the clearing obligation 4 months later.

How to submit a financial counterparty clearing notification

This notification should be submitted using the clearing threshold notification form found on our Connect system. This section can be used to submit notifications relating to both the FC and NFC clearing obligations.

You must be registered on our Connect system in order to submit a clearing threshold notification. Find out more about how to register on Connect.

For more information on the clearing regime, please visit our clearing obligation webpage.

Intragroup exemption from the reporting obligation

This section explains more about the intragroup exemption from the reporting obligation.

Under UK EMIR REFIT, any intragroup transaction where at least one counterparty is a non-financial counterparty (or would be qualified as a non-financial counterparty if it were established in the UK) may be exempt from the reporting obligation providing that specific circumstances are met.

The counterparties to that transaction may be subject to the intragroup exemption from the reporting requirements, provided that:

  • both parties are included in the same consolidation on a full basis;
  • both counterparties are subject to appropriate centralised risk evaluation, measurement and control procedures; and
  • the parent undertaking is not a Financial Counterparty (FC)

To benefit from this exemption, you must notify us and demonstrate that the conditions above are satisfied. If no objection is notified by us, the exemption will be valid from the end of the 3-month period after your notification.

Once we have confirmed that you may benefit from the exemption, you should send reports with Action type “E = Error” for all open derivative contracts with the counterparties for which the reporting exemption is valid.

How to submit a reporting exemption notification

You should submit the notification using the reporting exemption notification form found on our Connect system. Find out more about how to register on Connect.

For more information on the reporting requirements, please visit our reporting webpage.

Timely Confirmation

This section explains more about the timely confirmation requirements.

Financial counterparties must have procedures in place to report, on a monthly basis, the number of unconfirmed OTC derivative transactions that have been outstanding for more than 5 business days.

You will be contacted individually to request that a report is submitted. You don’t need to submit a report unless it has been requested, but you must have procedures in place to do so when requested.

Pension scheme arrangements: exemption from the clearing obligation

This section explains more about the exemption from the clearing obligation under EMIR for certain pension scheme arrangements.

UK EMIR provides for the obligation of counterparties to clear over-the-counter (OTC) derivative contracts that have been declared subject to the clearing obligation.

Under Article 89 of UK EMIR, some pension scheme arrangements may benefit from a temporary exemption from the clearing obligation for their OTC derivative contracts that are objectively measurable as reducing investment risks directly related to their financial solvency. The temporary exemption is valid for a period of 4 years from 1 January 2021.

In accordance with Article 89(2) of UK EMIR, we have a list of pension scheme entities and arrangements which have been granted an exemption from the clearing obligation.

Under article 89 UK EMIR we have assessed requests for a temporary clearing exemption from  pension scheme arrangements   falling within Article 2(10)(c) of UK EMIR and EEA pension scheme arrangements falling within article 2(10)(c) and (d) of EU EMIR ,  that are  encountering difficulties in meeting the variation margin requirements.  We have published the list of types of entities and types of arrangement which will benefit from the temporary clearing exemption. The list does not include pension scheme arrangements falling within  article 2(10)(a) and (b)  UK EMIR, which automatically qualify for the temporary clearing exemption.

Before using an exemption, pension scheme arrangements and entities must carry out a self-assessment to ensure compliance with one of the approved types listed below, as well as the relevant criteria set out in UK EMIR.

Such assessments should be properly documented, made available to us upon request, and reviewed on an ongoing basis to make sure they are updated to reflect any changes in circumstances.

Pension scheme arrangements and entities should, in addition to notifying their counterparties of the eligibility of the transaction for a clearing exemption under UK EMIR, also notify their counterparties of any changes to their exemption status.

Intragroup exemptions from the clearing obligation

This section explains more about intragroup exemptions from the clearing obligation.

Under UK EMIR, intragroup transactions may be exempt from the clearing obligation provided certain conditions have been met:

  • if your firm is a UK counterparty who wants to be exempt from the clearing obligation in relation to OTC derivative transactions with another UK entity belonging to your group, you must apply to us
  • if your firm is a UK counterparty who wants to be exempt from the clearing obligation in relation to OTC derivative transactions with another entity belonging to your group, which is established in a third country where an equivalence determination has been granted,
  • if your firm is a UK counterparty who wants to be exempt from the clearing obligation in relation to OTC derivative transactions with another entity belonging to your group, which is established in a third country where no equivalence determination has been granted,  you must apply to us  

How to apply

To benefit from the intragroup exemption from clearing, you must be registered on our Connect system to submit the application. You will need to include:

  • the name of your intragroup counterparty, plus your Legal Entity Identifier and country of establishment
  • a summary description demonstrating that both counterparties are included in the same consolidation on a full basis, either in line with relevant accounting standards or through consolidated supervision, in line with UK EMIR article 3(3)
  • a summary description demonstrating that both counterparties are subject to appropriate centralised risk evaluation, measurement and control procedures

For more information on the clearing regime, please visit our clearing obligation webpage.

Find out more about how to register on Connect.

What happens next – the review process and timetable

We have 30 calendar days to consider applications for intragroup exemptions from the clearing obligation. Within this period, we will email you to confirm whether you can use the exemption.

Intragroup exemptions from margin requirements for non-cleared derivatives

This section explains more about intragroup exemptions from the margin requirements for derivatives transactions not cleared through a central counterparty.

Our video on intragroup exemptions from margin and the application process provides more information on what firms are expected to do to benefit from the exemption.

Under UK EMIR, intragroup transactions may be exempt from the margin requirement in respect of non-centrally cleared OTC derivative contracts (Article 11 of UK EMIR and the Technical Standards onshoring Commission Delegated regulation 2016/2551) provided certain conditions have been met:

  • if your firm is a UK counterparty who wants to be exempt from the margin obligation in relation to non-centrally cleared OTC derivative transactions with another UK counterparty belonging to your group, no formal application is required. You should therefore satisfy yourself that you meet the relevant conditions
  • if your firm is a UK counterparty who wants to be exempt from the margin obligation in relation to non-centrally cleared OTC derivative transactions with another counterparty belonging to your group established in a third country where an equivalence determination has been granted
  • if your firm is a UK counterparty who wants to be exempt from the margin obligation in relation to non-centrally cleared OTC derivative transactions with another counterparty belonging to your group established in a third country where no equivalence determination has been granted, you must apply to us.

How to apply

You must apply by completing the relevant form and sending it to us by email to [email protected] along with the relevant supporting documentation, as detailed in the Margin IGT User Guide (link below).

We have 2 types of application form. The first form is a single pair application and should be used if your firm requires an exemption with just one other group entity. The second is a multiple pairs application form, which can be used if your firm requires an exemption with multiple entities within your group and the details required in Section 1 (Risk Management Procedures) are the same for all the entities within your application.

Please note, a maximum of 20 intragroup pairs can be submitted within the multiple pairs application form.

What happens next – the review process and timetable

We have 3 months to consider any of the above margining exemption applications. Within this period, we will email you to confirm whether you can use the exemption.

Temporary Intragroup Exemption Regime (TIGER) and Equivalence

The UK EMIR framework creates a temporary regime for intragroup exemptions from the clearing and margin requirements that were obtained before the end of the transition period in respect of OTC derivative contracts between UK and third country group entities (where no equivalence determination has been made in respect of the third country).

Under TIGER, these exemptions will continue to apply until 3 years after the end of the transition period (unless an equivalence determination is made in respect of the relevant third country before then).

Any new application to benefit from an intragroup exemption from the clearing and margin requirements for non-cleared OTC derivatives between UK and third-country group entities (where no equivalence determination has been made in respect of the third country) which are obtained after the end of the transition period will also be subject to TIGER. They will apply from the day they are granted until 3 years after the end of the transition period (unless an equivalence determination is made in respect of the relevant third country before then).

The duration of TIGER may be extended by the Treasury in certain circumstances.

In November 2020, the Treasury made an equivalence decision (the European Market Infrastructure Regulation (Article 13) Equivalence Directions 2020) which grants equivalence to the EEA States under article 13 UK EMIR in relation to intragroup exemptions from the clearing obligation and margin requirements for uncleared derivative transactions. 

This means that temporary exemptions we have already granted under TIGER for intragroup trade between UK and EEA group entities will expire on 1 March 2021 (for clearing exemption) and 1 May 2021 (for margin exemptions). To benefit from a new intragroup exemption under the equivalence direction, UK firms must notify us. Find out more information.

Page updates

30/10/2020: Information added Link in highlight box to EMIR news page.