EMIR imposes requirements to improve transparency and reduce systematic risks in derivative transactions. EMIR requires entities that enter into derivative contracts related to interest rate, foreign exchange, and equity and credit to (1) report trades to a trade repository, (2) clear certain OTC derivatives with a Central Clearing Party (CCP) and (3) implement risk management standards for non-centrally cleared derivative transactions, such as portfolio reconciliation, dispute resolution and portfolio compression. The trade reporting requirements and most of the risk management requirements have already come into effect. However, the central clearing obligation requirements and the margin requirements for non-centrally cleared derivative transactions have been subject to a phased-in approach since 2016 for the largest institutions till 2020 for smaller entities. Pension funds have been granted an exemption from the EMIR clearing obligation till August 2018.
1Implementation / enforcement 09/2009 - 07/2010
2Discussion / consultation 07/2010 - 08/2012
3Implementation / enforcement 08/2012 - 09/2013
4In effect 09/2013 -
Entities in scope of EMIR have already spent considerable effort on meeting the risk mitigation and reporting requirements. However, further effort will have to be made on meeting the central clearing requirements and the margin requirements for non-centrally cleared derivative contracts. With regard to the central clearing obligation, clearing members need to be selected (based on CCP access, services provided and cost charged), paperwork need to be completed with clearing members, instruments in scope for frontloading need to be identified and infrastructure changes need to be made. With regard to the margin requirements for non-centrally cleared contracts, a calculation methodology and process need to be developed and agreed upon and documented with counterparties, margin need to be segregated from other assets with non-cash margin held at a third party and collateral risk management procedures need to be documented and embedded in the organisation.
European Commission: EMIR