EMIR

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.

2019
2020
2021
2022
2023
2024
4
1
Implementation / enforcement 09/2009 - 07/2010
2
Discussion / consultation 07/2010 - 08/2012
3
Implementation / enforcement 08/2012 - 09/2013
4
In effect 09/2013 -

STATUS
The European Market Infrastructure Regulation (EMIR) requirements have been in effect since 2013 and are subject to a phased-in approach. The remaining requirements — the clearing obligation and margin requirements for non-centrally cleared derivative transactions — have been applicable since 2016.

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.

Further information:
European Commission: EMIR

author
Rob Voster Senior Manager
Categories: Financial Market Organisation