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European market infrastructure (EMIR)

 

On 29 March 2012, the European Parliament adopted the final text of the Regulation for the European Market Infrastructure Regulation (EMIR), with the aim to introduce greater transparency and better risk management to the ‘over the counter’ (OTC) Derivatives market.

Concretely EMIR, which is expected to be applicable as of 1 January 2013, will introduce:

i) a clearing obligation for eligible OTC derivatives with measures to reduce counterparty credit risk and operational risk for bilaterally cleared OTC derivatives,

ii) common rules for central counterparties (CCPs),

iii) a reporting obligation for OTC derivatives,

iv) rules on the establishment of interoperability between CCPs,

v) the concept of data trade repositories.

EMIR has to be seen in a broader global context. In Pitsburgh in 2009, the G20 leaders committed to the implementation of strong measures to “improve transparency and regulatory oversight of [OTC] derivatives in an internationally consistent and non-discriminatory way.” In the US, the Dodd-Frank Act defines the OTC Derivatives market regulation.

The situation is slightly more complex in Europe. Besides EMIR, which focuses on the post-trade handling of OTC contracts, other aspects of OTC regulation also need to be simultaneously addressed, notably for the trading/negotiation side by MiFID 2 and the Market Abuse Directive.

Other more remote texts may also intervene in the debate, among them the Securities Law Directive, the Central Securities Depositaries Regulation, and of course the EU version of the Basel III Accord (CRD IV).

For the ABBL, it is of paramount importance to keep the broad picture in mind with all these changes in order to avoid certain redundant or conflicting requirements.

 

Articles

  • 30/08/2014

    I could have chosen various angles for writing a regulatory news update after the summer break. Perhaps the timing is not so bad to present a paper that was released at the same time as the EU Commission’s draft regulation on the implementation of the Liikanen Review a few months ago. The regulation in question aims to deal with shadow banking by registering trades in Securities Financing Transactions.

  • 30/07/2014

    Hopefully by the end of the year, or later as most deadline have been passed by, like European tourists going in vacations crossing the different borders of EU Member States.  In fact, in May and July 2014, 3 major consultation documents have been issued by ESMA (of which one via the ESAs, the joint platform of the EU financial authorities). Just like the meanwhile very old Madness hit song  “One step beyond” …

  • 10/03/2014

    On the edge of the reporting obligation under EMIR ESMA found itself in a difficult position as to the status of FX Forward contracts: are they derivatives or not? The issue at stake is: shall these instruments be reported to a Trade Repository or not and, as a side issue, what is the definition of their status under MIFID rules?

  • 12/02/2014

    The CSSF wishes to remind all concerned counterparties that as from 12 February 2014, they need to report details of any derivative contract (OTC or exchange traded) they have concluded, or which they have modified or terminated, to a registered or recognised Trade Repository (TR).

  • 02/12/2013

    As the saying goes we are currently, from a regulatory point of view at least, living in interesting times, and today perhaps even more so than just few months ago. Financial institutions have been submerged by a tsunami of regulations, even though many of them have not yet reached the implementation phase. In fact, besides CRD IV, AIFMD, and in some interesting ways, EMIR, the rest is still in development phase.

  • 13/11/2013

    The ESMA announced that the first trade repositories have been authorised under the European Market and Infrastructure Regulation (EMIR) on 7 November. As a result, any derivative counterparty in the European Economic Area (EEA) that is subject to EMIR, including corporates and other unregulated market participants, will be required to provide specific reports for transactions in all derivative asset classes (i.e. interest rates, foreign exchange, equity, credit and commodities) and for both over-the-counter (OTC) and exchange-traded derivatives.

  • 23/10/2013

    ESMA published on 23 October 2013 an update of its Question and Answers (Q&A) on the European Markets Infrastructure Regulation (EMIR). This Q&A clarifies the use of Legal Entity Identifiers (LEI) for the purpose of trade reporting to trade repositories.

  • 12/09/2013

    The ABBL responded to this consultation proposing that only the most actively traded instruments if fully standardised may be eligible. Foreign Exchange, just like in the US, and as currently proposed in the CPSS-IOSCO margin for non-centrally cleared OTC derivatives.

  • 30/08/2013

    After a hot summer, weather-wise, it is likely that the last straight line to the end of the year will be hot as well, probably not in terms of temperatures, but from a regulatory perspective. Besides the imposing amount of work that still needs to be finalised in prudential regulatory matters, much work also lies ahead regarding securities and financial markets.

  • 24/06/2013

    The CSSF wishes to remind all concerned entities of the obligations applicable to them under Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (“EMIR”).

   
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