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.EMIR timeline ABBL