On 17 September 2019, the Luxembourg Bankers’ Association in collaboration with Allen & Overy organised, in the premises of BGL BNP Paribas, an industry conference on the topic of the European Market Infrastructure Regulation (EMIR) as well as the legal framework applicable to Over-the-Counter (OTC) derivatives trades.
As a reminder, EMIR has seen the light of the day as a direct consequence of the 2008 financial crisis and remains, as of today, the most visible and tangible regulatory framework coming out of the turmoil that took over the financial markets in the late 2000’s. With OTC derivatives being considered by politicians as one of the main roots that facilitated the financial crisis, the G20 in 2009 requested that this particular segment of the market needed better and more adequate regulation. As such, EMIR, joined at a later by a number of complementary pieces of financial regulation (notably the revised MiFID framework), has laid the foundation for modern post-crisis financial regulation.
The gradual entry into force of EMIR as of 2012 has deeply and significantly shaped the way European and international financial markets function today. Clearing processes and reporting standardised OTC derivatives trades have become the norm for financial counterparties active in this part of the market.
Nevertheless, an important number of questions and issues remain to be solved, given the fragmentation of the markets and the difficult implementation of uniform solutions to complex situations.
The efforts led by the European legislator to respond to a number of critics highlighted by practitioners in regard of EMIR have hence resulted in a targeted reform of the EMIR framework, which leaves the markets now with a revised set of EMIR regulations; EMIR Refit continues to address the regulation of OTC derivatives and the way clearing, settlement and reporting works for different types of counterparties identified in the regulation, while the framework of rules known as EMIR 2.2 introduces a more specific set of rules of governance, supervision and regulation of central counterparties.
In light of these recent changes to the way EMIR works and considering the persistent issues in the market regarding the practical implications of the EMIR framework, the conference organised by the ABBL together with Allen & Overy put a particular focus on market education in regard of reminding the main and essential notions and concepts introduced by the original EMIR and providing a comprehensive overview of the modifications and main obligations arising out of this set of revised regulations.
Emma Dwyer, partner at Allen & Overy London specialised in the field of derivatives regulation and at the forefront of analysing the complexities and changes that derivatives regulations require, provided participants with a master lesson in terms of EMIR, highlighting the various obligations, starting with the adapted client classification under EMIR Refit, and subsequently focusing, inter alia, on the clearing obligation (in terms of the new clearing thresholds) as well as the changing reporting requirements for the derivatives trades.
Following this keynote speech, an exquisite panel, under the moderation of Allen & Overy Luxembourg partner Paul Peporté, continued the discussion focusing now on the practical implications that EMIR had on their particular business as well as the challenges imposed by the regulation of this sector of financial markets on legislative and regulatory authorities.
Vincent Derbali, policy officer at the European Commission and expert in EMIR, Michaela Seifert, CSSF expert for EMIR from a banking perspective, Ingrid Garin, Managing Director at Bank of New York Mellon, and Haroun Boucheta, Head of Public Affairs at BNP Paribas Securities Services further discussed the merits of the revised EMIR framework and did not fail to mention that the revision was elementary in light of the issues and problems arising in the implementation of the original EMIR.
The European Commission and CSSF representatives provided further useful input in terms of upcoming reports and Level 2 and 3 texts, as well as the regulator’s interpretation and application of the text in their supervisory mission (notably in terms of risk-based approach and on-site inspection). The conference concluded after a networking cocktail spiced up by invigorating discussions about EMIR and the future of derivatives trading.
By Gilles Walers, Legal Adviser, ABBL