In the field of OTC derivatives, the European Market Infrastructure Regulation is perhaps the most important piece of European legislation to emerge from the financial crisis of 2008, affecting both buy- and sell-side market participants as well as corporate and other end-users of derivatives.
With a first formal legislative proposal for a regulation on OTC derivatives, central counterparties and trade repositories published in September 2010 by the European Commission, the EU parliament and the Council engaged in lengthy discussions lead to a final agreement on this piece of legislation in the summer of 2012. EMIR came into force in August 2012. Key clearing obligations are being phased in for different counterparty types from 2016 onwards. Margining requirements for uncleared derivatives are being phased from 2017 onwards. The EC carried out a review of EMIR between 2015 and 2016, which resulted in the publication of a legislative proposal for a regulation amending EMIR on 4 May 2017 and a proposal on the robust supervision of central counterparties on 13 June 2017.
Key aspects of EMIR include
- a mandatory clearing obligation for certain asset classes of OTC derivative contracts entered into between certain counterparties
- risk-mitigation requirements for OTC derivatives that are not centrally cleared (including margin requirements)
- trade reporting obligations for all derivatives (both OTC and exchange-traded derivatives)
- a framework for the regulation of central counterparties and trade repositories
As mentioned above, the clearing obligation is one of the key elements of EMIR and the following table summarises the clearing obligation start dates and frontloading periods phased in for different counterparty categories:
|G4 rates clearing obligation starts||G4 rates frontloading starts||CDS clearing obligation starts||CDS frontloading starts||EEA clearing obligation starts||EEA frontloading starts|
|Category 1 firms||21 June 2016||21 February 2016||9 February 2017||9 October 2016||9 February 2017||9 October 2016|
|Category 2 firms||21 December 2016||21 May 2016||9 August 2017||9 October 2016||9 August 2017||9 October 2016|
|Category 3 firms||21 June 2019||21 June 2019||21 June 2019|
|Category 4 firms||21 December 2018||9 May 2019||9 August 2019|
The ABBL is strongly involved in the EMIR review process, in light of its preliminary involvement in the drafting of the initial EMIR along with the amendment process.
As mentioned above, the European Commission proposed in May 2017 a first set of amendments to EMIR (the EMIR refit). According to the EU Commission, these amendments aim at introducing simpler and more proportionate rules on OTC derivatives, thereby reducing costs and burdens for market participants, without compromising financial stability. In June 2017, the EU Commission proposed a second set of amendments to EMIR to enhance the supervision of third country CCPs and make the supervision of EU CCPs more coherent. The June 2017 proposal provides for greater regulatory powers for the ECB in the process of authorisation, recognition and oversight of CCSps based both within and outside the EU. To fulfil these new responsibilities, the ECB adopted a recommendation in June 2017 to amend article 22 of its Statute. In October 2017, the EU Commission issued a favourable opinion on the ECB recommendation. In September 2017, the Commission adopted a package of proposals to strengthen the European System of Financial Supervision. The package also includes an amendment to the proposal adopted by the Commission in June 2017.
The ABBL actively monitors the legislative procedure around these texts and currently considers the following timeline for the work in the European Parliament for the coming months:
- 26 January 2018: Draft report on EMIR Refit:
- 31 January 2018: Draft report on CCP supervision
- End of February 2018: Consideration of the relevant draft reports
- End of February 2018: Deadline for amendments to the draft reports
- 19-20 March 2018: Consideration of the amendments to the draft reports
- 23-24 April 2018: Vote in ECON