EMIR

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 (hereinafter "EMIR") has introduced new requirements aimed at improving transparency and reducing credit risk associated with derivatives markets. EMIR lays down the following: clearing and risk management requirements for over-the-counter (OTC) derivative contracts; reporting requirements for derivative contracts; and uniform requirements for the performance of activities of central counterparties (CCPs) and trade repositories. EMIR applies to CCPs and their clearing members, to financial counterparties (FCs) and non-financial counterparties (NFCs), trading venues, and trade repositories.

EMIR imposes requirements on all types and sizes of entities entering into derivative contracts, including entities not active in the area of financial services. The Regulation indirectly applies also to entities established outside the European Union which trade with counterparties established in the Union.

All obligations imposed by this Regulation, including these obligations as further elaborated in delegated and implementing standards, are considered requirements applicable from the date of entry into force of respective legal acts.

Obligations and requirements introduced by EMIR

  • Clearing obligation: counterparties to OTC derivative contracts must have their OTC derivative transactions cleared through a CCP if those transactions concern a class of OTC subject to the clearing obligation and their value exceeds any of the set clearing thresholds.
  • Risk mitigation techniques for OTC derivative transactions not centrally cleared by a CCP: counterparties must have in place appropriate procedures and mechanisms for the measurement, monitoring and mitigation of operational risk and counterparty credit risk.
  • Reporting obligation: an obligation to report executed derivative transactions to trade repositories.
  • Requirements for trade repositories
  • Organisational requirements, prudential requirements for central counterparties, conduct of business rules.

Reporting requirements and exemptions

  • FCs and NFCs are subject to a reporting obligation towards the European Securities and Markets Authority (ESMA) and the relevant competent authority (Národná banka Slovenska) if they do not calculate OTC derivative positions or they exceed clearing thresholds.
  • Exemptions for intragroup transactions from the clearing obligation and the requirement to exchange collateral may be applied on the basis of either a notification of the intention to apply the exemption or an application for the exemption, depending on the transaction type and where the counterparty is established.

Pension scheme arrangements

To be exempted from the clearing obligation referred to in Article 89(1) of EMIR, pension scheme arrangements under Article 2(10)(c) and (d) of EMIR must apply to the relevant competent authority for the exemption. The competent authority will issue a decision on the exemption after assessing all the available evidence.

Changes introduced by EMIR Refit

The changes to EMIR cover the following areas:

  • Definition of financial counterparties
  • Clearing obligation
  • Reporting obligation
  • Risk mitigation techniques for OTC derivative contracts not cleared by a CCP
  • Registration and supervision of trade repositories
  • Requirements for trade repositories

Summary of changes introduced by EMIR Refit

Financial counterparties

In accordance with Regulation (EU) No 2019/834 amending EMIR (EMIR Refit) (new Article 4a(1)(a)), an FC taking positions in OTC derivative contracts may, every 12 months, calculate its aggregate month-end average position for the previous 12 months.

Where an FC does not calculate its positions, or where the result of that calculation exceeds any of the clearing thresholds, the FC must immediately notify ESMA and the relevant competent authority (Národná banka Slovenska) thereof, and, where relevant, indicate the period used for the calculation.

Guidance on notifications from financial counterparties of their exceeding or no longer exceeding the clearing threshold

In accordance with Article 12(4) of Commission Delegated Regulation (EU) No 149/2013, financial counterparties must report on a monthly basis the number of unconfirmed OTC derivative transactions not cleared by a CCP.

Guidance on reporting the number of unconfirmed OTC derivative transactions executed by financial counterparties

Annex: Template for reporting the number of unconfirmed OTC derivative transactions executed by financial counterparties (in Slovak only)

Non-financial counterparties

In accordance with Regulation (EU) No 2019/834 amending EMIR (EMIR Refit) (amended Article 10(1)(a)), an NFC taking positions in OTC derivative contracts may, every 12 months, calculate its aggregate month-end average position for the previous 12 months.

Where an NFC does not calculate its positions, or where the result of that calculation in respect of one or more classes of OTC derivatives exceeds the clearing threshold, the NFC must immediately notify ESMA and the relevant competent authority (Národná banka Slovenska) thereof, and, where relevant, indicate the period used for the calculation.

Guidance on notifications from non-financial counterparties of their exceeding or no longer exceeding the clearing threshold

Intragroup transactions: exemptions from the clearing obligation

In accordance with Article 4(2) of EMIR, counterparties belonging to the same group must notify their respective competent authorities in writing that they intend to apply the exemption for the OTC derivative contracts concluded between each other.

Guidance on applying clearing obligation exemptions for intragroup transactions pursuant to Article 4 of EMIR

Annex 1: OTC derivative contracts pertaining to a class of OTC derivatives that has been declared subject to the clearing obligation (to be updated regularly)

Annex 2: Template for the notification under Article 4(2)(a) of EMIR or for the application under Article 4(2)(b) of EMIR concerning an exemption from the clearing obligation under Article 4(1) of EMIR for intragroup transactions

Annex 3: List of countries for which the Commission has adopted an implementing act as referred to in Article 13(2) of EMIR (to be updated regularly)

Annex 4: Instructions for completing selected fields in the notification or application template

Intragroup transactions: exemptions from margin requirements

To be exempted from margin requirements, counterparties belonging to the same group must submit an application for exemption in accordance with Article 11 of EMIR to their relevant competent authority, together with proof of their compliance with the requirements for such exemption.

Guidance on applying exchange of collateral requirement exemptions for intragroup transactions pursuant to Article 11 of EMIR

Annex 1: List of countries laid down in implementing acts adopted by the Commission in accordance with Article 13(2) of EMIR (to be updated regularly)

Annex 2: Articles 18, 19, and 20 of Commission Delegated Regulation (EU) No 149/2013 of 19 December 2012

Annex 3: Template for the notification under Article 11(7) and (9) of EMIR or for the application under Article 11(6), (8) and (10) of EMIR concerning an exemption from the exchange of collateral requirement under Article 11(3) of EMIR for intragroup transactions

Annex 4: List of markets considered equivalent to an EU regulated market for the purposes of OTC derivatives definition (to be updated regularly)

Annex 5: Instructions for completing selected fields in the notification or application template

Intragroup transactions: exemptions from the reporting obligation

In accordance with Article 1(7) of EMIR Refit amending Article 9(1) of EMIR, the reporting obligation does not apply to derivative contracts within the same group where at least one of the counterparties is an NFC or would be qualified as an NFC if it were established in the Union, provided that:
(a) both counterparties are included in the same consolidation on a full basis;
(b) both counterparties are subject to appropriate centralised risk evaluation, measurement and control procedures; and
(c) the parent undertaking is not a financial counterparty.

Counterparties must notify their competent authorities (Národná banka Slovenska) of their intention to apply the exemption.

Guidance on applying reporting obligation exemptions for intragroup derivative transactions pursuant to Article 1(7) of EMIR Refit amending Article 9(1) of EMIR

Annex 1: Template for the notification of the intention to apply the reporting obligation exemption for intragroup transactions pursuant to Article 1(7) of EMIR Refit amending Article 9(1) of EMIR

Annex 2: Instructions for completing selected fields in the notification template

ESMA Questions and Answers concerning the implementation of 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) are available on the ESMA website.