EMIR Progress

David Lawton, FSA Director of Markets, took the opportunity to remind firms about the progress of the European Market Infrastructure Regulation (EMIR).

Since the publication of ESMA’s Consultation Paper on draft technical standards (see Regulatory Roundup 42), ESMA has issued its final report.

As a reminder, EMIR will impose: a reporting obligation for all counterparties to derivative contracts to report post trade contracts to a Trade Repository (TR) (it is reported that the LSE’s UnaVista intends to become an authorised Trade Repository); a clearing obligation via Central Counterparties (CCP) in respect of OTC derivatives; and risk mitigation techniques for contracts not cleared via a CCP. Further details can be found in the EMIR Regulation (see link).

There are exemptions for certain intragroup transactions and for non-financial counterparties below the clearing threshold and reference can be made to the Regulation, using the link provided, for further details.

Mr Lawton provided his ‘best guess’ on the timetable:

  • Entry into force of level 2 measures: late Q1 2013
  • First clearing obligations: Q4 2013
  • Reporting: July 2013 for credit and interest rate derivatives, January 2014 for all other classes
  • Collateralisation of non-cleared trades: consultation expected Q1 2013

In respect of ‘reporting’ note that (a) whilst there has been a concentration on OTC derivatives, this applies to all derivatives and not those just traded OTC and (b) the reporting obligation also applies to derivative contracts outstanding on 16 August 2012 and still outstanding on the reporting start date and should be made within 90 days of that start date.

The FSA suggests that firms – if they have not done so already – should establish clearing arrangements such as by entering into an appropriate clearing agreement with a broker. As for reporting, the FSA anticipates that smaller firms may choose to delegate reporting to larger firms that they trade with, assuming that the counterparties are willing to accept that responsibility.

Those firms that may be impacted can find minimum details of the data to be reported to a TR in Annex VI.I of the ESMA Final Report.