What is the purpose of EMIR?
EMIR mandates reporting of all derivatives to Trade Repositories (TRs). TRs centrally collect and maintain the records of all derivative contracts. They play a central role in enhancing the transparency of derivative markets and reducing risks to financial stability.
What is the clearing obligation under EMIR?
EMIR includes the obligation to centrally clear certain classes of over-the-counter (OTC) derivative contracts through Central Counterparty Clearing (CCPs). For non-centrally cleared OTC derivative contracts, EMIR establishes risk mitigation techniques.
What is an EMIR classification?
The ISDA EMIR Classification Letter is a form of letter that market participants may find useful as part of the management of their regulatory obligations under EMIR, the European Union regulation that deals mainly with: clearing over-the-counter derivatives; mitigation of risks associated with uncleared OTC …
How is EMIR classification determined?
EMIR identifies two sub-categories of Non-Financial Counterparties (NFC). All Non-Financial Counterparties must calculate their group’s aggregate month-end average position in derivative contracts for the previous 12 months, excluding derivative trades executed for hedging purpose (the “position”).
What are EMIR reporting obligations?
EMIR establishes the reporting obligation on both counterparties that should report the details of the derivative trades to one of the trade repositories (TRs), i.e. the buying party should report and the selling party should report. This obligation covers both financial and non-financial counterparties.
Does EMIR apply to individuals?
EMIR requirements apply both to financial and non-financial counterparties. Requirements of EMIR do not apply to private individuals and certain government institutions.
What is EMIR portfolio reconciliation?
Portfolio reconciliation and dispute resolution The objective of portfolio reconciliation is to enable two counterparties (Financial and Non-Financial) to compare key trades terms for a given portfolio of derivative contracts and identify any discrepancies at an early stage.
What is portfolio compression EMIR?
Portfolio compression is recognised under EMIR as a risk mitigation technique for the purposes of reducing counterparty credit risk. Benefits from performing portfolio compression exercises include a reduction in the number of trades and a reduction in exposure to specific counterparties.
Is EMIR a regulator?
The European Market Infrastructure Regulation (EMIR) is an EU regulation for the regulation of over-the-counter (OTC) derivatives, central counterparties and trade repositories. It established common rules for central counterparties and trade repositories.
Who is covered by EMIR?
EMIR covers entities that qualify for derivative contracts in regards to interest rate, equity, foreign exchange, or credit and commodity derivatives. It also outlines three sets of obligations, including the clearing, reporting and risk mitigation of applicable products.
Who has to report EMIR?
Does EMIR apply to non-EU entities?
Although EMIR directly applies to entities established in the EU only, it will apply indirectly to any non-EU entities entering into OTC derivatives with EU counterparties; EU entities have to comply with the EMIR obligations on any OTC derivatives transaction they enter into, whether the counterparty is an EU or non- …
What is the European market infrastructure regulation (Emir)?
The European Market Infrastructure Regulation (EMIR) sets out requirements for the clearing of OTC derivatives through authorised central counterparties (CCPs), collateral exchange and risk mitigation requirements for non-cleared derivatives, as well as post-trade reporting requirements for all OTC derivatives.
What are the different types of counterparties under Emir?
EMIR divides counterparties to OTC derivative contracts into ” Financial Counterparties ” (or FCs) and ” Non-Financial Counterparties ” (or NFCs ). ” Financial counterparties ” are, essentially, Union-regulated entities (or entities managed by Union-regulated managers) in the financial services, funds and insurance sectors.
Do I need to comply with both the UK rules and Emir?
This means that compliance with only one set of rules is required (i.e. the EMIR risk mitigation rules or the equivalent Third Country’s risk mitigation rules). If no equivalence decision is made in respect of the UK, then parties to transactions may be required to comply with both the relevant UK rules and EMIR.
What are the requirements for clearing OTC derivatives under Emir?
Article 4 of EMIR requires that counterparties clear all OTC derivatives falling within a class designated for clearing under EMIR (the Clearing Obligation) which is entered into between: an FC+ or NFC+ and an entity established in a Third Country that would be an FC+ or NFC+ if it were established in the Union; and