Personal scope
The following entities are covered by the different provisions of European Market Infrastructures Regulation (EMIR):
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Financial counterparties and non-financial counterparties above the clearing threshold:
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- Clearing obligation
- Risk mitigation techniques
- Reporting obligation
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Non-financial counterparties below the clearing threshold: |
- Reporting obligation
- Some risk mitigation techniques (timely confirmation, portfolio reconciliation and compression, dispute resolution)
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CCPs: |
- CCP requirements
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Trade repositories: |
- TR requirements |
Substantive scope
The following instruments are covered under the different provisions of EMIR:
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Clearing obligation and risk mitigation techniques
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All derivatives: |
Reporting obligation
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CCP requirements
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Comments
It follows from the above breakdown that for instance the reporting obligation applies equally to financial counterparties and all non-financial counterparties - irrespective of whether the non-financials are above or below the clearing threshold.
As regards reporting one more circumstance is also worth noting, namely that this requirement applies to all derivatives, and not concluded OTC only.
Regulatory technical standards (RTS) on the minimum details of the data to be reported to trade repositories stipulate, however, that non-financial counterparties below the clearing threshold are not subject to margin requirements, and are not required to report collateral, mark to market, or mark to model valuations of the contracts.
It is also noteworthy that pursuant to the RTS for contracts cleared by a CCP, mark to market valuations are only to be provided by the CCP.
General remark is, as the FSB report on OTC Derivatives Market Reforms - Eleventh Progress Report on Implementation of August 2016 observed, the EMIR scope is much broader than the scope of OTC derivatives regulations in the majority of non-EU jurisdictions.
Non-financial counterparties are not subject to mandatory clearing in other major third countries with important derivatives markets (e.g. US, Japan, Canada, Australia, HK, Republic of Korea, Singapore) as they consider that these counterparties do not bring systemic risk to the financial system.
This situation risks creating an un-level playing field at the international level and puts EU non-financial counterparties in a less favourable position than their competitors established in third countries, especially for groups with ties in third countries and when the same type of derivatives are traded within and outside the EU (Commission Staff Working Document Impact Assessment, Accompanying the document Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 648/2012 as regards the clearing obligation, the suspension of the clearing obligation, the reporting requirements, the risk-mitigation techniques for OTC derivatives contracts not cleared by a central counterparty, the registration and supervision of trade repositories and the requirements for trade repositories {COM(2017) 208 final} {SWD(2017) 149 final}, 4.5.2017 SWD(2017) 148 final, p. 29).
Spot energy transactions
When it comes to most common and practical examples, the question whether for instance energy spot transactions are within the scope of EMIR has been clearly resolved by the European Commission’s FAQ on EMIR No. II.1, which reads:
‘Energy spot transactions are not financial instruments under MiFID and are therefore not within the scope of EMIR. Energy derivatives are, however, covered by EMIR as defined in REMIT’.
Some remarks on the scope of REMIT are available here.
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Documentation |
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