What is EMIR?

EMIR is the regulation on OTC derivatives transactions, central counterparties and trade repositories (Regulation 648/2012) also known as the European Market Infrastructure Regulation which came into force on 16 August 2012. EMIR reflects G20 commitments to ensure appropriate management of counterparty credit risk in OTC derivatives trades and to improve transparency in derivatives markets.

What is the reporting requirement?

Article 9 of EMIR requires counterparties and central counterparties (CCPs) to a derivative contract to ensure that the details of any derivative contract they have concluded and any modification to or termination thereof are reported to a trade repository registered or recognised for the purposes of EMIR.

Who does the reporting requirement apply to?

The scope of the reporting requirement is broad. The reporting requirement applies to all counterparties and CCPs to derivatives contracts regardless of whether a counterparty is classified in EMIR as a financial counterparty or as a non-financial counterparty and whether the derivative is OTC or exchange traded. The reporting requirement also applies to intra-group trades.

When does the reporting requirement come into effect?

The reporting requirement comes into effect on 12 February 2014.

What are the reporting deadlines?

Is it possible to delegate reporting?

Yes. A counterparty or a CCP which is subject to the reporting obligation may delegate the reporting of the details of the derivative contract, for example, to the other contractual counterparty or to an appropriate third party (e.g. a CCP, exchange or suitable third party service provider). However, each counterparty remains legally responsible for its compliance with the EMIR reporting obligations. If delegating reporting, it is prudent to do so by written contract and to conduct checks. Counterparties and CCPs of derivatives contracts are obliged to ensure that there is no duplication in reporting.

What is a legal entity identifier (LEI)?

Each counterparty to a derivatives trade will be required to have a legal entity identifier code (LEI) to comply with the reporting requirements. A LEI is a global reference code which uniquely identifies each legal entity that engages in a financial transaction. The global system of LEIs is still being developed and in the interim a pre-LEI code may be obtained from the Irish Stock Exchange at www.isedirect.ie. The initial cost of a pre-LEI code from the Irish Stock Exchange is €150 plus VAT and there is an annual renewal fee of €100 plus VAT.

Is there an obligation to keep records of derivative contracts?

Yes. Counterparties are obliged to keep a record of any derivative contract they have concluded and any modification thereof for at least five years following the termination of the contract.

What practical steps should be taken by a counterparty to a derivative trade to comply with EMIR’s reporting requirements?

• Obtain a LEI.
• Decide whether to report directly or to delegate reporting to the counterparty or a suitable third party.
• If reporting directly, identify the appropriate trade repository for the particular type of derivative trade and contact the trade repository to make arrangements for reporting to it directly.
• If delegating reporting, establish whether the counterparty or a suitable third party is willing to undertake reporting and enter into a written agreement with it in respect of same. Conduct reasonable checks to ensure reporting is being carried out correctly as legal responsibility for compliance remains with each counterparty.
• Conduct a legal review of the contractual documents for the derivatives trade to ensure they are consistent with the reporting requirements and arrangements.

How can William Fry assist?

William Fry is available to assist you with legal advice on all aspects of compliance with EMIR. Please contact Shane Kelleher or any member of William Fry’s Financial Regulation Group for legal advice.