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EMIR Update

October 21, 2022


European Council decides not to object to delegated act under EMIR (extension of transitional periods for pension scheme arrangements)

In June 2015 and by way of a draft Delegated Regulation, the European Commission proposed to grant pension scheme arrangements a further two-year grace period from the central clearing obligations of EMIR. In essence the draft Delegated Regulation proposed that the current three year exemption for pension scheme arrangements from central clearing should be extended to 16 August 2017 with the granting of an additional one year grace period being within the purview of the European Commission, should the need arise.

On 14 July 2015, the European Council decided not to object to this regulation and, subject to European Parliament objection, it can enter into force.

ISDA EMIR Classification Letter and accompanying Guidance Note

ISDA has published a Classification Letter designed to assist market participants in complying with their obligations under EMIR. Under EMIR, the compliance by FCs and NFCs with certain regulatory obligations will depend on the classification of both parties to a given transaction. The Classification Letter enables a derivatives counterparty to provide to the other sufficient status information to determine the application of certain clearing requirements under EMIR.

Feedback statement to CP90 on the supervision of NFCs under EMIR

On 16 July 2015, the Central Bank published a feedback statement to its consultation on the supervision of NFCs under EMIR (which closed on 30 January 2015). The feedback statement acknowledges the difficulty facing the Central Bank in terms of supervision of NFCs given that the majority of NFCs themselves are not regulated by the Central Bank for the purposes of derivatives trading and only become subject to supervision following the entry into a derivative trade.

As well as proposing the introduction of further categorisations within the EMIR framework of NFC+ and NFC-, the Central Bank proposed the introduction of a new supervisory tool, the EMIR Regulatory Return (ERR) which was designed as an EMIR self-assessment tool for use by an NFC. The original ERR was designed with an additional independent “third party” assessor framework whereby the third party assessor would

a) Assess the accuracy of submissions made in the ERR
b) Document the NFC’s discrepancies and the reasons for the discrepancies, which have been provided by the NFC
c) Provide the Central Bank with a factual statement documenting the data accuracy of the ERR.

Following industry feedback, this approach has been revisited with the Central Bank preferring a risk-based model, thereby focussing on larger users of more complex derivative products. It has reconsidered the additional categorisations within the EMIR-NFC framework, and has modified the ERR structure so that the need for a third party assessor will be used on an exceptional basis and primarily in the context of non-compliance.

ESMA report proposes to include ETDs in EMIR’s interoperability arrangements for CCPs

On 1 July 2015 ESMA published its final report on interoperability arrangements (i.e. the arrangements between CCPs involving a cross-system execution of transactions) between EU-based CCPs together with related guidelines and recommendations. The report considered the scope of interoperability arrangements under EMIR to transactions in classes of financial instruments other than transferable securities and money-market instruments. The report concludes that the EMIR interoperability arrangements should be extended to exchange-traded derivatives with a further extension to be assessed at a later stage. ESMA has submitted the report to the Commission, the European Parliament and the Council for endorsement and implementation.

Contributed by Catharine Dwyer.