European Commission clarifies definition of EMIR

In our last issue of our Funds e-zine we reported that ESMA had asked the European Commission to clarify the definition of a derivative or derivative contract under EMIR which refers to the list of financial instruments in MiFID. The European Commission has now responded to ESMA agreeing that there is a need for clarity and consistency with regards to the the precise delineation between FX forward contracts and currency spot contracts under MIFID and confirming that it will urgently assess the options for action to ensure consistent application of the legislation. The Commission invited ESMA, as a part of its preparation for its advice to the Commission under MIFID II, to also assess the status of physically settled commodity forwards.

RTS specifying contracts that are considered to have a direct, substantial and foreseeable effect within the EU

The Delegated Regulation supplementing EMIR with regard to regulatory technical standards on direct, substantial and foreseeable effect of contracts within the Union was published in the Official Journal on 21 March 2014. It will enter into force on 10 April 2014 (20 days after its publication).

ESMA publishes list of authorised CCPs and OTC Derivatives

Following the authorisation of Nasdaq OMX Clearing AB as the first EU-based CCP on 18 March 2014, ESMA has published information about Nasdaq OMX Clearing AB and the contracts it is authorised to clear.

ESMA will propose draft regulatory technical standards (RTS) on the clearing obligation if the classes of OTC derivatives notified to ESMA meet the criteria defined in EMIR. The clearing obligation procedure defined in Article 5(2) of EMIR is triggered every time a new CCP clearing OTC derivatives is authorised. For the clearing obligation, ESMA will only assess the suitability of those classes notified to ESMA.

This means that if CCPs are authorised on different dates, several clearing obligation procedures may run in parallel. For each of these procedures, ESMA has up to six months from the time of the notifications to draft the respective RTS, consult and submit them for endorsement to the European Commission. After the Commission’s endorsement, the RTS are subject to a non-objection period by both the European Council and Parliament, after which the clearing obligation will be phased-in per type of counterparties.

Delegated Regulation on ESMA procedure for imposing fines and periodic penalty payments on trade repositories

ESMA has published a Delegated Regulation supplementing EMIR with regards to rules of procedure for penalties imposed on trade repositories by ESMA. ESMA had published a final report setting out technical advice to the European Commission on the rules of procedure in January 2014.

ESMA updates Q&A on implementation of EMIR

ESMA has updated its Q&A on the implementation of EMIR. View the updated Q&A here.

Contributed by Orla McKnight