EMIR Trade Reporting Obligation becomes effective from 12 February 2014
ESMA recently approved the registration of the first four trade repositories (TRs) under EMIR. These registrations mean that counterparties to derivative transactions will be re quired to begin trade reporting from 12 February 2014 (that is, 90 calendar days after the official registration date). The registered TRs cover all assets classes underlying derivatives including commodities, credit, foreign exchange and equity interest rates.
ESMA had recommended that reporting of exchange traded derivatives be postponed until 1 January 2015 in order for it to develop guidelines and recommendations to ensure a common, uniform and consistent application of the EMIR requirements, however the European Commission has advised ESMA of its intention to refuse the extension. ESMA is now working on producing the associated guidance which will, it has indicated, most likely be in the form of a Q&A document.
ISDA Guidance on Portfolio Compression under EMIR
ISDA has recently published operational guidance aimed at assisting relevant market participants with meeting the portfolio compression obligations imposed under EMIR.
The portfolio compression obligation, which has been in force since 15 September 2013, requires both financial and non-financial counterparties with 500 or more non-centrally cleared OTC derivative contracts outstanding with a counterparty, to have in place procedures to regularly, and at least on a twice-yearly basis, analyse the possibility of conducting a portfolio compression exercise to reduce their counterparty risk and to engage in such portfolio compression exercises where feasible.
The guidance includes both a step-by-step overview of EMIR’s portfolio compression requirements and a Product Feasibility Matrix using the ISDA taxonomy which outlines the products considered to be compressible. The feasibility of compressing various derivative product-types was determined based on the compression processing currently performed in the market and the ability to carry out a compression exercise considering the complexities of each product.
With a view to ensuring that it continues to be up-to-date and relevant, it is intended that the guidance will be reviewed at least bi-annually by the working group that produced it.
Draft RTS on: Contracts having effect in EU; and Evasion of EMIR provisions
On 15 November 2013, ESMA published draft regulatory technical standards (RTS) on (i) contracts between third-country counterparties that have a direct, substantial and foreseeable effect in the EU and (ii) the criteria for determining which contracts should be considered as evading the rules and obligations laid down in EMIR. The draft RTS have been submitted to the European Commission for consideration and the Commission has three months to decide whether to endorse them.
Central Counterparties established in non-EEA countries
ESMA has also recently published a list of central counterparties (CCPs) established in non-EEA countries which have applied for recognition under EMIR.
Contributed by Nicola Doran and James Phelan
