Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (“EMIR”) entered into force on 16 August 2012
The reporting obligation applies to all counterparties of a derivative contract, irrespective whether they are financial or non-financial and whether the derivative contract is OTC or not.
Counterparties and CCPs must ensure that the details of any derivative contract they have concluded and of any modification or termination of the contract are reported to a trade repository.
EMIR includes requirements for reporting of derivative contracts and implementation of risk management standards. It establishes common rules for central counterparties and trade repositories.
EMIR has a vast scope and applies to:
As seen from above the reporting obligation applies to all counterparties of a derivative contract, irrespective whether they are financial or non-financial and whether the derivative contract is OTC or not. However, a counterparty outside the EU does not have the obligation to report to a trade repository.
More specifically, the entities which have the obligation to report under article 9 are:
As an EU regulation the sound application of EMIR is monitored by European Securities and Markets Authority (ESMA) as well as all national competent authorities.
One of the cornerstone provisions of EMIR is Article 9. According to its text the counterparties and CCPs must ensure that the details of any derivative contract they have concluded and of any modification or termination of the contract are reported to a trade repository. The details must be reported no later than the working day following the conclusion, modification or termination of the contract.
In terms of transactions that should be reported, the focus is on:
Data elements which need to be reported:
All derivatives positions must be reported to a TR authorised by ESMA by the end of T+1. The reported information includes:
As from 1st of November 2017 revised RTS/ITS are in force. These new technical standards significantly changed the regulation, mainly the reporting of derivative contracts.
The main changes are as follow:
A list of the registered TRs is available here. The main purpose of the TRs is to make the necessary information available to the national and European supervisory authorities and thus to enable them to fulfil their respective responsibilities and mandates.
CCP is a legal person that interposes itself between the counterparties to the contracts traded on one or more financial markets, becoming the buyer to every seller and the seller to every buyer;
trade repository is a legal person that centrally collects and maintains the records of derivatives;
clearing is the process of establishing positions, including the calculation of net obligations, and ensuring that financial instruments, cash, or both, are available to secure the exposures arising from those positions;
OTC derivative or OTC derivative contract means a derivative contract the execution of which does not take place on a regulated market or on a third-country market considered to be equivalent to a regulated market;
financial counterparty is an investment firm, a credit institution, an insurance undertaking or reinsurance undertaking , a UCITS and, where relevant, its management company, an institution for occupational retirement provision (IORP), an alternative investment fund (AIF) or a central securities depository;
pension scheme arrangement is a institutions for occupational retirement provision, occupational retirement provision businesses of institutions, occupational retirement provision businesses of life insurance undertakings;
counterparty credit risk is the risk that the counterparty to a transaction defaults before the final settlement of the transaction’s cash flows;
interoperability arrangement is an arrangement between two or more CCPs that involves a cross-system execution of transactions;
clearing member is an undertaking which participates in a CCP and which is responsible for discharging the financial obligations arising from that participation;
client is an undertaking with a contractual relationship with a clearing member of a CCP which enables that undertaking to clear its transactions with that CCP;
group means the group of undertakings consisting of a parent undertaking and its subsidiaries;
ancillary services undertaking means an undertaking the principal activity of which consists in owning or managing property, managing data-processing services, or a similar activity which is ancillary to the principal activity of one or more credit institution;
covered bond entity means the covered bond issuer or cover pool of a covered bond.