For discussion purposes only | Working Paper | E.P.M. Joosen Page 3 of 24
This Working Paper is prepared by FMLA for the purposes of tracking the developments in respect of EMIR andsummarise positions as they develop in the period towards introduction of this new piece of legislation. Thisdocument is published on the website of FMLA www.fmlawfirm.eu for free consultation by interested parties.
The Working Paper does not contain concrete advice and contains information collected by FMLA based onbest efforts. FMLA waives any responsibility as regards the completeness, accuracy or consistency of theinformation contained in this Working Paper.
Contents of EMIR1.1
CCP: Central Counter PartyEMIR: Regulation (EU) No
/2012 of the European Parliament and of the Council on OTCderivatives, central counterparties and trade repositoriesESMA: European Securities and Markets Authority;ESRB: European Systemic Risk Board;Derivative: any financial instrument listed in points (4) to (10) of Section A of Annex I to the Marketsfor Financial Instruments Directive (as implemented in article 38 and 39 of the MiFIDimplementation Regulation. The concrete list of types of contracts stemming from thisdefinition is set out in
Annex A to this Working Paper
Key requirements of EMIR
The key requirements under EMIR are:
(certain classes of) derivative transactions will have to be accepted by a CCP, and must also be clearedon that CCP. This means that a CCP would contractually position itself between the two counterpartiesto a transaction. Market counterparties entering into transactions will need to become established asclearing members of a CCP, obtain access to a CCP as a client of a clearing member or become anindirect client in relation to trades subject to the clearing obligation;
there will be reporting of derivative trades to trade repositories in relation to both cleared anduncleared derivatives. A minimum set of reporting requirements will be introduced, this includes (i) theparties to a contract; (ii) the beneficiary of the rights and obligations arising from the contract and (iii)the characteristics of a contract, such as type, maturity date and investment. Reporting must be madeby both financial and non-financial counterparties or CCPs, observing certain reporting timelines andinformation thresholds; and
CCPs are required to impose on clearing members (and other CCPs where the CCP has entered intointeroperability agreements), call and collect from these parties margin as security collateral for creditrisk mitigation to the trade of derivatives. It is intended that the margin collected by a CCP should besufficient to cover losses that result from a least 99 percent. of the exposure movements.