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EMIR Regulation of OTC CCP

EMIR Regulation of OTC CCP

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Published by IQ3 Solutions Group
Regulation on OTC derivatives, central counterparties and trade repositories (15 April 2012). This Working Paper is prepared by FMLA for the purposes of tracking the developments in respect of EMIR and summarize positions as they develop in the period towards introduction of this new piece of legislation.
Regulation on OTC derivatives, central counterparties and trade repositories (15 April 2012). This Working Paper is prepared by FMLA for the purposes of tracking the developments in respect of EMIR and summarize positions as they develop in the period towards introduction of this new piece of legislation.

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Published by: IQ3 Solutions Group on Oct 18, 2012
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10/18/2012

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Financial Markets Lawyers Amsterdam B.V. (FMLA) is registered with the Trade Register of the Chamber of Commerce under number
52120996. FMLA’s Terms of Business are available on the firm’s website (www.fmlawfirm.eu) and have also been deposited with t
he Civil
Clerk’s Office of the District Court of Amsterdam. A copy of FMLA’s Terms
of Business is available on request, free of charge. Among other
provisions, FMLA’s Terms of Business contains a limitation of liability clause.
 
Filename:20120418 [Working Paper EMIR]Author:E.P.M. JoosenReference:BJ/2012/0150Version:2.0Send option:Confidentiality:For discussion purposes onlyDate:18 April 2012
Working Paper
Regulation on OTC derivatives, central counterparties and traderepositories -- status as at 15 April 2012
 
 
For discussion purposes only | Working Paper | E.P.M. Joosen
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2
 
 
For discussion purposes only | Working Paper | E.P.M. Joosen Page 3 of 24
INTRODUCTION
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.
1
 
Contents of EMIR1.1
 
Defined expressions
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
.
1.2
 
Key requirements of EMIR
The key requirements under EMIR are:
A.
 
(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;
B.
 
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
C.
 
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.

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