European Market Infrastructure Regulation (EMIR)
The European Market Infrastructure Regulation (EMIR) is a European regulation regarding derivatives, central counterparties and trade repositories. EMIR is set up following the commitment announced by the Group of 20 (G20) in 2009 to increase regulation on non-centrally cleared derivatives with the objective to increase the stability (mitigation of systemic risk and transparency) within global derivative markets. EMIR is the European part of the worldwide effort to reduce counterparty and operational risk in the over-the-counter (OTC) derivatives market. This regulation entered into force on 16 August 2012 and its obligations gradually took effect from 2013 onwards.
Please note that this publication only serves to provide general back-ground information, is not necessarily complete or correct, and does not contain individual, legal or other advice. EMIR might impact your (OTC) derivatives business and your relationship with us, so we urge you to inform yourself on this subject and obtain the necessary advice.
Who is impacted by EMIR?
- Financial and non-financial counterparties that are active in the (OTC) derivatives markets;
- Counterparties established in the European Economic Area (EEA), or with direct, substantial and foreseeable effect within the EEA;
- Non-EEA counterparties which enter into (OTC) derivatives contracts with a counterparty established in the EEA.
Client Classification and Obligations
EMIR recognizes a number of counterparty classifications. The effects, obligations and responsibilities to comply with EMIR vary according to the classification of an entity.
What are the counterparty classifications and obligations under EMIR?
EMIR recognizes the following counterparty classifications:
- Financial counterparties that exceed any of the clearing thresholds mentioned in table 1 (FC+)
- Financial counterparties that are below all of the clearing thresholds mentioned in table 1 (FC-, commonly referred to as Small Financial Counterparties (SFC))
- Non-financial counterparties (i.e. parties that are not FCs including private individuals if they act for commercial purposes) that exceed any of the clearing thresholds mentioned in table 1 (NFC+)
- Non-financial counterparties that are below all of the clearing thresholds mentioned in table 1 (NFC-)
|Asset Class||Treshold in gross notional value|
|Credit derivatives||€1 billion|
|Equity derivatives||€1 billion|
|Interest rate derivatives||€3 billion|
|Foreign exchange derivatives||€3 billion|
|Commodity and other derivatives||€3 billion|
Table 1. Clearing thresholds
- In order to determine the status, counterparties can calculate the average month-end OTC derivatives positions on group level for the previous 12 months on a yearly basis.
- Counterparties that do not calculate their positions will be subject to the clearing obligation for all asset classes.
- In calculating their positions, NFCs shall include all OTC derivative transactions that are not objectively measurable as reducing risks.
- EMIR further distinguishes exempted or partially exempted entities as well as Third Country Entities (TCE). The EMIR provisions that apply to these counterparties (if any), depend on the specific activities of the entity and/or its location.
- Exempted Entities are exempted from clearing and reporting obligations. These entities include members of the European System of Central Banks (ESCB) and other Member States’ bodies performing similar function, EU public bodies charged with the management of public debt, The Bank for International Settlements, and certain Third Country Central banks/ public bodies charged with management of public debt (subject to the Commission including these entities to the exclusion).
- Partially Exempted Entities are subject to reporting obligation. These entities include multilateral development banks, public sector entities if owned by central governments and that have explicit guarantee arrangements provided by central governments, the European Financial Stability Facility and the European Stability Mechanism.
What are the obligations under EMIR?
There are three main obligations under EMIR that may impact you:
Central Clearing for FC+ and NFC+
This is an obligation to clear certain classes of OTC derivatives through a central counterparty (CCP). To determine which classes of OTC derivatives are subject to the clearing obligation, ESMA takes various factors into account (the extent of standardization, volume, liquidity in the market, etc.).
Risk Mitigation Measures
The risk mitigation measures apply to OTC derivatives and include timely confirmation, dispute resolution, portfolio reconciliation, portfolio compression, valuation of contracts and exchange of collateral. These obligations apply depending on the qualification of the counterparties (FC+, FC-, NFC+ or NFC-).
In order to comply with EMIR reporting requirements, FCs as well as NFCs and partially exempted entities have to report the details of their derivative contracts (concluded, modified or terminated) to a Trade Repository (TR). This obligation applies to both cleared and non-cleared derivatives, exchange-traded as well as OTC derivatives.
The reporting obligation does not apply to non-EEA counterparties, but in case you trade OTC derivatives with EEA counterparties (such as Rabobank), the EEA entity may still have to disclose information regarding the non-EEA counterparty to comply with its own reporting obligation.
Under EMIR REFIT, for transactions between a FC and a NFC-, the financial counterparty will have a legal liability for reporting on behalf of both counterparties. This requirement shall apply 12 months after the in force date of EMIR REFIT (i.e. 18 June 2020). For more information on EMIR Refit, please visit the dedicated EMIR Refit page.
Coöperatieve Rabobank U.A (formerly known as Coöperatieve Raiffeisen-Boerenleenbank B.A.)
|Emir Clearing Category||Category 1|
|Legal Entity Identifier (LEI)||DG3RU1DBUFHT4ZF9WN62|
|Rabobank is able to clear OTC transactions with the following EU authorized CCP’s||Interest rate swaps:
LCH. Clearnet Limited
EUREX Clearing AG
The review of EMIR, also known as EMIR REFIT, contains multiple targeted reforms to further improve the functioning of the derivatives market in the EU. These reforms provide simpler and more proportionate rules for over-the-counter (OTC) derivatives to reduce costs and regulatory burdens for market participants without compromising financial stability.
For more information on EMIR Refit, please visit the dedicated EMIR Refit page.