On 4 July 2012, EMIR (European Market Infrastructure Regulation) – Directive (EU) No. 648/2012 of the European Parliament and of the Council on OTC derivatives, central counter parties, and trade repositories entered into force.
    Financial and non-financial institutions regardless of their place of registration, either in or outside EU. EMIR also applies to OTC transactions concluded between two non-residents of the EU, if the transaction concluded significantly affects the EU market.
  • Reporting about transactions:
    Provision of information regarding the concluded OTC transactions involving derivative financial instruments to trade repositories. The list of trade repositories approved by the European Securities and Markets Authority (ESMA): Registered Trade Repositories
    Information regarding transactions must be provided within one business day following the day on which the transaction has been concluded or the conditions of the transaction have been changed.
    Information must be provided by both counter parties of the transaction; however, it is allowed for one party to authorise the other party to provide information on behalf of both parties.
    Upon providing information to the repository, the counter parties must indicate special identification numbers – pre-LEI (Legal Entity Identifier), which the parties may receive from the authorised registrars. The current list of registrars is provided here.

  • Centralised clearing for OTC transactions involving derivative financial instruments:
    Pursuant to the requirements of EMIR, a client is obliged to carry out a transaction with an intermediary approved by the European Securities and Markets Authority (ESMA), if the transaction is speculative and the nominal gross amount of the transaction exceeds the set clearing thresholds. Clearing thresholds set for transactions with complex financial instruments are the following:
    • EUR 1 billion*, if the underlying asset is instruments which limit debt risks;
    • EUR 1 billion*, if the underlying asset is stocks;
    • EUR 3 billion*, if the underlying asset is interest rates;
    • EUR 3 billion*, if the underlying asset is currency;
    • EUR 3 billion*, if the underlying asset is raw materials, etc.
      * Nominal gross amount.
    Clearing thresholds for each class of OTC transactions are determined by technical standards developed by the European Securities and Markets Authority. A clearing threshold is calculated without taking into account OTC transactions, which are carried out for the purposes of reducing risks related to business activities or financial monitoring of a client or a group of companies related to the client. You can find the criteria which determine the need to register certain OTC transactions when calculating a clearing threshold here.
  • Taking measures for reducing risks.
    - timely confirmation of transactions;
    - portfolio compression – agreeing the portfolio report at least once a year;
    however, the frequency of agreeing depends on the amount of open transactions (transactions for which the final deadline has not set in yet);
    - procedure for settlement of disputes.

More information on EMIR is available on the ESMA website.