Find out more about the UK European Market Infrastructure Regulation on derivatives, central counterparties and trade repositories (UK EMIR), which imposes requirements to improve transparency and reduce the risks associated with the derivatives market.
The European Market Infrastructure Regulation (EMIR) has been onshored into UK legislation via a number of statutory instruments (SIs) and Binding Technical Standards (BTS).
A list of UK EMIR onshoring legislation can be found on the UK EMIR library page.
UK EMIR imposes requirements on all types and sizes of entities that enter into any form of derivative contract, including those not involved in financial services. It imposes requirements to improve transparency and reduce the risks associated with the derivatives market.
It applies indirectly to non-UK firms trading with UK firms. UK EMIR also establishes common organisational, conduct of business and prudential standards for central counterparties (CCPs) and trade repositories (TRs).
UK EMIR requires entities that enter into derivative contracts, including interest rate, foreign exchange, equity, credit and commodity and emission derivatives, to:
- report details of derivative contracts to an FCA registered, or recognised, TR
- clear, via a CCP, those OTC derivatives subject to a mandatory clearing obligation
- implement risk mitigation techniques, including operational processes and margining, for bilateral over-the-counter (OTC) derivatives that are not cleared by a CCP
UK EMIR REFIT
The onshored UK EMIR REFIT also brings into UK legislation amendments to UK EMIR that make the regime more proportionate for certain firms. Key changes include:
- Financial counterparties that are considered small (small financial counterparties or SFCs) are exempted from the clearing obligation, while remaining subject to risk mitigation obligations.
- Non-financial counterparties (NFCs) are subject to reduced clearing obligations.
- The exemption from the clearing obligation for Pension Scheme Arrangements (PSAs) is extended by another 4 years for UK and EEA PSAs.
- A streamlined reporting regime, including mandatory delegation to FCs when facing an NFC, and exemption from the reporting requirements for intragroup transactions when one of the counterparties is an NFC.
The Treasury have confirmed that the UK will create legislation to bring into UK law requirements under UK EMIR, including:
- requirements for firms who offer clearing services to do so on fair, reasonable and non-discriminatory, transparent commercial terms (FRANDT requirements)
- requirements for TRs to have policies and procedures in place to reconcile and validate the data reported to them and for the orderly transfer of data to other trade repositories
Temporary Transitional Power
The Treasury has given UK financial regulators the power to make transitional provisions to financial services legislation for a temporary period. This is known as the Temporary Transitional Power (TTP).
We will apply the TTP on a broad basis. However, transitional provisions are already included within a number of SIs that implement UK EMIR, so the use of the TTP for EMIR requirements is, in the majority of cases, not required.
There are a few limited areas (detailed in the TTP directions) where the TTP will apply to UK EMIR.
However, the UK EMIR reporting, clearing and margin requirements have been identified as a ‘key’ requirements. This means that firms must comply with UK EMIR reporting, clearing and margin requirements immediately following the end of the TP.
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