Implementing Law for European Market Infrastructure Regulation (EMIR) Promulgated

On 15 February 2013 the German implementing law for the so-called EMIR Regulation (European Market Infrastructure Regulation) was promulgated in the Federal Law Gazette and has entered into force the day after.

On 4 July 2012, the Regulation on OTC Derivatives, Central Counterparties and Trade Repositories, the so-called EMIR Regulation (European Market Infrastructure Regulation) was adopted. It entered into force on 16 August 2012 and is directly applicable in the member states (cf. Art. 288 TFEU). The member states had yet to designate the competent national authorities und stipulate suitable measures and sanctions to ensure compliance with the EMIR Regulation. To this end Germany adopted the implementing law that also amended provisions in the German Banking Act that were not compliant with EMIR. 

According to Article 1 paras. 1 and 2 EMIR, the Regulation lays down clearing and bilateral risk-management requirements for over-the-counter (‘OTC’) derivative contracts, reporting requirements for derivative contracts and uniform requirements for the performance of activities of central counterparties (‘CCPs’; defined in Art. 2) and trade repositories. The Regulation shall apply to CCPs and their clearing members, to financial counterparties and to trade repositories. It shall apply to non-financial counterparties and trading venues where so provided.

EMIR requires the European Securities and Markets Authority (ESMA) to develop draft regulatory and implement technical standards in relation to several provisions of EMIR.

The main obligations under EMIR are:

  • Central Clearing for certain classes of OTC derivatives (cf. Art. 4 (1) and Art. 5 (2) EMIR; ESMA standards for derivatives and CCPs)
  • Application of risk mitigation techniques for non-centrally cleared OTC derivatives;
  • Reporting to trade repositories;
  • Application of organisational, conduct of business and prudential requirements for CCPs;
  • Application of requirements for Trade repositories, including the duty to make certain data available to the public and relevant authorities.

A non-financial counterparty (cf. Art. 2 (8) (9)) like a utility only becomes subject to the clearing obligation according to EMIR, if it takes positions in OTC derivative contracts in the sense of EMIR and those positions exceed the clearing thresholds (cf. Art. 10), which have meanwhile been established by the European Commission based on the work of ESMA (for more information please see ESMA’s Final Report on Draft technical standards under the Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC Derivatives, CCPs and Trade Repositories. The clearing thresholds range from EUR 1 billion in gross notional value to EUR 3 billion in gross national value. For OTC commodity derivative contracts and other OTC derivative contracts not provided for under points (a) to (d) of Article 11 of the Commission Regulation a threshold of EUR 3 billion shall apply.

Source: Federal Law Gazette

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