European Market Infrastructure Regulation
After the 2008 financial crisis, lack of transparency was identified by the regulator as a root cause for risk building up in the derivatives market. In March 2012, the European Parliament adopted the European Market Infrastructure Regulation (EMIR – Regulation (EU) No 648/2012) with the aim of (i) increasing transparency in over-the-counter (OTC) derivatives markets, (ii) mitigating credit risk, and (iii) reducing operational risk. It is based on three principles:
Since February 2014, financial and non-financial counterparties (FC/NFC) as well as CCPs have had to ensure that every settlement, change and termination of a derivatives contract – regardless of whether it is OTC or exchanged-traded (ETD) – is reported to a TR by the end of the following business day.
In May 2015, the European Commission (EC) released a public consultation paper regarding EMIR (“EMIR II“). ESMA´s Final Report (2015/1645) was published on 13 November 2015 and submitted to the Commission for approval. On 21 January 2017, the European Union published the revised implementing technical standards (ITS) ((EU) No 1247/2012) and regulatory technical standards (RTS) ((EU) No 148/2013) for Art. 9 (reporting requirements) EMIR in the Official Journal of the European Union. These amendments came into force on 10 February 2017 and became applicable on 1 November 2017.
Following a further extensive evaluation by the EC, a set of revisions to EMIR were published in the Official Journal of the European Union on 28 May 2019 ((EU) No. 2019/834) and entered into force on 17 June 2019, the so-called EMIR Refit. Directly applicable are the potential waiver for intragroup transactions and the stop of the backloading obligation for trades concluded before February 2014 as well as amendments in the clearing obligation.
While the EU EMIR Refit will come into force on April 29th, 2024, the UK’s FCA announced that the EMIR Refit version for the UK will go live on September 30th, 2024. The FCA also published its EMIR validation rules and XML Schemas. These draft rules and schemas are subject to review and comments by the community until March 24th, 2023, with the final version expected to be released shortly afterward.
Although the UK EMIR Refit version is very much like ESMA’s Refit version, there are several differences:
Regnology provides a modular-based platform for transaction reporting and supports, with its TR2 module, the existing EMIR framework as well as the future amendments of EMIR Refit.
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