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EMIR: The jigsaw is nearly complete - 02/10/2012


The next milestone has passed in the EU’s long journey to implement the G20 commitment to reform OTC derivative markets

Both the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) have passed their proposed EMIR implementing rules - the binding technical standards - to the EU Commission for their anticipated adoption by the end of this year. In practical terms this means that firms now have a much higher degree of clarity and should be stepping up their implementation plans ahead of the looming compliance dates.

The recently published requirements span the following important areas:

  • the requirements that will be placed on firms which offer client clearing;
  • what constitutes eligible collateral for margin payments;
  • the levels of capital that central counterparties (CCPs) will need to hold;
  • the exact information that will need to be reported to a trade repository;
  • the details of how and when firms should perform risk mitigation techniques such as portfolio reconciliation and compression; and
  • the thresholds for determining whether non-financial firms will need to clear and exchange margins for derivative trades.

These reforms will radically transform how OTC derivatives are risk managed and reported. Every participant will be affected in some shape or form. They come at a time of vast regulatory change where business resources are already very stretched. Firms in the process of implementing the US requirements under Title VII of the Dodd-Frank Act should look to leverage the synergies between the two pieces of regulation where possible.

Discover all the details of these proposals in the PDF attached above.

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