EMIR FX Forward Reporting Delayed as ESMA Asks European Commission to Clarify Derivatives Definition


There has been another very significant twist in the somewhat chaotic implementation of the European Market Infrastructure Regulation (EMIR) as the European Securities and Markets Authority (ESMA) has today requested the European Commission to clarify the definition of a derivative or derivative contracts under EMIR.

The request for clarification arises, in particular, from differing interpretations as to whether certain types of foreign exchange (FX) hedging arrangements constitute reportable transactions within the scope of EMIR or should be treated as excluded. Most notably, the FCA in the UK did not consider FX transactions with a settlement period up to seven days, or entered into for commercial purposes, to be derivative contracts. This is similar, though not an exact match, for the corresponding exemption in the US under Dodd Frank for FX forwards.

Most, if not all, other Member States took a narrower view and assumed that FX transactions would need to be reported if the settlement period was more than two days. This did not address wider issues such as the fact that some FX transactions and, in some cases, the underlying security being hedged, have standard settlement periods of more than two days, or the very limited value of requiring a firm to treat a t+3 settlement as if it was a future.

ESMA has now asked the European Commission for clarity as a matter of urgency and “understands that until the Commission provides clarification, and to the extent permitted under national law, National Competent Authorities will not implement the relevant provisions of EMIR for contracts that are not clearly identified as derivatives contracts across the Union, in particular FX forwards with a settlement date up to seven days, FX forwards concluded for commercial purposes, and physically settled commodity forwards”.


Written by:

Published In:


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dechert LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.