The Regulation amending the European Market Infrastructure Regulation, known as EMIR Refit or EMIR 2.1, has been published in the Official Journal of the European Union.
The EMIR Refit amendments aim to introduce a simplified and more proportionate approach to certain aspects of EMIR as part of the EU's broader "Regulatory Fitness and Performance Program". Key changes include:
The Regulation will enter into force on June 17, 2019. The majority of the provisions will apply directly across the EU on that date, with the exception of:
Previous iterations of the text allowed time for repapering and implementing revised processes. However, for those obligations that apply from June 17, 2019, market participants do not have much time to comply. In particular, certain alternative investment funds will be reclassified as FCs, instead of Non-Financial Counterparties, and non-EU funds will be reclassified as third-country entities equivalent to FCs. The categorization of a fund as an FC or NFC or as a third-country equivalent entity is important since it determines whether certain key legal requirements in EMIR apply either directly (in the case of EU AIFs) or indirectly (in the case of non-EU AIFs trading with EU counterparties)—such as mandatory clearing, collateral rules and the reporting obligation. It is also important for persons that are dealing with funds to know the classification of their counterparties, since this determines the timeframe for confirmations, the frequency of portfolio reconciliation and compression and whether clearing and collateral obligations will apply. AIFs, their managers and counterparties affected by the new FC definition will need to implement enhanced conduct requirements and amend their ISDA documentation, taking into account whether they will become an FC+ or FC-. Non-EU funds may be asked to make changes by their EU bank counterparties.
Some EU member states may also struggle to bring their insolvency laws into line with EMIR and many of them – with the exception of the UK and Germany – would appear likely to be in breach of this requirement without introducing new national legislation.
View the EMIR Refit text.
View details of the EMIR Refit.
You may like to view our client note, "EMIR REFIT: Impact of the Reclassification of Funds".
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