Reporting, clearing and risk mitigation rules for derivatives under European law in 2013 – the impact on buy side entities


A few provisions of the Regulation on Derivative Transactions, Central Counterparties and Trade Repositories, known as the European Market Infrastructure Regulation 648/2012 (“EMIR”) are now in effect throughout the European Economic Area (“EEA”). Like Dodd-Frank, EMIR seeks to fulfill the G20 commitment that all standardized over-the-counter (“OTC”) derivatives (“Contracts”) should be cleared through a central counterparty (“CCP”) and details of Contracts reported to registered trade repository (“TR”). As EMIR’s final shape comes into focus, we have set out below some of the typical questions, particularly those asked by funds and fund managers (“Buy-Side Entities”), which we continue to encounter in the run-up to full implementation of EMIR.

EMIR contains three basic obligations, which are discussed in more detail in the Q&A below:

• Reporting Obligation – all counterparties with OTC and exchange traded Contracts will have to report details of those Contracts and any new Contracts, which they enter into, modify or terminate, to a TR in the EEA. The Contracts include credit, equity, interest rate, foreign exchange, commodity and other swaps and derivatives. The report will have to include details of the counterparties to the Contract and details of the Contract itself and will need to be made no later than one working day after its conclusion, modification or termination.

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