The European Markets Infrastructure Regulation[1] (the Regulation on OTC derivatives, central counterparties and trade repositories) ("EMIR") entered into force on 16 August 2012, although many of its requirements have not yet taken effect because they are dependant on the adoption by the European Commission ("Commission") of regulatory technical standards as submitted to it by the European Securities and Markets Authority ("ESMA")[2].
Article 9 of EMIR requires that all counterparties and CCPs (central counterparties) report the details of any derivative contract they have concluded, and any modification or termination of the contract, to a registered trade repository no later than the working day following the conclusion, modification or termination of the relevant derivative contract. Counterparties and CCPs are permitted to delegate their obligations under the reporting requirement.
This requirement applies to derivative contracts that were entered into on or after 16 August 2012, and to those entered into prior to 16 August 2012 if they remained outstanding on that date.
The definition of “derivative contracts” takes a broad meaning under EMIR and is derived from the definition provided in the Markets in Financial Instruments Directive (“MiFID”)[3].
With effect from 14 November 2013, ESMA has approved the registration of the first four trade repositories under EMIR. The entities are: DTCC Derivatives Repository Ltd. (DDRL), based in the United Kingdom; Krajowy Depozyt Papierów Wartosciowych S.A. (KDPW), based in Poland; Regis-TR S.A., based in Luxembourg; and UnaVista Ltd, based in the United Kingdom.
The registrations cover all derivative asset classes - e.g., commodities, credit, foreign exchange, equity and interest rates - and, crucially, irrespective of whether the contracts are OTC or exchange-traded.
By approving these registrations, ESMA has set the effective date for the reporting obligation to 12 February 2014 (i.e., 90 days from the effective registration). ESMA is in the process of considering further TR applications.
ESMA’s approval of the four trade repositories followed a statement published by the European Commission (the “Commission”) on the same day, announcing that the Commission intends not to endorse ESMA’s regulatory technical standards dealing with the format and frequency of reports to trade repositaries, which it submitted to the Commission on 7 August 2013 (the “RTS”).
In the RTS, ESMA had recommended postponing the implementation date for exchange-traded derivatives to be reported to trade repositories by a year (i.e., until February 2015), in order to allow ESMA sufficient time to develop associated guidelines. However, the Commission is of the view that ESMA’s concerns as set out in the RTS do not justify such a delay.
The reporting requirement will therefore apply to derivative contracts, regardless of whether they are OTC or exchange-traded, from 12 February 2014.
[1] Regulation (EU) No 648/2012
[2] Pursuant to Recital 93 of EMIR
[3] Including options, futures, swaps, forward rate agreements and other derivative contracts relating to securities, currencies, interest rates or yields, or other derivates instruments, financial indices or financial measures which may be settled physically or in cash; derivative contracts relating to commodities that (i) must be settled in cash or may be settled in cash at the option of one of the parties or (ii) can be physically settled, provided that they are traded on a regulated market or MTF or are not entered into for commercial purposes; derivative instruments for the transfer of credit risk; financial contracts for differences; and derivative
contracts relating to climatic variables, freight rates, emission allowances or inflation rates or other official economic statistics that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event), as well as any other derivative contracts relating to assets, rights, obligations, indices.
