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European Market Infrastructure Regulation (EMIR)

EMIR regulation (European Market Infrastructure Regulation) in a quest to be more transparent and reduce risk has introduced new obligations for derivative-trading companies. These obligations include emir reporting of all derivative contacts, mandatory centralized clearing of standardized OTC derivatives, risk mitigation techniques for non-centrally cleared derivatives, and enhanced collateral requirements.

What is EMIR regulation?

European Market Infrastructure Regulation (EMIR) is organised around three main pillars:

Risk Mitigations techniques (non cleared)

EMIR regulation introduced the following risk mitigation techniques to reduce the operational risk of bilateral (non-centrally cleared) OTC derivative transactions:

  • Timely confirmation: Counterparties must document the agreement of all the terms of a contract;
    Required starting from March 2013
  • Daily valuation: Counterparties must evaluate their contracts on a daily basis using a market-to-market method. Where this method cannot be used, a mark-to-model approach must be applied and the method must be calibrated and validated;
    Required starting from March 2013
  • Portfolio reconciliation: Counterparties must reconcile the key terms (e.g. valuation, asset class, underlying, etc.) of each trade with each counterparty to identify any discrepancies;
    Required starting from September 2013
  • Dispute resolution: Counterparties must have agreed procedures and processes to identify, record and monitor disputes relating to contract recognition or valuation and exchange of collateral, and to resolve disputes in a timely manner; 
    Required starting from September 2013
  • Portfolio compression: When counterparties have at any given time at least 500 trades outstanding between them, the counterparties must assess whether compression of the number of trades is appropriate (i.e. to achieve a risk exposure reduction).
    Required starting from September 2013

EMIR reporting

  • All OTC and ETD contracts should be reported to trade repositories the following day
    Required starting from 12 February 2014
  • Collateral and valuation reporting
    Required starting from 11 August 2014

Clearing Obligations and Collateral Requirements

Standardised derivative contracts (OTC derivatives) should be cleared through central counterparties in order to reduce the risk in the financial system.
Required starting from Q1 2016 (tbc)

European Market Infrastructure Regulation (EMIR)

EMIR compliance timeline

Our EMIR services

Since the beginning, the compliance with EMIR requirements has been a challenge for financial institutions and it still is. Deloitte Luxembourg has been helping the clients comply with EMIR provisions with the assistance ranging from strategic considerations to the full implementation.

Deloitte Luxembourg EMIR Services:

  • Strategic Organisation and Operational efficiency of derivative business
  • Compliance Health Check
  • Transaction Reporting Solutions
  • Collateral Management – Margin requirements for OTC and cleared derivatives transactions  

Discover more on our EMIR services page.

EMIR services
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