The European Markets Infrastructure Regulation (Regulation (EU) No. 648/2012) (“EMIR”) entered into force on the 16 August 2012.
During the financial crisis it was noted that OTC derivative contracts create a level of interdependence which makes it somewhat cumbersome to evaluate the risk involved therewith (including counterparty risk) unless such transactions are properly disclosed. This in-turn creates uncertainty which may lead to financial instability. EMIR accordingly is intended to minimise the financial stability risk associated with OTC derivatives by laying down clearing obligations and bi-lateral risk management for such instruments.
In terms of EMIR, counterparties to an OTC derivative contract and CCPs (legal person that interpose themselves between the counterparties to the contracts traded on one or more financial markets, becoming the buyer to every seller and the seller to every buyer) are to report the details of any derivative contract they have concluded (as well as any details relating to modifications thereto or termination thereof) to trade repositories registered or recognised in accordance with EMIR (“TRs”). Accordingly, once registered (or recognised, as the case may be) TRs are, as from a pre-defined reporting dates, to collect and maintain the records of derivative contracts.
On the 7th November 2013, the European Securities and Markets Authority (“ESMA”), a supervisory authority comprised within the framework of authorities forming the European Supervisory Authority, approved the registration of the first four trade repositories for the purpose of EMIR. The registration of the first TRs is in line with the latest “EMIR Indicative Timetable”, last updated by ESMA in September 2013.
The reporting date for each asset for which a TR has been or will be registered, is expected to be February 2014.