On 21 May, the European Commission launched a review of the Regulation on Over the Counter Derivatives, Central Counterparties and Trade Repositories, known as EMIR. As part of the review, the Commission is carrying out a public consultation to gather views from industry representatives and the public. The results of the consultation will feed into, and to a large extent form, the basis for the review.

‘The right direction’

Jonathan Hill, Commissioner for Financial Stability, Financial Services and Capital Markets Union, said the review ‘gives us an opportunity to see whether we are heading in the right direction and whether anything needs to be done differently’.  

EMIR entered into force in August 2012 and many of its requirements have now been implemented. It came into existence largely in response to the financial crisis of 2008 and the G20 leaders’ commitment in 2009 that over-the-counter (OTC) derivative transactions should be reported to trade repositories and, if standardised, cleared through central counterparties (CCPs).

While derivatives play an important role in the economy, they are associated with certain risks. In particular, the default of one market participant can potentially cause contagion across the markets, threatening financial stability. The crisis highlighted the need to better mitigate these risks. EMIR is seen as a key step towards creating safer, sounder and more transparent regulation for EU financial markets, ensuring that counterparty credit exposures are covered through the use of CCPs, or on a bilateral basis. Trade reporting requirements ensure that information on derivative transactions are reported to trade repositories and are accessible to regulatory authorities. This gives policy makers and supervisors a clear overview of what is going on in the markets.  EMIR also sets out uniform requirements for trade repositories and CCPs.

Focus of the consultation

The purpose of the public consultation is to get feedback from all stakeholders on their experience of EMIR to date. Certain core requirements and procedures under EMIR are yet to be implemented or completed. In particular, clearing obligations and obligations to exchange collateral for non-cleared transactions are not yet in force. Consequently, the review is expected to focus on those aspects of EMIR that have already been implemented.

The public consultation will run until 13 August. Another key element that will feed into the review is a public hearing, which will take place in Brussels on 29 May. Following the public consultation, the Commission will prepare a report to be delivered to the European Parliament and the Council.

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