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ESMA Publishes Q&A on EMIR

On 20 March 2013, the European Securities and Markets Authority (ESMA) published a Questions and Answers document on EMIR.  The document supplements the EMIR FAQ document already published by the European Commission and is designed to promote common supervisory approaches and practices.  It is currently comprised of 21 questions and answers divided into 3 parts:

  • OTC Derivatives;
  • CCPs; and
  • Trade Repositories.

Whilst aimed primarily at national competent authorities (NCAs) it also constitutes useful guidance to investors and other market participants, providing confirmation on a wide range of issues, such as:

  • derivative contracts traded on Multilateral Trading Facility are considered OTC derivatives for the purposes of EMIR;
  • beginning on 15 March 2013, NFCs should be calculating whether they exceed the clearing threshold (and notifying both ESMA and their NCA on the first day that their rolling average position over 30 working days does so);
  • NFCs are required to determine their own status against the clearing threshold, meaning that FCs are entitled to rely on a representation from a counterparty as to its EMIR status unless the FC is in possession of information which clearly demonstrates that those representations are incorrect; and
  • in order to comply with the timely confirmation requirements of EMIR, counterparties must reach a legally binding agreement with respect to all the terms of an OTC derivative contract; a requirement which also implies that both parties must agree in advance on a specific process to do so.

The document will be updated and expanded as and when appropriate.

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