The European Commission has published a delegated regulation amending an error in the phase-in of the variation margin requirements for over-the-counter (OTC) derivative contracts not cleared by a central counterparty.

Commission Delegated Regulation 2016/2251 (the "Delegated Regulation") (here) requires, among other things, certain EMIR counterparties to exchange both initial margin ("IM") and variation margin ("VM") with respect to their uncleared OTC derivatives. Articles 36 and 37 set out various transitional provisions for the requirements relating to IM and VM, respectively. See our briefing on the Delegated Regulation here.

The amending Delegated Regulation, which was published on 20 January 2017, adds two new paragraphs to Article 37, which specify the phase-in schedule for certain intra-group VM requirements. These paragraphs were inadvertently omitted from the final version of the Delegated Regulation and are analogous to the existing Articles 36(2) and 36(3), relating to IM.

The new paragraphs provide that where an intragroup transaction takes place between an EU entity and a third country entity, the entities will not be required to exchange VM until three years after the entry into force of the Delegated Regulation where there is no equivalence decision for that third country. Where there is an equivalence decision, the requirements will apply either four months after the entry into force of the equivalence decision, or according to the general timeline, whichever is later.

The amending Delegated Regulation will be sent to the European Parliament and to the Council of the EU for a one-month scrutiny period. It should be published in the Official Journal at the end of February or early March, if no objection is raised by the Parliament or the Council. It will enter into force on the day of its publication in the Official Journal and apply from 4 January 2017, the date that Delegated Regulation 2016/2251 entered into force.

You may access the draft Delegated Regulation here.