On 23 February 2013, the EU published six delegated regulations relating to the European Market Infrastructure Regulation (“EMIR”) (Regulation (EU) No 648/2012 on OTC derivatives, central counterparties (“CCPs”) and trade repositories).
These delegated regulations enter into force 20 days after publication, i.e. on 15 March 2013. This date is of significance not only as the implementation date for a number of detailed measures under the EMIR regime, but also because it starts the timetable for the implementation of other significant EMIR measures.
In summary, EMIR will require persons who enter into any form of derivative contract to report each contract to a trade repository, and to clear through a CCP those OTC derivatives subject to a mandatory clearing obligation.
Entry into force of EMIR – August 2012
EMIR itself entered into force on 16 August 2012. Being in the legal form of an EU regulation, EMIR’s provisions were legally binding in all EU member states as from the date it entered into force, without it needing to be transposed into national law.
Adoption of the regulatory technical standards by the EU Commission – December 2012
However, much of the detail of the regime was not contained in EMIR itself, but is to be found in delegated or implementing acts. Provisions in EMIR required the European Securities and Markets Authority (“ESMA”) and the European Banking Authority (“EBA”) to develop such “regulatory technical standards” and “implementing technical standards”. Both ESMA and the EBA submitted their draft technical standards to the EU Commission in September 2012. Nine technical standards were adopted by the Commission on 19 December 2012.
Following their adoption by the Commission, the European Parliament and Council were then able to exercise their rights of scrutiny over the six draft Commission regulations implementing the regulatory technical standards. Despite some initial concerns from the Parliament, both the Parliament and Council decided not to object to these measures.
The regulatory technical standards enter into force – 15 March 2013
Accordingly, the regulatory technical standards were published in the Official Journal of the EU on 23 February 2013 and will come into force on 15 March 2013, on which date they will be directly applicable in all EU member states.
Areas covered by the regulatory technical standards
The regulatory technical standards cover areas such as: capital and other requirements for CCPs, the clearing obligation, the public register, obligations of non-financial counterparties, risk mitigation techniques for OTC derivative contracts not cleared by a CCP (including marking-to-market obligations), the data to be reported to trade repositories, applications for registration as a trade repository and the data to be published and made available by trade repositories.
The entry into force of the regulatory technical standards on 15 March 2013 triggers significant parts of the EMIR implementation timetable
The timetable for the implementation of various other provisions of the EMIR regime is triggered by the entry into force of the regulatory technical standards on 15 March 2013. The current expected implementation dates of some of the key EMIR measures are noted below.
Authorisation of CCPs under EMIR – by March 2014
CCPs that are currently providing clearing services in the EU need to apply for authorisation (or recognition, if in non-EU third countries) under EMIR within six months of 15 March 2013. Therefore, on the current timetable, they will need to apply by mid-September 2013.
Within six months of the submission of a “complete application”, the national regulator will inform the applicant CCP whether authorisation has been granted (until CCPs are authorised under EMIR, they can continue to operate under their existing national regimes).
Depending on the speed of the authorisation process, the first CCPs could be authorised under EMIR during the latter part of 2013, and should all be authorised under the new regime by March 2014.
Commencement of the clearing obligation – summer 2014
The national regulators have one month from 15 March 2013 in which to notify ESMA of the classes of OTC derivatives already cleared by CCPs in their jurisdiction. The Commission has indicated that this will expedite the assessment of products to be subject to the clearing obligation.
Where a national regulator authorises a CCP to clear a class of OTC derivatives under EMIR, it is required immediately to notify ESMA of that authorisation. Within 6 months of receiving this notification (or establishing a procedure for the recognition of a third-country CCP), ESMA will develop and submit to the Commission draft regulatory technical standards specifying the class of OTC derivatives that should be subject to the clearing obligation and the dates from which the clearing obligation should take effect (including any phase-in period). The Commission will then decide whether to adopt these regulatory technical standards.
Therefore, if CCPs are authorised from about September 2013, and if ESMA and the Commission were to take about a further nine months in which to produce the relevant rules, the clearing obligation is likely to apply to financial firms from about the summer of 2014. The Commission has recently indicated that the clearing obligation for non-financial firms will be phased-in over an “appropriate period of time”, and so is not likely to be in place for some time after then.
Registration of existing trade repositories – by September 2013
A trade repository currently authorised to collect and maintain the records of derivatives in an EU member state needs to apply for registration under EMIR within 6 months from 15 March 2013.
Commencement dates for the reporting obligations – from 1 July 2013
Credit derivative and interest rate derivative contracts will need to be reported to trade repositories (a) by 1 July 2013, where a trade repository for that particular derivative class has been registered before 1 April 2013; (b) 90 days after the registration of a trade repository for a particular derivative class, where there is no trade repository registered for that particular derivative class by 1 April 2013; or (c) by 1 July 2015, where there is no trade repository registered for that particular derivative class by that date.
Other classes of derivative contracts need to be reported to trade repositories: (a) by 1 January 2014, where a trade repository for that particular derivative class has been registered before 1 October 2013; (b) 90 days after the registration of a trade repository for a particular derivative class, where there is no trade repository registered for that particular derivative class before or on 1 October 2013; or (c) by 1 July 2015, where there is no trade repository registered for that particular derivative class by that date.
The obligations under EMIR will be phased in over the next couple of years. The regulatory technical standards, which contain much of the detail of the regime, are EU regulations and so, like EMIR itself, are directly applicable in EU member states from the date on which they enter into force. This date, 15 March 2013, will also start the timetable for the implementation of other significant measures under the EMIR regime.