On May 4, 2017, the European Commission announced its proposals to amend the current European Market Infrastructure Regulation ("EMIR"). The proposals stem from its public consultation and Call for Evidence, which were carried out in 2015 and 2016 (the "EMIR Review").
The proposed changes will now be considered by the European Parliament and the Council of the EU; however, if they are enacted in their current proposed form, they will affect not only European counterparties, but also many non-EU counterparties.
Although not related to the EMIR Review, the Commission also chose May 4, 2017, to publish a Communication addressed to the European Parliament, the Council of the EU, and the European Central Bank.
The Communication sets out the Commission's intention to introduce, in June 2017, legislative proposals aimed at ensuring "financial stability and the safety and soundness of central clearing counterparties (CCPs) that are of systemic relevance for financial markets across the EU." Essentially, these proposals will provide for "enhanced supervision" at EU level of non-EU CCPs and/or location requirements for those CCPs. Many commentators regard this as an attempted "land-grab" by the EU of the business of clearing euro-denominated derivatives, and the Commission notes that 75% of euro-denominated interest rate derivatives are currently cleared in the UK (which has notified its intention to leave the EU).
Please see our client alert for a more detailed discussion of these proposals, including:
- the classification of counterparties;
- reporting requirements;
- the scope of the clearing obligation;
- required access to clearing;
- margin rules; and
- the applicability to pension funds.