On 18 November 2013, ESMA issued final draft RTS related to derivative transactions by non-EU counterparties, to address the EMIR provisions regarding central clearing and risk mitigation techniques applying to those OTC derivatives entered into by two non-EU counterparties and which have a direct, substantial and foreseeable impact on EU financial markets.

The draft RTS clarify that OTC derivative contracts entered into by two counterparties established in one or more non-EU countries, for which a decision on equivalence of the jurisdiction’s regulatory regime has not been adopted, will be subject to EMIR where one of the following conditions are met:

  • One of the two non-EU counterparties to the OTC derivative contract is guaranteed by an EU financial institution for a total gross notional amount of at least €8bn, and for an amount of at least 5% of the OTC derivatives exposures of the EU financial guarantor; or
  • The two non-EU counterparties execute their transactions via their EU branches and would qualify as financial counterparty if established in the EU.

The draft RTS were submitted for endorsement to the European Commission on 15 November 2013, and the Commission has three months to decide whether to endorse the final draft RTS, which must then be submitted to the European Parliament and the Council.