It will be recalled that on 3 May 2011, the Hungarian Presidency of the Council of the EU published a compromise proposal dated 29 April 2011, relating to the proposed European Market Infrastructure Regulation (“EMIR”) to be considered at a meeting of the Council’s working party on financial services (see “Financial Services Europe and International Update”, DechertOnPoint, Issue 7 (May 2011) (following earlier compromise proposals previously published by the Presidency).
In the ECON Committee meeting held on 24 May 2011, the following elements of the proposal were agreed:
- the scope of the proposal (e.g., for the clearing obligation) remains OTC derivatives whereas the reporting obligation will apply to all derivatives;
- a central role is envisaged for the European Securities and Markets Authority (“ESMA”), including involvement in the authorisation of new Central Counterparties (“CCPs”) and in carrying out on-site inspections;
- the college structure will contain a maximum of seven members;
- inter-operability provisions will only be applied to cash equities, with a threeyear period required during which CCPs must meet certain standards before they can apply for inter-operability;
- clearing obligations will only apply from the date of entry into force of the EMIR; however, ESMA is to be asked to consider whether a retroactive reporting obligation could be introduced;
- a special regime will apply for pension funds; and
- third country CCPs will be subject to a review by a process of similar rigour as that applicable to EU CCPs.
A plenary vote on EMIR is scheduled to take place during the July session of the European Parliament. Indications are that this will be the first of two readings unless agreement can be reached between Parliament and Council. The second reading in Parliament has to occur within three months of the Council agreeing its Common Position. In practice this means the proposal could easily be held up for a further six months.
The Regulation is expected to be agreed and in force before the end of 2011 however.