The European Regulation on OTC derivatives (the "European Market Infrastructure Regulation") (herein after "EMIR") n°648/2012 dated 4 July 2012 and published in the Official Journal of the European Union came into force on 16 August 2012.
Following the economic and financial crisis of 2008, the European Member States decided to introduce supervisory regulations to the derivatives market within the European legal framework, for the purpose of transparency.
The EMIR Regulation is directly applicable in the Member States and does not require any further implementation. However it must be completed by technical standards which have been sent by the European Securities and Markets Authority (herein after "ESMA") to the European Commission. The European Commission then has three months to approve them.
The Emir Regulation has, inter alia, established the following rules:
- The clearing of standardised derivatives that are eligible according to the ESMA;
- The implementation of risk management procedures for non-eligible Central Counterparties;
- An obligation to report OTC transactions.
The ESMA has until 31 December 2012 to publish the guidelines and recommendations related to the application of the regulations. Furthermore Central Counterparties have six months to comply with the EMIR regulations' provisions.