The European Commission is making rounds across the industry as the governing body of the European Union announced earlier today that EMIR rules could get a revamp. After commissioning a review of the regulatory framework, the conclusion for EU’s authorities is that changes could well be appropriate.
The Commission’s Vice President Valdis Dombrovskis stated that the proposed changes could save up to €1.1 billion in operational costs and up to €5.3 billion in one-off costs. The measures will mostly affect companies that are using Exchange Traded Derivatives (ETDs) and non-financial corporations.
Some retail brokers that are using exchange-traded contracts to hedge their market exposure could be affected by the proposed changes.
The changes that the EC is proposing are likely to be on a fast track through the European Parliament as the official statement on the matter proposes that the changes begin in January 2018. The deadline coincides with the implementation of the MiFID II (Markets in Financial Instruments Directive) regulatory framework.
The full text of the proposed changes can be found below:
EMIR_Changes_Proposal by Victor Golovtchenko on Scribd
Summary of Proposed EMIR Changes
The most important changes that are related to financial industry participants are related to the introduction of single counterparty reporting. When a derivatives transaction is executed between a financial and a non-financial counterparty, the reporting part will be taken care of by the financial industry representative.
In additon, ETDs will be reported only by the Central Counterparty Clearing House (CCP) on behalf of both counterparties.
Smaller companies from the financial industry that are offering clearing services will only need to report if they breach a certain threshold. At present, financial counterparties need to clear each OTC derivative for which a clearing obligation exists once the respective phase-in period is over.