European Commission Preparing to Reduce Some EMIR Obligations

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 Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term 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 Clearing House A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the e A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the e Read this Term (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.