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Introduction to EMIR

Authored by: Synechron Business Consulting Group

European Markets Infrastructure Regulation (EMIR) is part of the G20 commitments to prevent future financial crises. The main elements of EMIR include the following:

Reporting Obligation

  • All counterparties to exchange traded and OTC derivative transactions must ensure that the details of any derivate contract they have concluded and any modification or termination of that contract are reported to a registered trade repository.
  • Reports are to be submitted in a standardized format.
  • The details of a contract must be reported no later than the working day following the conclusion, modification or termination of the contract.

Mandatory Clearing

  • Obligation to clear all standardized OTC derivative contracts.
  • The clearing obligation will become effective on a product-by-product (asset class) basis, to be advised by European Securities and Markets Authority (ESMA) after public consultation.
  • Frontloading requirement for existing contracts with remaining maturity.
  • Non-financial counterparties are subject if they breach the clearing threshold.

Risk-mitigation for non-centrally cleared trades

It is required to implement additional risk mitigation requirements for OTC derivatives not subject to mandatory clearing.

  • Timely confirmation of transactions
  • Portfolio compression
  • Portfolio reconciliation
  • Daily marking-to-market/model
  • Dispute resolution procedures
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