European Market Infrastructure Regulation (EMIR)

On 16 August 2012, Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (European Market Infrastructure Regulation or EMIR) entered into force. On 17 June 2019, EMIR was amended by Regulation (EU) 2019/834 of the European Parliament and of the Council of 20 May 2019 (EMIR Refit).

EMIR applies to all financial counterparties (FC) such as credit institutions, investment firms or UCITS, and to non-financial counterparties (NFC) such as corporates, professionals of the financial sector that do not qualify as FCs or securitisation vehicles. Moreover, it applies indirectly to non-European counterparties trading with European counterparties.

EMIR lays down among others the following requirements:

• To report all derivatives contracts to a trade repository (TR) (Article 9 of EMIR);
• To assess a counterparty’s status compared to the clearing threshold and if relevant notify the CSSF and ESMA thereof (Articles 4a and 10 of EMIR);
• To centrally clear certain OTC derivative contracts (Article 4 of EMIR);
• To apply risk-mitigation techniques for OTC derivative contracts that are not centrally cleared through a central counterparty (CCP) (Article 11 of EMIR).

Nevertheless EMIR foresees certain exemptions for intragroup OTC derivative contracts:

• Exemption from the clearing obligation for certain asset classes (Article 4(2) of EMIR);
• Exemption from the bilateral exchange of margins (Articles 11(6) to 11(10) of EMIR);
• Exemption from the reporting obligation (Article 9(1) of EMIR).

In addition, EMIR sets out rules for the authorisation, the registration and the supervision of, as well as requirements applicable to, CCPs and TRs.

Under Articles 4a and 10 of EMIR, as amended by EMIR Refit, where a counterparty (FC or NFC) does not calculate its positions against the clearing threshold, or when the result of the calculation exceeds the clearing thresholds, the counterparty is required to immediately notify the CSSF and ESMA.

The counterparty should also notify the CSSF and ESMA when it no longer exceeds the clearing thresholds.

For the notification to the CSSF, when a counterparty exceeds or no longer exceeds a clearing threshold, the interactive form available below shall be used. Modified or incomplete templates cannot be accepted for this purpose.

For the notification to ESMA please refer to the procedures described on the ESMA website under the section post-trading.

As defined in Article 4(2) of EMIR, FCs established in Luxembourg where the CSSF is the competent authority and NFCs established in Luxembourg can make use of the exemption from the clearing obligation for intragroup transactions in OTC derivatives contracts.

They have to notify or apply to the CSSF not less than 30 calendar days before the intended use of the exemption.

FCs and NFCs should use the interactive form available below.

As defined in Article 11(6) to 11(10) of EMIR, FCs established in Luxembourg where the CSSF is the competent authority and NFCs established in Luxembourg can make use of the exemption from the exchange of collateral obligation for intragroup transactions in OTC derivatives contracts.

They have to notify or to apply to the CSSF before the intended use of the exemption by using the form available below.

As defined in the third subparagraph of Article 9(1) of EMIR, FCs established in Luxembourg where the CSSF is the competent authority and NFCs established in Luxembourg can make use of the exemption from the reporting obligation for OTC contracts concluded with intragroup counterparties, where at least one of the counterparties is an NFC or would be qualified as a NFC if it were established in the Union.

They have to notify the CSSF not less than three months before the intended use of the exemption by using the form available below and send it filled by email to emir@cssf.lu.

Furthermore, each notification for intragroup exemption from reporting must be accompanied by the form ‘Information by non-financial counterparties and RAIFs’ specified below.

The CSSF accepts only notifications for intragroup exemption from reporting which contain all the elements specified in this section and in the related forms.

FCs established in Luxembourg where the CSSF is the competent authority shall report to the CSSF any disputes between counterparties relating to an OTC derivative contract, its valuation or the exchange of collateral for an amount or a value higher than EUR 15 million and outstanding for at least 15 business days in accordance with Article 15(2) of Commission Delegated Regulation (EU) No 149/2013 of 19 December 2012.

For this notification FCs shall use the form available below.

The CSSF requires all NFCs that are not subject to prudential supervision and RAIFs, which conclude derivative transactions (OTC and ETD) to provide the CSSF with details of the person responsible for ensuring the on-going compliance with EMIR. For this purpose NFCs and RAIFs shall use the form available below to be sent (in excel format) by email to emir@cssf.lu.