PwC's Managing upstream risk: Regulatory reform review - An asian perspective December 2013 | Page 26

2.15 EMIR

Derivatives traded on EU trading venues are
covered by reporting rules under both EMIR
and the Markets in Financial Instruments
Directive (MiFID). MiFID covers the actual
trading of derivatives, whereas EMIR is about
post-trading arrangements. ESMA’s Q&As are
aimed at clarifying counterparties’ reporting
requirements and at fostering consistency by
avoiding reporting conflicts between the two
regimes.

According to the legal definitions included
in EMIR, any EU counterparty which has
concluded a derivative contract is covered
by EMIR’s reporting obligation. At the same
time, conclusion of derivative contracts should
be understood as execution of a transaction
under MiFID. Accordingly, the following
counterparties will have to report their ETD
trades to TRs:

Update

IOSCO on 20 December 2013 published a letter
from Commissioner Michel Barnier in reply to
its own repeated requests for clarification on
the status of Asian-Pacific CCP’s under EMIR.
Highlights of Barnier’s responses are as follows:
• The letter opens with the caveat that
although Mr Barnier is trying to provide
clarity, the European Court of Justice is the
final arbiter of EU legislation;
• The Commission has received technical
advice from ESMA with respect to the legal\
supervisory arrangements in the relevant
countries. Where significant disparities
with EMIR are found, the Commission will
engage in dialogue to explore alternative
means of resolution;

• Central Clearinghouses (CCPs) clearing the
trades;

• ESMA will shortly submit draft memoranda
of understanding to the countries for their
review

• Clearing members of the CCP clearing the
trades;

• The Commission is aware that CCP’s in
third-country jurisdictions are providing
services to EU banks that are subject to
the CRR, and that this will induce these
CCP’s to seek with ESMA. Accordingly, the
Commission will undertake equivalence
assessments “in the very near future” to
facilitate recognition of these CCP’s; and
• The Commission will consider extending
the time-period for these assessments in line
with Article 497 CRR.

On the same day, ESMA clarifies reporting
of on-exchange derivatives under EMIR by
issuing an updated Q&A. From 12 February
2014, EMIR requires all EU counterparties to
a derivative contract to report their trades to a
TR, irrespective of whether these are traded on
or off exchange. Reporting derivative contracts
enables regulators to identify and analyse
potential risks associated with derivative
markets.

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Regulatory Reform Review | Banking

• MiFID investment firms executing derivative
trades on a trading venue of which it is a
member; and
• Counterparties to derivative contracts that
do not fall into any of the categories above,
except when they are exempt because of
their status.

Any of these participants are obliged to
report all derivative contracts that they have
concluded with any of the other participants.
Clearing members and their clients need to
report separately, whereas firms who are not
a counterparty to a derivative contract do not
have to report their trades.