Fixing EMIR? The Commission's proposal

Many firms have been focused in recent months on the impact of margining rules under the European Market Infrastructure Regulation (“EMIR”) for non-cleared over-the-counter (“OTC”) derivatives (see our December 2016 briefing for more details). The next significant phase of developments under EMIR is likely to result from the European Commission’s legislative proposal to amend EMIR published on 4 May 2017.

The Commission’s proposal aims to make the clearing obligations, risk-mitigation techniques and other rules under EMIR simpler and more proportionate and so reduce the compliance burden and associated costs for smaller financial services firms, corporates and pension funds. However, in its current form the Commission’s proposal would significantly increase the burden on some entities, particularly securitisation issuers. The proposal is currently being reviewed by the European Parliament. While it is not expected to take effect until 2018 at the earliest, it is not too soon to look at the proposed changes and consider how the proposal might steer the compliance agenda for various market participants.

In this briefing we outline some of the key elements of the proposal and focus primarily on how the changes might affect non-financial counterparties, small financial counterparties, securitisation issuers, alternative investment funds and pensions funds.