The European Commission yesterday launched a review of EMIR, as mandated by Article 85. The press release can be found here, and the consultation document here.

The review asks general questions about market participants’ views on the various sections of EMIR, i.e. Trade Reporting, Mandatory Clearing, Risk Management etc. This is found in the second part of the consultation document.

There are also specific areas of focus. Several of these focus on CCPs and clearing, but there is also an area of focus on the the “systemic importance of non-financial firms”. Looking at question 1.2 the emphasis is on the level and calculation of the clearing threshold and whether this has caused any unintended consequences for Non Financial Counterparties.

In the energy and commodities trading sector, the vast majority of market participants are below the clearing threshold (“NFC-“), meaning that they are not impacted by mandatory clearing etc. so it would be difficult to claim that there have been unintended consequences. However, this status is in danger for many because of the proposed narrowing of exemptions under MiFID II. If that exemption is lost, the market participant becomes a “Financial Counterparty”, which would render the results of this part of the consultation irrelevant. Such an exemption loss for a participant would bring the CCP and clearing measures into view instead.  If on the other hand the exemption is kept, the threshold would be of more concern.

The trade reporting requirements apply to the entire market. There has already been one consultation about this run by ESMA and we can expect the results of this soon. It will be interesting to see if any further information comes out of this consultation to supersede it.