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EMIR

Final risk mitigation standards published by IOSCO

IOSCO have published their final document on  the risk mitigation standards to be applied to non-cleared OTC derivatives, which can be found here.

The document addresses the risk mitigation measures, in addition to margin, that are desired to reduce risk, and most of which were addressed in the EU as part of EMIR, i.e.:

– Dispute resolution procedures
– Portfolio reconciliation
– Portfolio compression
– Timely confirmation
– Valuations

The standards also address documentation and cross border issues. The objective is that all jurisdictions meet the standards set out here to avoid regulatory arbitrage.

The document at this level is aimed at financial counterparties and “systemically important” non financial counterparties. As such it may not apply to a large number of energy and commodities companies. In the EU however, EMIR is quite specific about how most of the principles apply to FCs, NFC+s and NFC-s. In addition MiFID II is likely to re classify many in commodities and energy as FC.

As the report indicates, the EU and US have addressed many of these requirements through specific legislation, and as such the target could be considered to be other jurisdictions. We can therefore expect to see specific rules in many other countries.

About avivhandler

Aviv is the Managing Director of ETR Advisory, a niche consultancy focused on the regulation of the commodity, energy and financial markets. He has more than 23 years of experience in the financial, energy and commodity markets, covering regulatory compliance, credit, risk and financial technology. Prior to founding ETR, he was Partner at SunGard Global Services, where he built a Centre of Excellence in European Energy and Commodity Regulation. Before that, he founded Coherence, a consulting firm specializing in credit risk in commodity and energy trading as well as software product management. The credit practice ultimately became part of Sirius Solutions, where he was the Managing Director of Europe. He has also held management roles at KWI and Iris Financial, among other organizations. Mr. Handler holds a degree in computer science from Imperial College, University of London.

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