Last week the European Commission published this report, which provides views of the implementation of EMIR since it came into force in August 2012, and started to apply in the following 18 month. It is written following ESMA’s EMIR review, which was published in the summer of 2015.
The report address a few issues which were also brought up in the review including:
- EMIR has been burdensome for Non Financial Counterparties (NFCs), including many energy and commodity market participants.
- Of these firms, many will be of less relevance from a systemic perspective. However there are also a number who may be systemically relevant.
- Thus, it would be appropriate to reduce the burden for “smaller”NFCs, but not the systemically relevant ones.
- The idea of “simplifying” the calculation of the clearing threshold, by no longer permitting a hedge exemption, and at the same time raising the threshold, is mentioned, as it was in ESMA’s review
- The difficulty of meeting the backloading requirement (which is likely delayed as part of the new RTS) is also mentioned.
The “gist” of the report, is therefore in line with last year’s EMIR review: It is preferable to reduce the burden of EMIR on smaller NFCs, but in return there is a possible benefit from the Commission’s perspective in more “large” NFCs being caught by the “NFC+” rules, which amongst other things mandate mandatory clearing and the “uncleared margin rules”, as well as more complex reporting requirements.
This, combined with the possibility of more Financial Counterparties arising out of the as yet not finalised Ancillary Activity test under MiFID II, could see large and medium sized energy and commodity market participants see a greater burden from EMIR, coupled with a reduction for smaller companies.