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EMIR, Uncategorized

Possible changes in EMIR outlined in Commission report

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.

About avivhandler

Aviv is the Managing Director of ETR Advisory, a niche consultancy focused on energy and commodity regulation. He has more than 20 years of experience in energy and commodity trading, credit, risk and financial technology. He has delivered a series of trading, credit and risk solutions to a wide variety of oil majors, power and gas companies and investment banks. Prior to founding ETR, he was Partner at SunGard Global Services, where he built a Centre of Excellence in European Energy 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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