EMIR

 

Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories (European Market Infrastructure Regulation, EMIR) aims to increase transparency and reduce risks in the derivatives market. EMIR regulates the performance of activities of central counterparties and trade repositories and also sets out a number of obligations, to be addressed in more detail herein, for all undertakings that enter into derivative contracts.

To whom does EMIR apply?

EMIR applies to all undertakings that enter into derivative contracts. The application of the different EMIR obligations depends, however, on whether the undertaking is, according to the Regulation,

• a financial counterparty (FC) or
• a non-financial counterparty (NFC).

Undertakings which are financial counterparties under the Regulation are defined separately, and all other undertakings are non-financial counterparties.

In addition to this classification, the application of certain EMIR obligations depends on whether an undertaking regularly calculates its position in OTC derivative contracts under the Regulation or, if it does not calculate its position, whether the undertaking’s position exceeds in some asset class a clearing threshold under the Regulation (see below). If an undertaking does not calculate its positions, or if it calculates and exceeds the threshold, the undertaking must notify the European Securities and Markets Authority (ESMA) and the Financial Supervisory Authority (FIN-FSA) of this (see “Notifications to the FIN-FSA” below).

The application of the EMIR obligations further depends in certain respects on whether, in the manner explained in more detail below, a derivative contract is an OTC derivative contract or not and whether it is cleared by a central counterparty (CCP).

What are the EMIR obligations?

Notifications to the FIN-FSA

Notifications related to calculation of positions

Under Article 4a(1) and Article 10(1) of EMIR, an undertaking that decides not to calculate its positions in OTC derivative contracts regularly under the Regulation shall immediately notify ESMA and the FIN-FSA thereof.

An undertaking which decides to calculate its position under the Regulation and whose position, according to the calculation, exceeds the clearing threshold in some asset class is also obliged to immediately notify ESMA and the FIN-FSA thereof. If the positions do not, according to the calculation, exceed the clearing threshold in any asset class, there is no need to notify the FIN-FSA about the calculation.

If, however, an undertaking which has previously submitted a notification of exceeding the clearing threshold to the FIN-FSA later no longer exceeds the clearing threshold and therefore wishes to be released from the clearing obligation, the undertaking must also notify ESMA and FIN-FSA that it no longer exceeds the clearing threshold.

For these notifications, there are instructions and a template on ESMA’s website (see Notification). The ESMA template can also be used in notifying the FIN-FSA. Notifications to the FIN-FSA should be sent to the email address kirjaamo(at)finanssivalvonta.fi.

Reporting of unconfirmed OTC derivative transactions

Under Article 12(4) of Commission Delegated Regulation (EU) 149/2013, financial counterparties must have the necessary procedures to report to the FIN-FSA on a monthly basis the number of unconfirmed OTC derivative transactions that have been outstanding for more than five business days. These reports do not need to be sent to the FIN-FSA, however, unless the FIN-FSA specifically requests them.

Reporting of disputes

Under Article 15(2) of Commission Delegated Regulation (EU) 149/2013, financial counterparties must report to the FIN-FSA any disputes between counterparties relating to an OTC derivative contract, its valuation or the exchange of collateral for an amount or value higher than EUR 15 million and which are unresolved for at least 15 business days. If the need arises to make such a report, the counterparty must contact the FIN-FSA (see Contacts).

Notifications related to EMIR reporting problems

As of 29 April 2024, according to Article 9(1) of Commission Implementing Regulation (EU) 2022/1860, the entity responsible for EMIR reporting shall notify the following reporting problems to the FIN-FSA:

• misreporting reporting due to flaws in reporting systems affecting a significant number of reports
• reporting obstacles that prevent the report submitting entity from sending notifications to the trade repository within the deadline
• significant problems resulting in reporting errors but do not lead to rejection of reports by the trade repository.

The entity responsible for reporting shall notify those problems to the Financial Supervisory Authority without undue delay upon becoming aware of them. ESMA has provided more detailed guidance on the notification obligation in the different situations where problems arise (see Regulatory links). Notifications should be made to the FIN-FSA using the form for which ESMA has developed this template, and by sending the form by e-mail to TR-reporting(at)finanssivalvonta.fi. Notifications can also be sent by secure e-mail (instructions).

Exemptions

Exemption of intra-group derivative contracts from the reporting obligation

Under Article 9(1) EMIR, the reporting obligation shall not apply to derivative contracts within the same group where at least one of the counterparties is a non-financial counterparty, provided that:

• both counterparties are included in the same consolidation on a full basis;
• both counterparties are subject to appropriate centralised risk evaluation, measurement and control procedures; and
• the parent undertaking is not a financial counterparty.

It is also required that the counterparty notify the FIN-FSA of its intention to apply this exemption. Notifications to the FIN-FSA should be made in accordance with this model and should include this attachment (Excel). Completed notifications and attachments should be sent to the email address kirjaamo@finanssivalvonta.fi

Exemption of intra-group transactions from the clearing obligation

Intra-group transactions according to Article 3 of EMIR may receive an exemption from the clearing obligation, as follows:

• by notifying the FIN-FSA when a counterparty in the group is established in Finland or another EU Member State
• with the permission granted on application by the FIN-FSA, when a counterparty in the group is established in a third country. 

The FIN-FSA should be contacted before a notification or application is made (see Contacts).

Exemption of intra-group transactions from mandatory exchange of collateral

Intra-group transactions according to Article 3 of EMIR may, on certain conditions, also receive an exemption from mandatory exchange of collateral.

Under Article 11(5) of EMIR, mandatory exchange of collateral is not applied to intra-group transactions, on the conditions prescribed therein, if both counterparties are established in Finland. This does not require the FIN-FSA’s permission nor a notification to the FIN-FSA. The counterparties themselves must ensure that the conditions prescribed in Article 11(5) are fulfilled.

In other cases, an exemption of intra-group transactions from exchange of collateral requires a notification to the FIN-FSA according to Article 11(6-10) of EMIR and possibly to the competent authority of another Member State in which a counterparty in the group is established, or permission granted by them on application. The FIN-FSA should be contacted before a notification or application is made (see Contacts).