May 22, 2014

8th ESMA Q&A on EMIR

The ESMA EMIR Q&A has been updated to version 8, the new or modified questions are listed below. They seem to be addressing 'long tail' issues and don't appear to create any new operational implementation details. No changes to Trade Reporting, but I suspect some of the economics of OTC products are addressed including clearing thresholds and capital calculations. See below for the PDF and source of the new document.

  1.  Should an umbrella fund that is a UCITS or an AIF be considered as the counterparty to a derivative transaction in the context of EMIR, or should the sub-funds thereof be considered as the counterparties?
  2. General Question 3: Status of counterparties covered by AIFMD [last update 21 May 2014]
    • What is the status of the following counterparties under EMIR?
    • i. EU AIFs and non-EU AIFs referred to in Article 61(3) of AIFMD (i.e. closed-ended AIFs that do not make any investments after 22 July 2013) and in Article 61(4) of AIFMD (i.e. closed-ended AIFs whose subscription period had closed prior to entry into force of AIFMD) that are managed by AIFMs that are exempt from authorisation due to the provisions of Article 61(3) and (4).
    • ii. AIFs referred to in Article 61(3) of AIFMD (i.e. closed-ended AIFs that do not make any invest- ments after 22 July 2013) and in Article 61(4) of AIFMD (i.e. closed-ended AIFs whose subscrip- tion period had closed prior to entry into force of AIFMD) that are managed by AIFMs author- ised or registered under AIFMD because they also manage other types of AIF.
    • iii. Securitisation special purpose entities referred to in Article 2(3)(g) of AIFMD.
    • iv. Special purpose vehicle (SPVs) created by real estate and private equity AIFs.
  3. The definition of a financial counterparty provided in Article 2(8) of EMIR includes AIFs which are managed by authorised or registered AIFMs. Which entities does the definition exactly cover?
  4. Article 10 of EMIR – Calculation of the clearing threshold
  5. May a contract between a Financial Counterparty (FC) and another counterparty be eligible for an intragroup exemption if:
    • the FC belongs to both a group of undertakings referred to in Article 3(1) or Article 80(7) and (8) of Directive 2006/48/EC (CRD), and another group referred to in Articles 1 and 2 of Directive 83/349/EEC, and
    • the other counterparty merely belongs to the group under Articles 1 and 2 of Directive 83/349/EEC?
  6. When will the Public Register be available on ESMA’s website and what type of information will be published in this register?
  7. In which EMIR counterparty category does a non-EU central bank fall?
  8. Can a participant of a trading venue which is also a clearing member of the relevant CCP deny its clients the protections established under Article 39 of EMIR where it executes trades on behalf of its clients and subsequently clears those trades with the relevant CCP?
  9. Pursuant to Article 3(2) of RTS 153/2013, a CCP shall not share its staff with other group entities, unless under the terms of an outsourcing arrangement in accordance with Article 35 of EMIR. Does the term “staff” extend to the senior management of the CCP (for example the chief executive officer of the CCP) or is it limited to those individuals with clerical or administrative roles?
  10. Pursuant to Article 28(1) of EMIR, a CCP shall establish a risk committee, which shall be composed of representatives of its clearing members, independent members of the board, and representatives of its clients. Employees of the CCP, external independent experts and employees of competent authorities may attend in a non-voting capacity. None of the groups of representatives shall have a majority in the risk committee.
    • ​​a) Is it possible for representatives of other interests (for example trading venues served by the CCP) to be members of the risk committee?
    • b) How broadly must an individual represent the interests of the CCP’s clients in order to qualify as a representative of such clients on the risk committee?
  11. Guideline and Recommendation 3(b)(v) – Prudential Requirements
    • Pursuant to Guideline and Recommendation 3(b)(v) of the ESMA Guidelines and Recommendations for establishing consistent, efficient and effective assessments of interoperability arrangements, interoperable CCPs are not allowed to contribute to each other’s default funds or other financial resources (as such are defined in Article 43 of EMIR). However, Guideline and Recommendation 3(b)(iii) provides that CCPs should assess, collect or have access to, the required inter-CCP resources necessary to cover credit and liquidity risk arising from the interoperable arrangement, including in extreme but plausible market conditions.
    • How should a CCP meet Guideline and Recommendation 3(b)(iii) in the absence of requiring the interoperable CCPs to contribute to its default fund or other financial resources given that a CCP’s default fund and other financial resources (as opposed to the margins it collects) are the means through which the CCP ensures that its financial resources are sufficient to cover extreme but plausible market conditions?


Source of the new Q&A is here and also attached below.


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