Monday, May 27, 2024

The European Market Infrastructure Regulation (EMIR)

In this article, We learn about “The European Market Infrastructure Regulation (EMIR)”.Let’s Go!

The European Market Infrastructure Regulation (EMIR) is an EU regulation implemented by the European Securities and Markets Authority (ESMA) on 16 August 2012 Take effect.

Its main objective is to regulate all over-the-counter (OTC) derivatives through measures to increase transparency and reduce risks to the financial system.

EMIR sets out three key provisions:

1. Clearance

Derivatives should be cleared through a central counterparty. Foreign exchange derivatives include forward contracts, options and swaps. Liquidation must be approved by a competent authority authorized by ESMA.

2. Risk Mitigation for Non-Cleared Derivatives

This includes exchanging collateral and ensuring mitigation procedures are in place. Risk mitigation procedures are designed to measure, monitor and mitigate the operational and credit risks arising from such contracts.

3. Report to Transaction Repository (TR)

All derivatives contracts (without exception) must be reported to the trade repository on a T+1 business day (trade date + 1 business day) basis. These reports will contain a wealth of information, including details such as derivative categories and contract terms.

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