Derivatives / EMIR 1 Definitions. A derivative is a financial contract linked to the fluctuation in the price of an underlying asset or a basket of assets. 2 EU rules on derivatives contracts. Derivatives play an important role in the economy, but they also bring certain risks. 3 Equivalence decisions under EMIR.
What is the European market infrastructure regulation (Emir)?
The European market infrastructure regulation (EMIR) lays down rules on OTC derivatives, central counterparties and trade repositories. A derivative is a financial contract linked to the fluctuation in the price of an underlying asset or a basket of assets.
What are the reporting requirements under Emir?
EMIR introduces reporting requirements to make derivatives markets more transparent. Under the regulation. detailed information on each derivative contract has to be reported to trade repositories and made available to supervisory authorities.
What is equequivalence under Emir?
Equivalence decisions under EMIR. EMIR provides a mechanism for recognising CCPs and trade repositories based outside of the EU. Once recognised, EU and non-EU counterparties may use a non EU-based CCP to meet their clearing obligations and a non EU-based trade repository to report their transactions to.
Which areas of Emir are eligible for Equivalence decisions?
In addition to the equivalence of CCPs and trade repositories, the Commission can also develop equivalence decisions for other areas of EMIR, such as reporting, margins for uncleared derivatives and risk mitigation techniques, and non-EU trading venues.
How does Emir reduce the counterparty credit risk?
EMIR introduces rules to reduce the counterparty credit risk of derivatives contracts. In particular all standardised OTC derivatives contracts must be centrally cleared through CCPs if a contract is not cleared by a CCP, risk mitigation techniques must be applied
