What is a financial counterparty?
Financial Counterparty (FC) – broadly defined as an entity authorized under one of the EU’s financial services directives – a MiFID authorized investment firm, a bank, a UCITS fund, an AIF managed by an AIFM. Non UCITS funds not managed by an authorized or registered AIFM do not fall within the definition of a FC.
What is a non-financial counterparty under EMIR?
Non-financial counterparty (NFC) under the EMIR Regulation is an undertaking established in the European Union other than a financial counterparty (FC) or a CCP. The term “non-financial counterparty” is defined within Article 2(9) EMIR.
What is a small financial counterparty?
“The category of small financial counterparties (SFCs) should be defined in such a way that very small financial counterparties for which central clearing is not economically feasible because of their small volume of activity are not subject to the clearing obligation.
What is an NFC counterparty?
Non-Financial Counterparty (NFC) +/- 2) NFC- is an NFC that has not breached the above thresholds. An NFC- will be exempt from clearing and margining EMIR obligations, but will still be required to comply with transaction reporting, timely confirmations and portfolio compression and reconciliation.
What is the difference between EMIR and MiFID?
MiFID II and EMIR share the regulatory coverage of the OTC derivatives market. While MiFID II introduces a trade obligation for OTC derivatives as part of its market structure related measures, EMIR addresses the duty for central clearing. In this case, both regulations complement each other.
What is the purpose of EMIR?
EMIR mandates reporting of all derivatives to Trade Repositories (TRs). TRs centrally collect and maintain the records of all derivative contracts. They play a central role in enhancing the transparency of derivative markets and reducing risks to financial stability.
What does NFC mean in EMIR?
EMIR identifies two sub-categories of Non-Financial Counterparties (NFC). All Non-Financial Counterparties must calculate their group’s aggregate month-end average position in derivative contracts for the previous 12 months, excluding derivative trades executed for hedging purpose (the “position”).
How is EMIR classification determined?
Is a pension fund a financial counterparty?
Occupational pension schemes are classified as financial counterparties and, therefore, are subject to EMIR requirements. As financial counterparties, occupational pension schemes are subject to the requirements to clear and report trades and put in place risk mitigation techniques for uncleared trades.
What is the difference between Emir and MiFID?
Is Emir a regulator?
The European Market Infrastructure Regulation (EMIR) is an EU regulation for the regulation of over-the-counter (OTC) derivatives, central counterparties and trade repositories. It established common rules for central counterparties and trade repositories.
What does EMIR apply to?
EMIR establishes new regulatory requirements on all types and sizes of entities that enter into any form of derivative contract, including those not involved in financial services. It also indirectly applies to the non-EU entities trading with EU entities.
Who is a financial counterparty under the Emir?
EMIR Refit text of 6 March 2019 (as confirmed by the Committee of Permanent Representatives in the European Union – COREPER) amends the said Article 1(1)(8) of the EMIR as follows: “‘financial counterparty’ means: (a) an investment firm authorised in accordance with Directive 2014/65/EC of the European Parliament and of the Council;
When does EMIR Refit apply to NFC- transactions?
Under EMIR REFIT, for transactions between a FC and a NFC-, the financial counterparty will have a legal liability for reporting on behalf of both counterparties. This requirement shall apply 12 months after the in force date of EMIR REFIT (i.e. 18 June 2020).
What is the EMIR Refit?
The EMIR Refit creates a new category of FC for those FCs whose open OTC derivatives positions do not exceed the clearing thresholds, i.e. small FCs (alternatively called FC- entities, with entities exceeding the clearing thresholds being FC+).
What do fund managers need to know about Emir?
The following highlights the key items which are immediately relevant to fund managers: ii An entity categorised as a “financial counterparty” ( FC) under EMIR is required, among other things, to clear over-the-counter (OTC) derivatives and exchange bilateral margin with counterparties for uncleared transactions.