EU EMIR: EU Margin and Clearing Rules' changes take place
Two delegated acts amending Legislation (EU) 648/2012 (EU EMIR) on the European market infrastructure (EU) were published in the Official Journal of the European Union on 17 February 2021. The delegated laws (the Acts) bring in amendments to the EU requirements for the marginalization of non- cleared OTC derivatives (Margin Rules) and to the requirements for the clearing of interest rate ranges and credit derivative groups (Clearing Rules). The amendments to the rules follow the publication of the final report on the Margin Rules of the European Supervisory Authorities* (ESAs), which proposed updated amendments to the Margin Rules set out in EU Delegated Regulation 2016/2251, and their final report on the Clearing Rules, which proposed amendments to the Clearing Rules set out in EU Delegated Regulations 2015/2205, 2016/592 and 2016/1178. The modifications introduced by the Acts largely follow the proposals set out in the reports of the ESAs. In our description, the reports are covered.
Summary of changes:
The reforms proposed by the Acts, in summary, are:
Amendments to the initial phase-in margin schedule, such that the implementation of Phase 5 will take place on 1 September 2021 and the implementation of Phase 6 on 1 September 2022;
The introduction of the opt-out requirements for physically-settled FX swaps and physically-settled FX forwards from the variation margin, except where both counterparties are investment firms or credit institutions under the EU Capital Requirements Regulation or equivalents of third countries;
Extension of the temporary exemption until 30 June 2022 from the clear or exchange margin requirement for intragroup transactions where one counterparty is located in a third country for which no decision on equivalence has been taken;
Extension of the temporary exemption from the exchange margin requirement for single-stock equity options and index options by 4 January 2024;
The introduction of transitional periods during which the initiation of a transaction solely to replace a UK entity with an EU entity does not give rise to new obligations under the Margin Rules or the Clearing Rules; and
Deletion from the Clearing Rules of the provisions pertaining to 'minimum remaining maturities' to reflect the elimination by the EU EMIR Refit Control of the frontloading condition.
Application date and implications for on shoring:
From 18 February 2021, the Statutes, and the changes they make, apply. Since the Acts were not in effect prior to 31 December 2020, the amendments made were not implemented into English law. However, in a policy statement (page 20), the UK Government stated its intention to consult on possible modifications to the corresponding UK margin rules to introduce similar changes under the UK EMIR onshore regime.