EMIR

EMIR applies to businesses based in the European Union, with EMIR differentiating requirements for individual entities depending on the category they belong to under EMIR. Entities subject to EMIR are collectively referred to as Counterparties.

EMIR divides businesses into the following categories:

a) Financial Counterparties (FC)
Investment firms, credit institutions, insurance companies, reinsurance companies, UCITS and their management companies, institutions managing employee pension schemes, and alternative investment funds managed by alternative investment fund managers – provided they have been granted the appropriate authorization under the EU directive.

b) Non-financial Counterparties (NFC)
Entities based in the European Union that are neither financial counterparties nor clearinghouses. Non-financial counterparties are divided into those that are subject to the obligation to clear transactions through central counterparties (NFC+) and those that are not subject to this obligation (NFC-).

c) Non-financial Counterparties NFC+
These are entities that have exceeded the thresholds set by regulation, based on the average position of the counterparty in derivative instruments over a 30-business-day period.

EMIR defines the following thresholds based on specific asset classes:

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Exceeding the threshold for one of the asset classes means the obligation to clear transactions through clearinghouses for all asset classes subject to the clearing requirement, even if the thresholds for other asset classes have not been exceeded.

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d) Central Counterparties (CCP)
Authorized clearinghouses that operate between counterparties to contracts, becoming the buyer to every seller and the seller to every buyer. The role of the CCP is to properly manage the risk that may arise when one of the counterparties is unable to meet its obligations.

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One of the key requirements of EMIR is the obligation to clear certain derivative transactions on the OTC market through CCP clearinghouses.

Transactions can be cleared directly in the clearinghouses only by entities that hold the status of a clearing member in that particular clearinghouse. Other entities can clear transactions through clearing members who provide intermediary services.

The reporting obligation can be fulfilled independently by participating and reporting concluded contracts directly to one of the trade repositories, or by delegating the reporting obligation to another entity.

In Poland, reporting to the authorized repository of the National Depository for Securities S.A. (KDPW_TR) can be done for all types of derivative contracts subject to the reporting obligation concluded on regulated markets and OTC.

The counterparty delegating the obligation to another entity remains responsible for the correct reporting of transactions, including: submitting the report, the information contained in the report, or the transaction details.

Data regarding each concluded derivative contract, its modifications, or termination must be reported to the appropriate repository no later than the business day following the conclusion, amendment, or termination of the contract (T+1).

The Act on Trading in Financial Instruments (Article 173a and Article 173b) provides for the possibility of imposing sanctions on counterparties who fail to fulfill or improperly fulfill the obligations arising from EMIR.

EMIR Refit is the Regulation of the European Parliament and Council (EU) 2019/834 of May 20, 2019, which came into effect on June 17, 2019, amending Regulation (EU) No. 648/2012 in relation to the clearing obligation, suspension of the clearing obligation, reporting requirements, risk mitigation techniques for over-the-counter derivative transactions not cleared by a central counterparty, the registration of trade repositories and supervision over them, as well as the requirements for trade repositories.

The purpose of EMIR Refit is to simplify some of the obligations under EMIR and introduce a more proportional approach to regulatory burdens for entities with low trading volumes in financial markets.

Changes Introduced by EMIR Refit::

Change of definition of financial counterparty (FC)

extending the directory of entities considered as financial counterparties to include alternative investment funds (AIFs) established in the EU or whose AIFMs have been authorised or registered in accordance with the AIFMD Directive.

Introduction of the concept of small financial counterparty (SFC)

Entities belonging to this category of counterparties are exempted from the obligation to centrally settle transactions, but are required to apply risk mitigation techniques, in particular subject to the obligation to exchange collateral. The distinction between FC and SFC will follow the same thresholds that apply to non-financial counterparties

New rules on making counterparties subject to the obligation to centrally settle transactions

• financial counterparties and non-financial counterparties that do not calculate their aggregated average position in derivatives contracts at the end of the month for the previous 12 months,
• financial counterparties that exceed any of the thresholds associated with the clearing obligation will be required to centrally settle all OTC derivative contracts of any class of derivatives;
• non-financial counterparties that exceed thresholds in respect of one or more classes of OTC derivatives will be required to centrally settle contracts for those asset classes for which clearing thresholds have been exceeded.

Mandatory reporting

• Financial counterparties will be solely responsible for reporting data on behalf of both counterparties to the repository of transactions concluded with NFC counterparties.