EU EMIR: EMIR 3 and the active account requirement
05 February 2025

On 27 January 2025, ESMA closed its first consultation on draft technical standards under EU Regulation 2024/2987, a new iteration of EU EMIR known as EMIR 3 that entered into force on 24 December 2024. We summarise the changes made by EMIR 3 in this briefing.
Many of the obligations created by EMIR 3 apply from 24 December 2024, but some, including aspects of the new active account requirement (AAR), will only apply from 25 June 2025. The basic framework of the AAR is set out in EMIR 3, but this needs to be supplemented by technical standards drafted by ESMA. Now that the consultation period has closed, ESMA plans to expedite the review process so that the technical standards can be finalised before 25 June 2025.
In this briefing, we outline key considerations for market participants, based on ESMA's proposed technical standards.
The draft technical standards are divided into three sections covering (i) the operational requirement and stress testing for active accounts, (ii) the representativeness requirement, and (iii) the new reporting requirements. We discuss each below.
AAR scope
The AAR is a new clearing obligation designed to increase clearing activity in the EU. It comprises two elements – the requirement to establish an appropriate account with an EU CCP (known as the operational requirement) and the requirement to clear in that CCP a minimum number of in-scope transactions each year, being a number of transactions that is representative of that entity's non-EU clearing activity (known as the representativeness requirement).
In order to determine whether one or both of these requirements applies, a number of calculations need to be undertaken. These are described below.
For a particular entity to determine whether it is in scope of the AAR at all, there are two calculations that it needs to perform:
Euro-denominated short-term interest rate derivatives (EUR STIR) are technically exchange-traded derivatives but can be classified as OTC derivatives under EU EMIR if not executed on an EU regulated market or a non-EU "equivalent" regulated market. In the consultation, ESMA clarifies that EUR STIR that are classified as OTC derivatives need to be included in the AAR scoping calculation. This includes EUR STIR executed on a UK CCP, as the UK market has not been found to be "equivalent".
The clearing obligation calculations (limb 1 above) should be undertaken in the usual way (i.e. aggregate month-end average positions for the previous 12 months, with the group scope depending on whether the calculating entity is an FC or an NFC).
The AAR calculations (limb 2 above) should also be based on aggregate month-end average positions for the previous 12 months, with EU-consolidated groups counting all group activity, including that of non-EU entities. There is no differentiation for FCs and NFCs and no hedging exemption, but intragroup transactions can be excluded.
If the clearing thresholds change after ESMA's expected review, market participants may need to re-visit their scoping calculations. This could result in a change in status for some entities, which would be operationally burdensome and possibly costly. However, in the consultation ESMA indicates that any future change to the thresholds is unlikely to be substantial. Furthermore, the Recitals to EMIR 3 suggest that the European Commission expects ESMA's review to focus predominantly on the commodity derivatives threshold, which should limit its impact.
Once an entity has determined that it is in scope of the AAR, it needs to then consider separately whether it is subject to (i) the operational requirement only, (ii) the representativeness requirement only, or (iii) both the operational and the representativeness requirements. It is possible to be subject to the operational requirement but not the representativeness requirement, and vice versa. See the scoping flowchart at Annex 1 for a summary.
An entity that is in scope of the AAR will be subject to the reporting requirements discussed below irrespective of whether it is subject to the operational requirement, the representativeness requirement, or both.
Notification requirement
If an EU entity exceeds both of the thresholds described above, it is within scope of the AAR and must notify ESMA and its competent authority accordingly. ESMA has published a standardised notification template for this.
Scope
In an entity is in scope of the AAR, unless the 85% operational account exemption described in Exemptions and deviations below is applicable, the operational requirement will apply.
ESMA suggests that the 85% threshold should be calculated on an aggregated basis, at group level for EU-consolidated groups, excluding intragroup transactions. However, this is not explicitly stated in the EMIR 3 regulation and may change in the final technical standards.
The obligation
If the operational requirement applies, the in-scope entity has six months to establish with an appropriate EU CCP an active account that meets the specified operational criteria. For entities that are in scope from 24 December 2024, this means having one or more operational accounts in place by 25 June 2025.
ESMA suggests in the consultation that this requirement can be satisfied on a group-wide basis by one entity within the group. However, it is unclear how this would operate in practice, so it will be necessary to consider how, if at all, this is reflected in the final technical standards.
Account criteria
Each account needs to meet certain operational criteria. Among other things, accounts must be (i) permanently functional, (ii) operationally able to clear all the entity's new in-scope transactions, and (iii) able to accept multiple in-scope transactions from other CCPs at short notice.
ESMA's draft technical standards build on these requirements, specifying that in-scope entities should establish:
These are all standard requirements when establishing a clearing arrangement, so should not prove unduly onerous. However, the draft standards also go further, requiring in-scope entities to:
Market participants are required to demonstrate compliance with the above to their competent authority every six months. Under the draft technical standards, this would include written confirmations (including the statement from the CCP), summaries of material changes since the last report, and information on the account statements for cash and collateral. Firms would also need to provide signed confirmation from the EU CCP as to operational capacity and stress testing. In an indirect clearing scenario, the draft technical standards provide for in-scope entities to request the necessary CCP confirmations from the firm providing the clearing service.
This may require the implementation of internal processes to ensure that the new requirements are met on time.
Stress testing
Entities that are subject to the operational requirement need to stress test their active accounts at least once a year. ESMA says in the consultation that it understands the term "stress testing" to mean "running appropriate tests on the systems and resources of the counterparty, as well as the [EU CCP] account".
In the draft technical standards, ESMA proposes that firms should have to conduct (and provide written confirmation of this to ESMA) technical and functional tests to verify operational capacity and IT connectivity with the CCP, and also provide a signed written statement from the CCP confirming that the account can withstand an increase in clearing activity of up to 85% of the total clearing activity in in-scope transactions by entities subject to the AAR.
The consultation indicates that the 85% stress test should be carried out every six months for counterparties with a "notional clearing volume outstanding" of above EUR 100 million, and every 12 months for other entities. Acknowledging that "notional clearing volume outstanding" is not a commonly used metric, ESMA suggests that it should be interpreted to mean the cleared outstanding notional amount, in line with the metric used to measure against the clearing thresholds under the clearing obligation. The term is also used in relation to the EUR 6bn threshold exemption discussed below, in which context the same interpretation should be used.
Scope
If an entity is in scope of the AAR, unless the EUR 6bn threshold exemption described in Exemptions and deviations below is applicable, the representativeness requirement will apply.
The obligation
The representativeness requirement is the most complex of the two AAR elements and mandates the clearing of a minimum number of transactions per year in an EU CCP. The minimum number is to be determined regularly by each in-scope entity, based on various parameters.
In-scope counterparties will need to clear through an EU CCP at least five transactions falling within the required number of most relevant sub-categories for each class, for each reference period. This needs to be considered on an annual average basis, so competent authorities will need to consider the total number of trades over a year when assessing compliance.
These parameters are explained below, and in the summary table attached as Annex 2.
The EMIR 3 text specifies the broad categories of transaction that are in scope of the AAR. These are:
ESMA's technical standards build on these broad categories by sub-dividing them further, into sub-groups based on (i) classes of in-scope transaction and (ii) sub-categories of class. Once in final form, the technical standards will specify which sub-groups of each type of in-scope transaction are subject to the representativeness requirement, based on a combination of class and sub-category.
Recommended classes
ESMA's recommended classes for each in-scope transaction type are:
Recommended sub-categories
For each class of derivative, in-scope entities will need to clear in their EU account at least five transactions falling within each of their "most relevant transaction sub-categories" per reference period, on an annual average basis.
This involves:
ESMA's proposed parameters are deliberately wide and give in-scope entities broad scope to ensure compliance with the representativeness requirement.
Reference periods
ESMA must also set the reference periods that will be used to determine whether the required minimum number of transactions is actually cleared over the year. EMIR 3 requires ESMA to specify different minimum reference periods for entities with an outstanding cleared notional amount in in-scope transactions of under €100 billion (small counterparties) and entities with an outstanding cleared notional amount in in-scope transactions of above €100 billion (large counterparties), excluding transactions that are entered into as part of a client clearing arrangement.
ESMA recommends the following reference periods (as indicated in the table in Annex 2):
It is not clear whether firms are required to clear five trades in the sub-categories that have the most trades during the current reference period or the previous reference period.
Although the parameters of the AAR are not yet settled, in-scope entities may wish to use the consultation as an indication of ESMA's direction of travel and establish their accounts and start clearing on the basis of the recommendations.
Various exemptions and deviations apply in certain circumstances:
Finally, in the consultation ESMA addresses industry concerns by clarifying that firms are not expected to enter into transactions solely for the purpose of complying with the AAR.
AAR reporting
Every six months AAR in-scope entities will need to report to their competent authorities their in-scope transaction activity and risk exposure, so that AAR compliance can be assessed. In its consultation, ESMA specifies how firms should calculate and report this, referencing data already used for trade reporting. Helpfully, the draft technical standards contain reporting tables populated with reporting fields that cross-refer to the EU regulation on EU EMIR trade reporting. ESMA also refers market participants to existing reporting guidelines for further guidance.
The data to be reported is divided by ESMA into two categories:
ESMA proposes that entities should report notional amounts on both a gross and a net basis.
EU-consolidated groups are required to report certain information for all EU and non-EU group entities.
There are further reporting requirements for entities which are subject to the representativeness requirement. They need to report (i) their in-scope transaction EU and non-EU clearing activity (ii) whether they are required to clear five trades or one trade per sub-category, and (ii) what their reference period is, so that the competent authority can assess AAR compliance. Entities that are subject to the operational requirement also need to submit reports to demonstrate compliance with that requirement.
ESMA guidance
In the consultation, ESMA notes that the anticipated AAR reporting is separate from the existing trade reporting regime, not least because under the existing regime reports are made to trade repositories rather than directly to competent authorities. ESMA also notes the lack of a mandate for it to develop implementing technical standards for AAR reporting, commenting that this could lead to a divergence in reporting methods. To mitigate this, ESMA proposes two solutions:
Next steps
ESMA plans to implement the AAR technical standards on an expedited basis, so that they are in place before 25 June 2025. It may be problematic for firms to start implementation measures without final technical standards, but the consultation gives a strong indication of ESMA's views and should serve as a useful steer.
For more information on and EU EMIR and UK EMIR, please see our EMIR Hub or contact your usual Ashurst contacts.
Annex 1 – EMIR 3 AAR scoping flowchart
Annex 2
Category | Classes | Maturity ranges | Trade size ranges | Number of "most relevant" sub-categories | Reference period | Number of trades to be cleared per reference period |
EUR-denominated interest rate derivatives | EUR Fixed-to-float | 0-5Y | 0-25M | 5 (of 12 sub-categories) |
| At least 5 in each of the 5 "most relevant" sub-categories |
EUR OIS | 0-1Y | 0-25M | 5 (of 12 sub-categories) |
| At least 5 in each of the 5 "most relevant" sub-categories | |
EUR FRA | 0-6M | 0-75M | 5 (of 12 sub-categories) |
| At least 5 in each of the 5 "most relevant" sub-categories | |
PLN-denominated interest rate derivaties | PLN Fixed-to-float | Any | Any | 1 (of 1 sub-category) |
| At least 5 |
PLN FRA | Any | Any | 1 (of 1 sub-category) |
| At least 5 | |
EUR-denominated short-term interest rate derivatives | EUR STIR referencing 3-month Euribor | 0-6M | Any | 4 (of 4 sub-categories) |
| At least 5 in each sub-category |
EUR STIR referencing 3-month €STR | 0-6M | Any | 4 (of 4 sub-categories) |
| At least 5 in each sub-category |
The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.