Legal development

EU EMIR exemptions from clearing and margining - latest developments

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    Intragroup clearing and margining exemptions extended by three years

    On 13 June 2022, the European Supervisory Authorities (ESAs) published two Final Reports containing draft technical standards that, if adopted, will extend by three years the temporary exemptions from clearing and margining available under EU EMIR 1 for intragroup transactions. If they are extended, as is widely expected, the new expiry date for each will be 30 June 2025. The reports are accessible here and here.

    The proposed rules now need to pass through the EU legislative review process, which can take several weeks. As the extension is not expected to take effect until after expiry of the current temporary exemptions, the ESAs have also issued a so-called forbearance statement: official guidance to national competent authorities that they should not prioritise supervisory action against entities which are technically in breach of the rules after the temporary exemptions have expired, pending official implementation of the extension.

    Permanent v temporary exemptions

    Under EU EMIR, permanent exemptions from clearing and margining are available for intragroup transactions between an EU entity and a non-EU entity, but only where the non-EU entity is established in a jurisdiction in respect of which an equivalence decision has been made by the European Commission. For intragroup transactions involving a non-EU counterparty in a non-equivalent jurisdiction, temporary exemptions, or "derogations" are available.

    Having already been extended previously, the derogations are currently due to expire on 30 June 2022. However, as relatively few jurisdictions have been recognised by the EU as equivalent for these purposes, the ESAs consider it appropriate that the temporary exemptions be extended again, to 30 June 2025, extending the relief while the European Commission continues its equivalence assessments.

    Similar position under UK EMIR

    The position is similar under the onshored version of EU EMIR (UK EMIR). Under Regulation 82 of The Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2019, which forms part of the suite of documents onshoring and amending UK EMIR, temporary exemptions are available for intragroup transactions between a UK entity and a non-UK entity established in a jurisdiction which has not been found equivalent by HM Treasury.

    The exemptions last until 31 December 2023 unless equivalence is granted in the meantime, in which case they expire either two months (for clearing exemptions) or four months (for margin exemptions) thereafter, and permanent exemptions can be sought instead.

    PSA clearing exemption to be extended by one year

    Separately, on 9 June 2022, the European Commission published a Delegated Regulation that will extend by one year the temporary exemption from the EU EMIR clearing obligation applicable to pension scheme arrangements. The exemption has already been extended a number of times on a rolling basis and is now due to end on 18 June 2023.

    In a related report, the Commission expressed the view that, thereafter, the exemption should not be rolled again, as pension scheme arrangements are largely operationally ready to clear and some already clear trades voluntarily. Pension scheme arrangements remain concerned about the underlying issue of access to cash, but the Commission considers that liquidity has improved sufficiently for the exemption to be extended only once more, and to expire definitively on 18 June 2023.

    Authors: Kerion Ball and Kirsty McAllister-Jones

    1  The European Market Infrastructure Regulation (EU Regulation 648/2012)

    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.

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