UK amends UK EMIR Margin Rules

Key points

On 27 November 2025, the PRA and the FCA published Policy Statement 23/25, which amends the UK EMIR Margin Rules.¹

The changes:

• permanently exempt single-stock equity options and index options from the UK EMIR Margin Rules;
• allow UK firms to agree with counterparties to stop exchanging initial margin on outstanding legacy transactions and release previously collected initial margin if and for so long as one of them is below the EUR 8 billion threshold; and
• allow UK firms transacting with non-UK firms to use the threshold assessment periods and application dates of the non-UK jurisdiction to determine initial margin scoping for transactions with that counterparty.

The regulators consulted on the amendments earlier this year and have implemented them without substantive changes.

Background

The UK EMIR Margin Rules require in-scope market participants to exchange variation margin and initial margin in respect of certain non-cleared OTC derivative transactions. The rules were onshored into English law with very few substantive changes on 31 December 2020 as part of the UK's wider onshoring of applicable EU legislation. The UK and EU rules remain closely aligned but divergence is gradually increasing.

Single-stock equity options and index options have benefited from a rolling temporary exemption under both the EU and UK Margin Rules since their entry into force. 

The new amendments convert the UK temporary exemption into a permanent exemption, aligning the UK treatment of these products with that of other major jurisdictions, including the EU, which introduced a permanent exemption from margining  (subject to regular review) under EMIR 3 (discussed here), and the US.

Initial margin requirement to expire if either counterparty falls below EUR 8 billion 

The requirement to exchange initial margin applies where each counterparty (i) is a financial counterparty or a non-financial counterparty that exceeds one of the clearing thresholds and (ii) has a group-wide average aggregate notional amount (AANA) of non-cleared OTC derivatives of EUR 8 billion or more. 

Market participants perform their AANA calculations based on notional amounts for the months of March, April and May in a particular year. If both counterparties exceed the EUR 8 billion threshold, they must exchange margin from the beginning of the next calendar year. 

Before the rules were amended, if one or both counterparties fell below the EUR 8 billion threshold, they still had to continue margining their existing in-scope transactions, even if they remained below the threshold for the remainder of the transaction. This imposed a significant burden on affected firms. 

The new amendments allow transacting counterparties to agree that, if one or both of them drop(s) below the EUR 8 billion threshold: 

1. they can stop exchanging initial margin at the end of that calendar year; and 

2. they must return previously exchanged initial margin. 

If both parties later exceed the threshold again, they need to start margining again.

The PRA and the FCA consider that this approach more accurately reflects the lower systemic risk of market participants that undertake less trading activity.

UK firms permitted to use counterparty jurisdiction scoping rules and timing 

The final change allows UK market participants transacting with non-UK counterparties that are subject to margining requirements in their own jurisdiction to align the UK-imposed scoping calculations and timeframes with that of the other jurisdiction.

For example, UK firms calculate initial margin thresholds using notional amounts for March, April and May. Once a counterparty falls below the threshold, initial margin need not be exchanged from the start of the next calendar year. 

However, the calculation periods and timeframes applicable in other major jurisdictions vary. This means that a particular transaction can temporarily be in scope of the UK Margin Rules but not in scope of the corresponding rules in the other jurisdiction. In cross-border transactions, the operational and economic effect of this misalignment is significant. 

The amendment means that if, for example, the non-UK jurisdiction has a scoping calculation period of June, July and August, the UK entity can use this period too. 

Similarly, where one of the counterparties falls below the threshold, if the initial margin requirement ceases earlier under the non-UK rules, the UK entity can now also use this earlier date.

In light of this change, firms will have to be especially vigilant when recording the dates and timeframes applied to particular trading relationships.

Commentary

These amendments align the UK framework with other major jurisdictions and clarify ambiguities, bringing more consistency to the market and reducing unnecessary costs and uncertainty.