The onshored version of EU Regulation 648/2012 on OTC derivatives, central counterparties and trade repositories ("EU EMIR") as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 (as amended), including amendments made as part of the broader onshoring process ("UK EMIR"), took effect from 11pm on 31 December 2020 ("IP Completion Day"). While most of the obligations under UK EMIR are substantively the same as those under EU EMIR, or are subject either to regulators' so-called "standstill powers" or to specific transitional provisions, which both allow in-scope entities up to 15 months to comply, there are some exceptions. In particular, entities which are in scope of UK EMIR should be aware that:
- they must have arrangements in place to allow them to report derivative transactions entered into on or after 1 January 2021 to one of the following trade repositories authorised and registered under UK EMIR: ICE Trade Vault Europe Limited, UnaVista Limited, DTCC Derivatives Repository Plc or REGIS-TR UK Limited;
- if they benefitted from an intragroup exemption from clearing or margining with EEA group entities prior to IP Completion Day, in order to continue to benefit from that intragroup exemption, they must, by 1 February 2021 (i) notify the FCA of the entity pairs to which the intragroup exemption applies, and (ii) confirm whether there have been any changes to the conditions under which the original exemption was granted; and
- if they benefitted from an intragroup exemption from margining with third-country group entities in respect of which an equivalence decision has not been made ("Non-Equivalent TCEs"), they must reapply to the FCA for the exemption if (i) the circumstances relevant to the satisfaction of exemption conditions have changed and have not already been communicated to the FCA, or (ii) they require individual communication of the decision. Otherwise, they can continue to rely on such exemption on the same basis and subject to the same limitations as previously applied, notwithstanding the expiry of the formal derogation on 4 January 2020.
In-scope entities seeking to rely on the continuation of intragroup exemptions should also consider the position under applicable law in counterparty jurisdictions, as corresponding exemptions may not be available to counterparties in certain jurisdictions.
No action is required under UK EMIR by in-scope entities to maintain (i) intragroup exemptions from clearing with Non-Equivalent TCEs, as such exemptions are grandfathered under UK EMIR for three years after IP Completion Day (except where a relevant equivalence decision is made, in which case the grandfathering period expires two months after the decision), or (ii) intragroup exemptions already in place with respect to equivalent third-country entities (i.e. those incorporated in Japan or subject to US CFTC margin rules), as the EU equivalence decisions have been onshored.
Authors: Kerion Ball and Kirsty McAllister-Jones.
