Company's groupings qualifying as non-financial counterparties currently below the clearing threshold under EMIR Regulation, considering clearing and collateral exemptions for intra-group transactions as valuable alternative for their businesses, may face a dilemma whether to make the appropriate submissions to relevant authorities for exemption only the grouping crosses the threshold value or immediately initiate this procedure for future potential use.
Both scenarios appear viable. However, to be mindful of potential delays involved with the exemption procedure and the need for business flexibility, if the grouping considers making use of the intra-group clearing and collateral exemptions advantageous, the latter of the above options should be given priority.
Such a procedural arrangement may occur a competitive edge when an interesting potential (non-hedging), extra-group, transaction appears on the horizon and its execution would effect in placing the entire grouping above the clearing threshold (necessitating in consequence, in the requirement to collateralize all intra-group transactions the effect the grouping would like to avoid).
Theoretically, a grouping being a non-financial counterparty can multiple times find itself above and below a clearing threshold and internal group arrangements implementing EMIR should be flexible enough to enable smooth functioning of business irrespective of the above movements reflecting potential changes in the derivatives exposure.
Considering once more the options mentioned at the beginning, the former exposes the non-financial counterparties, whose speculative derivative's position is below the clearing threshold, to the procedural petrification, which can devoid the undertaking of potential business opportunities.