Inside information on the carbon market - time to build expertise
- Category: MAD/MAR
I'm sure your company has in place documented systems and procedures to conduct - with due diligence - assessments, which of your emissions data will have the potential to influence on the market price of carbon (or that the said impact is, for example, negligible).
No? But, obviously, you have already verified whether your company exceeded, at the group level, the threshold of 6 million tonnes of carbon dioxide equivalent a year or a rated thermal input of 2,430 MW. Not true? I don't believe it!
If, neglecting the above issues, you're counting on the fact that your company is already publishing inside information under the REMIT Regulation, this misunderstanding may have severe consequences.
Short story – how we went MAD
- Category: MAD/MAR
The impact of the new regulatory measure is estimated (assuming the threshold of 6 million tonnes a year) that 70 companies would be captured by the requirement to disclose inside information on the carbon market (approximately 56% being energy producer and the rest other industrial emitters) accounting for 70% of the total verified emissions, and 857 companies would be exempted.
FCA starts accepting applications for EMIR intragroup exemptions from margin from 4 January 2017.
- Category: EMIR
Flawed inception of mandatory clearing
- Category: EMIR
Financial counterparties and alternative investment funds (AIFs) which are not clearing members and which have a lower level of activity in OTC derivatives (to be measured against a quantitative threshold) will likely benefit from extended deadlines for mandatory clearing.
CCP-cleared trades terminated - not modified (in EMIR reports)
- Category: EMIR
Where an existing contract is subsequently cleared by a CCP, it mustn't be reported under EMIR to the trade repository as a modification of the existing contract, but the original contract should be flagged as terminated and the new contract resulting from clearing should be reported.
This is the essence of ESMA's recent draft amendments with respect to EMIR reporting of derivatives subject to clearing.
It will be also expressly stipulated by the law that when a contract is concluded in a trading venue and cleared on the day of execution, only its cleared form will be reported.
Hedging - tornado approaches
- Category: EMIR
Clearing thresholds' calculations are quite complicated - partially on account of requirement to classify all OTC derivatives transactions as hedging or non-hedging (which fatigue applies even to the smallest counterparties).
There is a chance, in the foreseeable future the companies' procedures setting the company's position versus clearing threshold may become simpler, but this novelty unnecessarily would mean less regulatory burden.
Flawed definition for financial counterparties in EMIR
- Category: EMIR
Financial counterparties may find it difficult to establish whether they qualify as such under EMIR. Maybe the uniform European Register of Financial Counterparties would help somewhat.
Individual client accounts uneasy take-up
- Category: EMIR
Why do firms choose omnibus client accounts ignoring better protections offered by the individual form of segregation?
Non-fully backed bank guarantees coming to an end as the CCP collateral
- Category: EMIR
Expiring EMIR exemption will make as from 15 March 2016 CCP collateral more costly for non-financial counterparties.
Collateral vs central clearing - alternatives for OTC derivatives market
- Category: EMIR
The implementation of the central clearing obligation is expected to decrease the total gross notional outstanding for non-centrally cleared derivative activities (which is estimated about EUR 146 trillion) to about EUR 74.9 trillion (or by 49%).
It means 51% of these transactions will be cleared centrally and - after the implementation of the margin requirements - about 49% of the OTC derivatives market will be captured by the EMIR collateral requirement.
Enhanced EMIR reporting scrutiny as from November 2015
- Category: EMIR
1 November 2015 marks the end of the period where trade repositories verified the completeness and accuracy of EMIR trade reports submitted by market participants using relatively less elaborate checks.
The first level validation, which is already in place since 1 December 2014, consisted in determining by trade repositories, which fields are mandatory in all circumstances and under what conditions fields can be left blank or include the Not Available (NA) value.
In turn, the second level validation, which will be mandatory as from the end of October 2015, will refer to the verification that the values reported in the fields comply in terms of content and format with the rules set out in the technical standards.