The authorisation under EMIR Regulation of Nasdaq OMX Clearing AB by the Finansinspektionen in Sweden as the first EU-based CCP on 18 March 2014 has limited impact on the European carbon market since the scope of the notification does not cover emission allowances.



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.



There is no requirement to ensure that the TRN reported under EMIR has the same value as the Transaction Reference Number reported under MiFID.


EMIR contains also a requirement to assign a Unique Trade Identifier (UTI) which is unique but the issues how it should be generated or by whom are not specified legally.




When it comes to EMIR reporting compliance strategy the fundamental choice for market participants is whether to report derivatives themselves or to delegate reporting to their counterparty or another service provider.


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On 12th February 2014 derivatives market participants are required to be fully prepared to backload existing trades. Practical arrangements enabling this elaborate operation are just being worked out by clearing houses.



Where a clearing member desires to use its own assets (i.e. assets that were not posted by a client of the clearing member) to fulfil the margin requirements of the client account, then such assets could be recorded in a client account at a CCP, however in doing so the assets would be treated as assets held for the account of clients of the clearing member. This would mean that upon a default of the clearing member, the assets would be exposed to losses connected to the client account in which the assets were recorded and could no longer be used to meet any losses on the defaulted clearing member's house account(s).


This interpretation has been acknowledged by ESMA in regulatory guidance.



Deadlines for EMIR reporting for exchange-traded derivatives (ETDs) will likely be extended by 1 January 2015.



Generally, a group of companies is often perceived by legislators and judicature as a single economic unit. The case is also present under EMIR rules, where for instance, to establish whether a subsidiary has crossed a clearing threshold, transactions of the entire group must be counted.


On the other hand, when a group - as a single economic unit - buys emission permits in the carbon market, the value of transaction is - for EMIR clearing threshold calculations - 300% of the trade.


It is evident that the monitoring of the EMIR requirements by non-financials mustn't consist in the verification of the clearing threshold levels only, but needs to be supported by sophisticated procedures and IT tools.




Among potential compliance concerns regarding EMIR and particularly the issue of clearing thresholds is the question how the counterparty trading with the non-financial counterparty (NFC) is going to be made aware that the NFC has or has not yet exceeded the clearing threshold and how the responsibility for breaching the respective restrictions is shared.



Intragroup transactions when calculating clearing thresholds are counted twice.



Emissions derivatives market participants are required under the EMIR rules to calculate whether they cross the clearing threshold. The status of being below the relevant threshold should effect for these counterparties in more favourable pricing of the respective products.



Regulatory (RTS) and Implementing (ITS) Technical Standards on EMIR (European Commission Regulations No 148/2013 – 153/2013 of 19 December 2012) have been formally published (OJ L 52, 23.2.2013), which means that the relevant time-limits for implementation start running.