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29.05.2015 | KPMG Law Insights

Derivatives – Insights – Derivatives | Edition No. 1/2015

Dear readers,

EMIR has not finished yet. There are many open questions and uncertainties regarding the EMIR requirements. ESMA is trying to bring some light in to this situation. Recently, it has released its 13th updated EMIR Q&A, guidelines on the definition of commodity derivatives on recognized third-country CCPs.

Sincerely yours,

Andres Prescher

 

ESMA

ESMA publishes updated EMIR Q&A’s

The European Securities and Markets Authority (ESMA) published on 27 April 2015 the 13th update of its Questions and Answers – implementation of the Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR) (EMIR Q&A).

The update focuses on the Q&A’s “Part III: Trade Repositories” (TR Questions), in particular, on the reporting field “Maturity” and on the validations of EMIR reports.

Regarding the maturity date, the Q&A clarify that the maturity date field shall, in general, represent the “original date of expiry of the reported contract.” Early Terminations of a contract shall not be reported in this field. Only where the maturity date of an existing contract is subject to changes which are already foreseen in the original contract specifications such changes shall be reported in the maturity filed of a modification report.

Regarding the TRs validations of EMIR reports ESMA is about to start implementing the second level validation. This means TRs will have to verify that values reported in the fields comply in terms of content and format with the rules set out in the technical standards (Regulation (EU) No 148/2013).

Please find here the link to the ESMA press release and link to the ESMA Q&A.

ESMA

ESMA publishes guidelines on the definition of commodity derivatives

On 6 May 2015 ESMA published its guidelines on the application of the definitions in Sections C6 and C7 of Annex I of Directive 2004/39/EC (MiFID). The guidelines apply to competent authorities (in Germany: BaFin) who shall incorporate the guidelines into their supervisory practice and, thus, are relevant for all regulated entities involved in derivatives trading.

The guidelines contain clarifications regarding the definition of commodity derivatives and their classification under MiFID and are aimed at ensuring a common, uniform and consistent application of the derivative definitions. Since these definitions are also incorporated by reference into EMIR the guidelines have a direct impact on the application of all relevant EMIR obligations as well. Even though the guidelines are based on MiFID1, ESMA’s express purpose is to ensure, wherever possible, there is continuity between the application of the MiFID1 regime and the MiFID2 regime where it comes to the definition of derivatives.

While the actual guidelines mainly confine themselves to re-phrasing what could already be inferred before from the wording of MiFID’s Annex 1 C and Art. 38 of MiFID Implementing Regulation (Regulation (EC) No 1287/2006) the, in our opinion, more relevant part is the guidelines’ Annex 1. In this Annex 1 ESMA gives its view on several responses to the consultation, e.g. regarding the effect of “secondary contractual rights” on the nature of settlement, on issues related to “take or pay” contracts or on the definition of “commercial purposes”. These statements provide a deeper insight into ESMA’s understanding of derivatives and help to cast more light into some of the remaining shadows of the derivatives definition under MiFID and EMIR.

The guidelines will apply from 7 August 2015. Please find here the ESMA guidelines.

ESMA

ESMA recognizes third-country CCPs

The European Securities and Markets Authority (ESMA) has on April 29, 2015 recognized ten third-country CCPs established in Australia, Hong Kong, Japan and Singapore. The recognition by ESMA allows third-country CCPs to provide clearing services to clearing members or trading venues established in the EU.

Those CCPs are established in jurisdictions which have been assessed as equivalent by the European Commission with regard to their legal and supervisory arrangements for CCPs. Several other steps led to the recognition of those third-country CCPs, including the conclusion of cooperation agreements with the relevant third-country authorities, as well as the consultation of certain European competent authorities and central banks, as required by EMIR.

As a result, ESMA has published a list of third-country CCPs recognized to offer services and activities in the EU. The list will be updated after each new decision on the recognition of third-country CCPs.

Please find here the ESMA press release and the list of recognized third-country CCPs.

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