EMIR update. Impact on Asian counterparties. Paul Browne Penny Miller Jason Valoti. 27 March 2014

Transcription

1 EMIR update Impact on Asian counterparties Paul Browne Penny Miller Jason Valoti 27 March 2014

2 Key issues Risk mitigation techniques countdown to 30 April and significance for non-eu counterparties Reporting practical issues Obtaining of LEIs Clearing extra-territorial application to hypothetical financial and nonfinancial counterparties over the clearing threshold 2 / B_LIVE_APAC1:407641v1

3 EMIR timeline 15 March 2013 Timely confirms Daily valuation NFC+ notification 12 February 2014 Trade Reporting For OTC and ETD 10 October 2014 Extra-territorial clearing and risk mitigation obligations Unclear timing for: Margin requirements for uncleared trades Capital requirements for uncleared trades Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr 15 Sep 2013 Portfolio reconciliation Portfolio compression Dispute resolution March 2014 June 2014 First CCPs authorised Frontloading period commences 1-6 months after frontloading ESMA to submit draft RTS on clearing obligation 2-6 months after submission of draft RTS First clearing obligations NASDAQ OMX authorised on 18 March 2014 Draft RTS for NASDAQ OMX due by 18 September 2014 Possible clearing obligation for NASDAQ OMX products: December 2014 March / B_LIVE_APAC1:407641v1

4 Risk mitigation for non-cleared trades 30 April Risk mitigation requirements for non-cleared trades Portfolio reconciliation Dispute resolution Compression Application to Non-EU counterparties Although obligations do not apply on a direct basis to third country entities (TCEs), obligations will have an indirect impact on TCEs trading with EU counterparties Key ways to comply: Adhere to the ISDA EMIR Portfolio Reconciliation, Dispute Resolution and Disclosure Protocol Agreement with counterparties 4 / B_LIVE_APAC1:407641v1

5 What products are caught by EMIR? MiFID definition of derivative Rates Credit derivatives Equity derivatives Commodity derivatives Spot FX vs Forward FX ESMA and EU Commission letters Spot T+2/commercial forwards? Clearing exemption for FX? 5 / B_LIVE_APAC1:407641v1

6 EMIR Reporting Obligation Applies to all derivatives (exchange traded and OTC) and both parties All non-eu counterparties trading with an EU counterparty must obtain a Legal Entity Identifier (LEI) Reporting required 1BD after transaction is executed, modified or terminated Reporting start date ( RSD ) no earlier than 12 February 2014 for all asset classes exposure reporting (valuation and collateral) 180 days to report (i.e. 11 August 2014) Backloading of existing trades: if outstanding at RSD, 90 days to report (i.e. by 13 May 2014) if not outstanding at RSD but outstanding on, or entered into after, 16 August 2012, 3 years to report (i.e. by 12 February 2017) Delegation and avoidance of duplication 6 / B_LIVE_APAC1:407641v1

7 Clearing agreements: ISDA/FOA Client Cleared OTC Derivatives Addendum FOA Clearing Module CCP-specific client clearing documentation (eg SwapClear) Proposed ISDA Cleared Derivatives Execution Agreement Upgrade to futures clearing agreements Choice of omnibus client segregation or individual client segregation Risk and cost disclosure Front-loading agreement/provisions? Clearing Broker Addendum ISDA MA FOA Other or or Client 7 / B_LIVE_APAC1:407641v1 7

8 Third country regimes/ccps EU Commission may adopt Level 2 measures declaring the regime in the relevant non-eea state to be equivalent ESMA delivered its technical advice to the EU Commission on the (conditional) equivalence (or not) of the legal and supervisory rules of: US and Canada Japan Australia Hong Kong Singapore South Korea Switzerland India In addition, a CCP established in a third country may provide clearing services to clearing members or trading venues established in the Union only where that CCP is recognised by ESMA. 8 / B_LIVE_APAC1:407641v1

9 Further information from Simmons & Simmons Legal Headwinds Regulatory Revolution Tracker 9 / B_LIVE_APAC1:407641v1

10 Contact details Paul Browne T E Paul.Browne@simmons-simmons.com Penny Miller T E Penny.Miller@simmons-simmons.com Jason Valoti T E Jason.Valoti@simmons-simmons.com 10 / B_LIVE_APAC1:407641v1

11 simmons-simmons.com elexica.com 11 / B_LIVE_APAC1:407641v1