European Securities and Markets Authority Chair Queries EMIR REFIT Clearing Threshold Calculation for Certain Financial Counterparties

The Chair of the European Securities and Markets Authority, Steven Maijoor, has requested clarity from the European Commission on the methodology for calculating the clearing threshold of a Financial Counterparty that is part of a non-financial group under the revised European Market Infrastructure Regulation (known as EMIR REFIT).

The EMIR REFIT, among other things, introduced a clearing threshold for all FCs that operates in mostly the same way as the existing clearing threshold for Non-Financial Counterparties. However, under EMIR, NFCs are not obliged to include derivatives contracts entered into for hedging purposes in their clearing threshold calculations whereas FCs must include all OTC contracts they enter into. In his letter, Mr. Maijoor notes that FCs within a non-financial group are obliged to take into account all OTC contracts entered into by both FCs and NFCs within the group, regardless of any hedging contracts held by the group NFCs. Mr. Maijoor argues that FCs should be entitled to apply the hedging exemption that relevant NFCs within the same group are applying. The language of the EMIR REFIT does not, however, make it clear whether this would be permitted. ESMA therefore seeks clarification on this point.

The EMIR REFIT has, subject to certain exceptions, been applicable directly across the EU since June 17, 2019, including the new FC clearing threshold. It amends the existing European Markets Infrastructure Regulation with the aim of introducing a simplified and more proportionate approach to certain aspects of EMIR. ESMA published a statement on the application of the clearing obligation under EMIR REFIT at the end of March this year, but this particular point on the calculation of the clearing threshold by FCs within a non-financial group was not covered.

View ESMA's letter.

View details of the EMIR REFIT Regime.

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