EMIR is a system of regulations that include reporting requirements to serve as a set of operational risk management standards. These requirements apply to derivative contracts and post-trade-related transactions. These regulations also established rules specifically for central counterparties (CCPs) and TRs.
The purpose of the introduction and enforcement of EMIR is to increase transparency in the European post-trade processes and market, as well as reduce systemic counterparty and operational risks by regulating OTC derivatives. The overarching goal of EMIR is to improve operations, reduce financial risks, and increase visibility to prevent future financial system turmoil.
EMIR was originally adopted by the ETC back in July 2012 and went into force in August 2012. The ETC adopted technical standards in December 2012, and went into effect in March 2013. The primary rules that were proposed included the following:
- All standardised OTC derivatives should be traded on exchanges or where available via electronic delivery methods
- All standardised OTC derivatives should be cleared through CCPs.
- Both OTC derivative contracts and listed derivatives should be reported to TRs.
- Non-centrally cleared derivatives contracts should be subject to higher capital requirements.
Read More: EMIR: A Brief Guide