What is EMIR?

EMIR is a European regulation that applies to all companies established in the European Union(EU)/European Economic Area (EEA) that have entered into or will enter into a derivatives transaction. EMIR mainly contains rules for Over-The-Counter (OTC) derivatives contracts, but also for exchange-traded derivatives (ETDs). 

EMIR applies directly in the EU. In the two countries that are part of the EEA but not of the EU (Liechtenstein and Iceland), EMIR has to be incorporated in national legislation first. 

EMIR also has consequences for entities that are established outside of the EEA, in the case that they enter into derivatives transactions with entities that are established within the EEA.

Why EMIR?

After the financial crisis in 2008, the G20 members agreed on a number of measures in order to minimize the risk of a similar financial crisis in the future. The G20 members agreed to draft new national and/or international rules for derivatives transactions with the aim of improving the safety and the transparency of the financial markets. A number of the G20 agreements that apply to Europe have been laid down in EMIR.

What are the most important EMIR rules?

The EMIR rules have been implemented in tranches. At this moment most of the EMIR rules have entered into effect. Some rules apply to FCs as well as NFCs and NFCs+. Other rules only apply to FCs and NFCs+.

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To which products does EMIR apply?

EMIR has consequences for OTC derivatives and exchange-traded derivatives (ETDs) such as:

  • equity derivatives
  • interest rate derivatives
  • fx derivatives (except FX spot products); and
  • commodities derivatives (except energy spot products)
Please note: FX forwards and FX swaps are NOT exempt.
Embedded derivatives in loan agreements are not OTC derivatives that are covered by EMIR. EMIR covers only bilateral OTC derivatives transactions.

To whom does EMIR apply?

EMIR applies to all parties that enter into derivatives transactions, and that are incorporated in the European Union (EU) / European Economic Area (EEA). Some rules only apply to OTC derivatives transactions, others also apply to ETD transactions. 

Natural persons are exempt under EMIR, unless they perform economic activities and the derivatives transaction relates to these activities. An example is a one-man business. 

EMIR also has consequences for entities that are established outside of the EEA, in the case that they enter into derivatives transactions with entities that are established within the EEA.