Ireland: EMIR Health Check For Corporates

Last Updated: 4 February 2014
Article by Aiden Small and Phil Cody

With 12 February being the EMIR reporting start date, it is timely to recap on the various EMIR deadlines as they apply to corporates.

The European Market Infrastructure Regulation (Regulation No. 648/2012) (the "Regulation") affects all entities which transact derivatives. It is implemented on a phased basis through a series of technical standards (these technical standards, together with the Regulation, being "EMIR"). EMIR imposes different requirements based on whether an entity is a Financial Counterparty ("FC"), a Non-Financial Counterparty whose non-hedging derivatives activity exceeds certain thresholds set out below ("NFC+") or a Non-Financial Counterparty which is below the applicable thresholds ("NFC-"). It is anticipated that the majority of unregulated corporates will be NFC-s (on the basis that they transact derivatives for hedging purposes only). However, particular considerations may arise for corporates who transact significant volumes of derivatives for speculative purposes. EMIR applies to all derivatives, including forward FX.


The EMIR clearing thresholds (which apply at a group, and not an entity, level) are:

Credit €1bn
Equity €1bn
Interest Rate €3bn
Foreign Exchange €3bn
Commodity €3bn
Other €3bn

If the non-hedging transactions of a company's corporate group do not exceed these thresholds, the company will be an NFC-.

"Hedging transactions" are defined for the purposes of EMIR as transactions which are objectively measurable as reducing risks relating to the commercial activity or treasury financial activity of the company or that of its group. The remainder of this briefing assumes that the non-hedging derivatives activity of your corporate group does not exceed the above thresholds (and accordingly that the members of your corporate group which transact/have transacted derivatives are NFC-s). However, please note that there is extensive EMIR guidance on what constitutes hedging and specific guidance may be appropriate.

In this briefing we first focus on the reporting obligation, which takes effect on 12 February 2014. We then recap on those EMIR obligations which are already in effect. Finally, we look ahead to EMIR obligations which have yet to take effect.


The EMIR obligation: the reporting obligation requires FCs and NFCs (whether NFC+ or NFC-) to ensure that details of any derivative contract concluded (and any modification or termination of those contracts) are reported to a trade repository. The obligation to report trades will apply in respect of: (i) any legacy trades that were in existence on 16 August 2012 (even if now terminated); (ii) any new trades since that date; and (iii) future trades. Note, intra-group transactions are not exempted from the reporting obligation.

Timing: the reporting obligation comes into force on 12 February 2014. As of such date, FCs and NFCs (whether NFC+ or NFC-) must ensure that details of any derivative contracts and any modifications or terminations of those contracts are reported to a trade repository. There is no concept of a "national" trade repository. Currently there are no Irish trade repositories, but reporting may be made to one of the recognised non-Irish trade repositories. The responsibility to report applies to both counterparties, but parties can delegate this obligation to a third party or arrange for one of the counterparties to report on behalf of both counterparties. However, the legal responsibility to report may not be delegated and, accordingly, your company will remain responsible for any failure to report or error in reporting by its delegate.

Derivative contract entered into from 12 February 2014 Details of each derivative contract must be reported no later than the working day following the conclusion, modification or termination of the contract
Derivative contract entered into before 16 August 2012 and still outstanding on 12 February 2014 On or before 12 May 2014
On or before 12 May 2014 12 February 20141
Derivative contract entered into before, and outstanding on, 16 August 2012 but no longer outstanding on 12 February 2014 On or before 12 February 2017
Derivative contract entered into on or after 16 August 2012 but no longer outstanding on 12 February 2014 On or before 12 February 2017

Required action: as noted, the responsibility to report applies to both counterparties, but parties can delegate this obligation to a third party or arrange for one of the counterparties to report on behalf of both counterparties. Note that the ISDA/FOA EMIR Reporting Delegation Agreement has recently been published and may form the basis of documenting delegation of reporting. You should discuss with your counterparties how to satisfy the reporting obligation. Note that the reporting obligation also extends to intragroup transactions. Where a company and its counterparty submit separate reports of the same trade, they should ensure that the common data are consistent across both reports. In order to report, a company will require a Legal Entity Identifier ("LEI"). An LEI is a global reference code that uniquely identifies a legal entity. The Global LEI Foundation operating the Central Operating Unit ("COU") will take over operational governance of the LEI system, but is not yet operational.

Pending the COU becoming operational, a pre-LEI code process has been established to assist relevant entities who are already required to have a pre- LEI code (for, example, entities subject to EMIR OTC reporting). You can apply for pre-LEI codes through the Irish Stock Exchange at See also the relevant FAQs at The ISE fee, on application, is €150 per code (exc. VAT), with an annual renewal fee of €100 (exc. VAT) per code.


The EMIR obligation: EMIR requires counterparties to agree in writing means by which portfolios of uncleared OTC derivative contracts are to be reconciled. The frequency with which reconciliation must be carried out will depend on the number of trades that are in place with a particular counterparty. For an NFC- which has more than 100 OTC derivative contracts outstanding with a particular counterparty, the reconciliation must be performed once per quarter. For an NFC- which has 100 or fewer OTC derivative contracts outstanding with a particular counterparty, the reconciliation need only be performed once per year.

Timing: the portfolio reconciliation requirement came into effect on 15 September 2013 and applies to each entity which transacts derivatives (including NFC-s).

Required action: ISDA has published the ISDA 2013 EMIR Portfolio Reconciliation, Dispute Resolution and Disclosure Protocol (the "Relevant ISDA Protocol"). The Relevant ISDA Protocol may offer a corporate the most efficient way of facilitating compliance with its EMIR portfolio reconciliation obligations provided that its counterparty has acceded to the Relevant ISDA Protocol as a Portfolio Data Sending Entity. This would allow the corporate to be a Portfolio Data Receiving Entity and to reconcile portfolios on the basis of information provided by its counterparty.


The EMIR obligation: EMIR requires that parties to OTC derivatives contracts have agreed detailed processes and procedures in place in relation to the identification, recording, monitoring and resolution of disputes regarding their derivative contracts and to exchange of collateral.

Timing: the dispute resolution requirements came into force on 15 September 2013 and apply to each company which transacts derivatives (including NFC-s).

Required action: adherence to the Relevant ISDA Protocol may offer a corporate the most efficient way of facilitating compliance with its EMIR dispute resolution obligations (provided that its counterparty has acceded to the Relevant ISDA Protocol).


The EMIR obligation: all non-cleared derivatives entered into after 15 March 2013 must be confirmed as soon as possible following execution and in any event within the deadline specified for transactions of that type.

Timing: the timely confirmation requirement came into effect on 15 March 2013. The timing requirements are as follows:

Credit default swaps & interest rate swaps 15 March 2013 to 31 August 2013 5 business days following date of execution
Credit default swaps & interest rate 1 September 2013 to 31 August 2014 3 business days following date of execution
Credit default swaps & interest rate swaps 1 September 2014 Onwards 2 business days following date of execution
All others 15 March 2013 to 31 August 2013 7 business days following date of execution
All others 1 September 2013 to 31 August 2014 4 business days following date of execution
All others 1 September 2014 Onwards 2 business days following date of execution

Required action: none, save to ensure that your company complies with the delivery of confirmations of trades within the above timelines. You might expect that some of the company's counterparties may (in order to assist in the satisfaction of their "timely confirmation obligations" under EMIR) request amendments to the company's ISDA (or other OTC derivatives) documentation to provide that confirmations sent by them to your company will be deemed accepted by your company within a certain short period.


The EMIR obligation: FCs and NFC+s are required to mark-to-market (MTM) outstanding non-centrally cleared OTC contracts on a daily basis. This requirement will not apply to your company provided it is (and continues to be) an NFC-.

Timing: the MTM requirement has applied from 15 March 2013. The requirement applies to contracts outstanding on or after 15 March 2013, irrespective of the date on which they were entered into.

Required action: none (provided that the company is and remains an NFC-). However, note that valuations will need to be reconciled as part of the portfolio reconciliation process (even where a company is an NFC-).


The EMIR obligation: the obligation to engage in portfolio compression will only apply if there are 500 or more OTC derivative trades in place with a particular counterparty.

Timing: the portfolio compression requirements came into effect on 15 September 2013.

Required action: none (assuming that your company does not have 500 or more derivative trades with a particular counterparty).


EMIR requires mandatory central counterparty clearing of certain standardised OTC derivatives contracts. The clearing obligation is not in effect yet but it will apply only to FCs and NFC+s. Accordingly, it should not impact a company's derivatives activities provided that it is and continues to be an NFC-.


The rules around collateralisation of non-cleared OTC derivatives will not be finalised until after the BCBS-IOSCO report on margin requirements has been issued. The potential impact on your derivatives contracts will need to be assessed by reference to those rules, once formulated, but may require transactions (which, but for EMIR, would not have been collateralised) to be collateralised.


1 Although previous expectations had been that this date would be 12 May 2014, recent informal ESMA guidance has confirmed that the deadline is 12 February 2014.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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