European Union: The European Market Infrastructure Regulation: An Overview, Real Estate Intelligence

Last Updated: October 11 2013
Article by John C. Ahern and Tom Hodge

The scope of the European Market Infrastructure Regulation

The European Market Infrastructure Regulation ("EMIR") is the European Union's implementation of the G20 commitment to reduce systemic risk and increase transparency in the OTC derivatives market. In order to achieve these aims EMIR imposes three sets of obligations upon market participants: (i) clearing; (ii) reporting; and (iii) risk mitigation.

Whilst many non-bank entities might assume they are not affected by EMIR, they should note that it has very broad application. In particular, real estate funds and managers, corporate and trading entities ought to be cognisant of the application of EMIR to their OTC derivative activities.

Scope of market participants captured

EMIR distinguishes between types of market participant and has two broad categories of counterparties:

a) Financial counterparties ("FCs"), which are: investment undertakings; banks; insurance, assurance and reinsurance undertakings; undertakings which operate collective investment schemes and their managers; institutions for the provision of occupational retirement benefits; and alternative investment funds managed by alternative investment fund managers, which are authorised by the relevant EU directive.

b) Non-financial counterparties ("NFCs"), are any entities incorporated or established in the European Union that are not FCs. NFCs are further divided depending on the scale of their OTC derivatives trading activity: those NFCs that engage in OTC derivatives transactions which exceed certain notional value thresholds[1] ("NFC+");and those NFCs whose OTC derivatives transactions do not exceed a threshold ("NFC-").

Classification as a FC, NFC+ or NFC- impacts upon the extent to which a market participant must comply with EMIR. However, all OTC derivatives market participants (except individuals) will be required to comply with EMIR to some extent (there is no de minimis exception).

Scope of OTC derivatives contracts captured

Every type of OTC derivative contract is captured by EMIR. EMIR applies to both standard and non-standard OTC derivatives contracts and does not distinguish between speculative OTC derivatives contracts and those made for commercial purposes.

Territorial scope

EMIR has wide territorial reach and does not simply apply where both market participants are based in the EU.

If a FC or a NFC enters into a OTC derivatives transactions with a counterparty based outside the EU then the transaction will be caught (subject to various agreements between the EU and other countries on equivalent regulatory regimes). As well, transactions between counterparties where neither counterparty is based in the EU will be captured by EMIR if the OTC derivatives transaction has "a direct, substantial and foreseeable effect" within the EU.

The scope of EMIR is broad, significantly broader than that of Title VII of Dodd-Frank, and will raise issues of compliance for all market participants. The obligations that must be complied with are below, for each obligation also detailed is the date when that obligation has or will enter into force.

The Clearing Obligation

The clearing obligation only applies to FCs and NFCs+ who enter into OTC derivatives contracts where the derivative is standardised and liquid. The table below shows when EMIR's clearing obligation will apply.

The clearing obligation requires all eligible OTC derivatives contracts to be cleared through a central counterparty that has been authorised or recognised by the European Securities and Markets Authority ("ESMA").

Entry into force: expected to enter into force in July 2014, but this is dependent on central counterparties being authorised or recognised by ESMA.

The Reporting Obligation

The reporting obligation is broader than the clearing obligation in that it applies to all derivatives contracts (not simply those that are standardised and liquid) and all counterparty types (including NFCs-). The reporting obligation will apply to both counterparties to a transaction whenever negotiations of an OTC derivative contract are concluded or the contract is modified or terminated. The report must be made to a trade repository which has been authorised or recognised by ESMA.

A market participant can delegate its reporting obligation to its counterparty or an agent/third-party service provider. However, liability for failure to make a report will remain with the market participant even if it has delegated reporting.

Entry into force: expected to enter into force in February 2014, but this is dependent on trade repositories being authorised or recognised by ESMA 90 days in advance of that date. The Risk Mitigation Obligations

These risk mitigation obligations apply to those OTC derivatives contracts that are not subject to the clearing obligation.

(i)Record keeping obligation

All market participants are to maintain records of their OTC derivatives trading activities and retain these records for a period of 5 years following termination of the relevant OTC derivatives contract.

Entered into force: 16 August 2012

(ii) Timely confirmation obligation

Requires counterparties to an OTC derivatives contract to confirm the details of that contract by electronic means and within a "timely manner". What "timely" means varies depending on the type of OTC derivatives contract and when it was entered into.

Entered into force: 15 March 2013

(iii) Valuation obligation

FCs and NFCs+ must, on a daily basis, value their outstanding OTC derivatives contracts using either a mark-to-market or mark-to-model valuation process.

Marking-to-market entails tracking the current market value of an OTC derivative contract so that losses or gains on a position can be calculated.

Marking-to-model is where a financial model is used to price a position instead of using market prices to calculate values (mark-to-market).

Entered into force: 15 March 2013

(iv) Portfolio reconciliation obligation

Where market participants have multiple OTC derivatives contracts with the same counterparty then a portfolio reconciliation process will have be conducted (at a varying frequency depending on whether the counterparties are FCs, NFCs+ or NFC-). Portfolio reconciliation is the process by which counterparties check that they have a consistent record of the terms of their transactions with each other by comparing descriptions of their portfolios.

Entered into force: 15 September 2013

(v) Portfolio compression obligation

All market participants with 500 or more uncleared OTC derivatives contracts with the same counterparty must have procedures in place to regularly (at least twice a year) determine whether to conduct a portfolio compression exercise. Portfolio compression entails terminating equal and offsetting trades with the same counterparty. It reduces the gross notional size and number of trades in a market participant's portfolio without changing the overall risk profile or value of the portfolio.

Entered into force: 15 September 2013

(vi) Dispute resolution obligation

Market participants must agree with their counterparties procedures and processes to identify, record and monitor disputes relating to the OTC derivatives contracts between them.

Entered into force: 15 September 2013


EMIR imposes substantial obligations on all market participants, including those not ordinarily subject to financial services regulation. In addition to market participants putting systems and controls in place in order to comply with EMIR, market participants will also need to completely review their existing derivatives documentation. Amending existing documentation can be accomplished either through adhering to the relevant ISDA Protocols or through the drafting of bespoke bilateral agreements.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

John C. Ahern
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.