European Union: EMIR 3.0: Trilogues To Start Shortly; Active Account Requirement Is The Key Negotiation Point

We expect trilogue negotiations on EMIR 3.0 to start this month, following confirmation from the EU Council and confirmation from the European Parliament's Economic and Monetary Affairs Committee of their respective negotiating positions.

This follows the European Commission's December 2022 proposal for targeted amendments to EMIR (read our insights on that proposal here).

The part of the Commission's proposal that has generated the most discussion at EU level in recent months has been the requirement for firms subject to the clearing obligation to clear at least a portion of certain systemic derivatives through active accounts at EU CCPs. The Commission proposal was that those derivatives be those already identified by ESMA as being of substantial systemic importance for the financial stability of the EU or one or more of its Member States i.e. interest rate derivatives denominated in euro and Polish zloty, credit default swaps, and short-term interest rate derivatives denominated in euro.

The EU Council is proposing a representativeness requirement, under which a certain proportion of clearing activity would need to take place in the active account based on the bank or other counterparty's portfolio of derivatives contracts (with the focus being on interest rate derivatives denominated in euro and Polish zloty, and short-term interest rate derivatives denominated in euro).

The European Parliament, while supportive of a requirement that financial counterparties and non-financial counterparties that are subject to the clearing obligation should hold at least one active account at an EU CCP through which systematically important products are cleared, is suggesting that the Commission carry out a cost/benefit analysis first, following which the active account requirement could be phased-in.

We will continue to keep clients and contacts informed as trilogue negotiations on EMIR 3.0 progress.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.