Activity

EMIR 3 introduces several significant amendments that directly impact intragroup derivative trading arrangements, aiming to refine existing exemptions and introduce new reporting burdens in certain scenarios.
Here’s a breakdown of the implications:
1. Intragroup Exemption from Reporting (Article 9 of EMIR)
* Continued Benefit (with conditions): Firms can still benefit from the intragroup exemption from reporting requirements under Article 9 of EMIR, provided the specified criteria are met. This exemption applies even if one of the counterparties is a non-EU NFC.
* Crucial Exception: UK-headed Groups: A notable existing limitation, which remains unchanged by EMIR 3, is that this exemption does not apply where the parent undertaking is established in a third country (e.g., the UK). This means that groups with a UK parent entity already have an obligation for their EU entities to report intragroup derivatives transactions.
* New Reporting Burden for EU Parents of NFC+s: This is a key change introduced by EMIR 3.
* Scenario: Where an NFC+ (an EU non-financial counterparty subject to the clearing obligation) with an EU parent benefits from the intragroup exemption from reporting.
* New Obligation: The EU parent is now required to report the net aggregate positions by class of derivatives entered into by that NFC+ on a weekly basis to the competent authority.
* Implication for EU Corporate Groups: This means that EU corporate groups that include NFC+ entities, even if they qualify for the intragroup reporting exemption for the individual NFC+ entity, may find themselves subject to these additional, centralized reporting requirements at the parent level. This adds a new layer of oversight and data collection for these groups.
2. Intragroup Exemption from Clearing and Margining
* Previous Reliance on Equivalence Determinations: Historically, for intragroup transactions between EU and non-EU entities, groups had to rely on the EU’s equivalence determinations for the relevant non-EU regimes. Many of these determinations were temporary and, as you noted, were due to expire on June 30, 2025.
* EMIR 3’s Shift to a “Blacklisted” Approach: EMIR 3 fundamentally alters this framework by effectively making these exemptions more permanent and less reliant on specific equivalence decisions.
* New Criterion: Parties will now be able to access the intragroup exemption from clearing and margining provided that the non-EU counterparty is not established in a “blacklisted” third country.
* Definition of “Blacklisted”: This broadly refers to jurisdictions identified as high-risk for money laundering and terrorist financing by the Financial Action Task Force (FATF), and/or the EU list of non-cooperative tax jurisdictions. The specific lists are maintained by the EU and are subject to periodic updates.
* Simplification and Certainty: This change aims to simplify the intragroup exemption framework and provide greater certainty for groups with cross-border intragroup derivatives. It removes the administrative burden and uncertainty associated with temporary equivalence determinations.
* Unchanged Conditions: All other existing conditions that need to be satisfied to rely on the intragroup exemption from clearing and margining remain unchanged by EMIR 3. These typically include:
* Both counterparties being part of the same group.
* Both counterparties being subject to appropriate centralized risk management procedures.
* No impediments to the prompt transfer of own funds or repayment of liabilities between the counterparties.
* Reporting to the competent authority (even if exempted from general transaction reporting).
In summary, EMIR 3 introduces a new, aggregate reporting obligation for EU parents of NFC+ entities, while simultaneously streamlining and providing more permanence to the intragroup clearing and margining exemptions for cross-border transactions, shifting from an equivalence-based system to a blacklist-based system. Groups with significant intragroup derivative activity will need to carefully assess these changes to ensure ongoing compliance and optimize their internal processes.

Video courtesy of IPO-VID In Patrick’s Opinion

Video courtesy of IPO-VID In Patrick’s Opinion