Knowledge Base
Post-Trade and Market Infrastructures
Infrastructures ensuring the proper settlement of financial transactions. Covers clearing, settlement-delivery, central securities depositories, and post-trade risk management.
Skills
Questions
What threshold must be exceeded by a non-financial counterparty (NFC) to be classified as NFC+ under EMIR Refit?
Under EMIR Refit, a non-financial counterparty (NFC) becomes NFC+ if it exceeds at least one clearing threshold for the relevant derivative classes, excluding hedging positions. The thresholds are set at 1 billion euros for credit and equity derivatives, 3 billion for interest rate, foreign exchange, and other derivatives, and 4 billion for commodities.
What is the minimum number of transactions that counterparties exceeding a notional volume of 6 billion euros must clear in their EU active account under EMIR 3.0?
EMIR 3.0 stipulates that counterparties whose notional volume exceeds 6 billion euros must clear at least 5 transactions per class in their EU active account during the reference period. This measure aims to ensure effective use of the active account.
What is the maximum deadline for reporting a transaction under EMIR?
The reporting obligation under EMIR requires that all derivative transactions (OTC and listed) be reported to a trade repository registered with ESMA within T+1. This requirement aims to ensure rapid market transparency.
What are the main objectives of the EMIR regulation, according to Article 1?
Article 1 of the EMIR regulation explicitly states its objectives: reduce systemic risk, improve transparency of the OTC derivatives market, mitigate counterparty credit risk, and reduce operational risk. These objectives were established in response to the shortcomings revealed by the 2008 crisis, notably the lack of transparency and the absence of centralized clearing.
True or False: Total Return Swaps are subject to reporting obligations under SFTR only.
Total Return Swaps are considered derivatives and are therefore subject to reporting obligations under EMIR. However, SFTR also imposes transparency obligations toward investors for these instruments. Thus, they are reportable under EMIR and subject to transparency requirements under SFTR.
True or False: Intra-group transactions are always exempt from the central clearing obligation under EMIR.
Intra-group transactions are exempt from the central clearing obligation under certain conditions, including prior notification. However, this exemption is not automatic and depends on compliance with the conditions specified by the regulation. For example, EMIR 3.0 has introduced additional measures for certain intra-group transactions.
Categorize items by dragging them to the appropriate zones
Items to categorize:
EMIR
SFTR
EMIR focuses on OTC derivatives and their central clearing, while SFTR addresses securities financing transactions such as repos and securities lending/borrowing. For example, transaction reporting under EMIR differs from that under SFTR.
Main obligation introduced by EMIR 3.0 concerning euro-denominated derivatives?
Click to see answer
EMIR 3.0 introduces the Active Account obligation with a CCP established in the EU for FCs and NFC+ exceeding thresholds for EUR or PLN interest rate derivatives. This measure aims to repatriate euro-denominated derivative clearing to the EU post-Brexit.