EMIR is a European regulation that was adopted across the EU in 2012 to increase transparency and reduce systemic risk in the over-the-counter (OTC) derivatives market.
EMIR was designed to increase the level of transparency in the OTC derivatives market, and therefore reduce systemic counterparty and operational risk - which is cited as one of the major causes of the 2008 financial crisis.
Most European legislations periodically undergo the European Commission’s regulatory fitness and performance programme (Refit), whereby they are reviewed for potential enhancements and improvements. This process was completed for the EU’s EMIR regime in 2019, with changes implemented in July the same year to address compliance costs, transparency issues and insufficient access to clearing for certain counterparties.
This is referred to as EMIR Refit and introduced a range of updates to the existing regime to streamline the reporting obligations, improve the quality of the data reported, make supervision more effective and increase access to clearing by removing unnecessary obstacles.
Specific changes include those for “small financial counterparties” who became exempt from the obligation to clear their transactions through a CCP, while remaining subject to risk mitigation obligations. Smaller non-financial counterparties (NFCs) also saw reduced clearing and reporting obligations.
As EMIR was introduced across Europe, hundreds of financial firms suddenly needed to find a solution to help them comply efficiently and accurately. Several years later, and even after the EMIR Refit, achieving EMIR compliance is still a significant undertaking for firms.
The complexity of the reporting rules has driven up the demand for skilled staff and with only a few EMIR solutions in the market, the choice is limited and license fees are high.