This information is intended for all the Company's clients - legal entities - non-financial counterparty (NFC) residents of the EU or the EEA who conclude transactions with derivatives through Renesource Capital.
EMIR (EMIR - EUROPEAN MARKETS INFRASTRUCTURE REGULATION) is a European Union regulation that aims to regulate trading and ensure hedging of transactions in derivative financial instruments (FI).
EMIR Regulation No. 648/2012 was approved on 4th of July 2012 and entered into force on 16th of August 2012.
- Risk mitigation techniques;
- Clearing obligations;
- Reporting obligations for concluded transactions (exchange traded derivatives (ETD) and over-the-counter (OTC) transactions).
Information on EMIR is available on ESMA's website
Types of derivative financial instruments that are reported to Trade Repositories
Reports are prepared on concluded transactions to specialized institutions - Trade Repositories. Reporting should be performed by the end of the next business day after the conclusion of the transaction or amendment of the terms of the transaction.
The reporting procedure applies to transactions with derivative financial instruments (derivatives).
Information on the European Market Infrastructure Regulation (EMIR)
The Regulation applies to all legal entities established in the EU. The obligation to report lies within both parties to the transaction. Reporting to trade repositories may be entrusted to third parties or the other counterparty (if agreed).
LEI (Legal Entity Identifier) is mandatory to ensure transaction reporting to Trade Repositories.
Risk mitigation techniques.
EMIR requires counterparties to apply stringent risk mitigation processes and techniques for uncleared OTC derivative trades: new confirmation deadlines, execution of portfolio reconciliation and compression, dispute resolution procedures, daily mark-to-market valuation, initial and variation margining, capital requirements
After conclusion of the trade, in accordance with the Agreement concluded between Renesource Capital and the Client, Renesource Capital will send the Client a statement of account containing the trade confirmation. If the Company does not receive a reasoned claim for the information mentioned in the account statement during 24 hours, the transaction and / or FI portfolio will be considered approved.
If the transaction is not approved, the Company is obliged to report the unapproved transactions to the Financial and Capital Market Commission.
The obligation to perform settlement (clearing) is the obligation of the Client to perform a transaction with a transaction intermediary (central counterparty (CCP)) approved by the European Securities and Markets Authority (ESMA), if the concluded transaction is speculative and the gross notional value of open position exceeds the specified settlement (clearing) limit. For each category of over-the-counter (OTC) financial instruments, there is a clearing threshold defined by ESMA (for aggregate month-end average position for the previous 12 months):
- 1 bln. EUR, for which the underlying asset is credits and debts instrument;
- 1 bln. EUR, the underlying asset is equity;
- 3 bln. EUR, for which the underlying asset is interest rate;
- 3 bln. EUR, for which the underlying asset is foreign exchange;
- 3 bln. EUR for which the underlying asset is a commodity or other instrument.
Please be aware, that the calculation of clearing limits must be performed by the Clients (non-financial counterparties, NFC) individually, taking into account that Renesource Capital does not have absolute information on all OTC derivatives traded by the Client.
OTC derivative transactions that do not meet the hedging criteria are considered to be speculative transactions and should be included in the calculation of settlement (clearing) limits.
Not all OTC derivative transactions are taken into account when calculating limits. Transactions with OTC derivative financial instruments entered into for the purpose of hedging business or financial supervision risk (hedging transactions) for the Client or a group of the Client's related companies are not included in the calculation of settlement (clearing) limits. NFC need to include the OTC derivative contracts which are not objectively measurable as reducing risk. Criteria for determining whether a transaction should be included in the calculation of clearing limits are available in technical standards developed by ESMA:
Renesource Capital informs clients about reporting rules and procedures.
In case of questions or uncertainties, please contact your account manager or write by e-mail to: Compliance@renesource.lv