Urgent need for NFCs and smaller FCs to determine their EMIR status due to EMIR REFIT
One of the key changes needs urgent attention. EMIR REFIT creates a new regime for determining who is in-scope for the clearing obligation. This applies to financial counterparties ("FCs") as well as non-financial counterparties ("NFCs"). Importantly for NFCs, this also determines whether they are subject to the mandatory margin regime and certain other enhanced requirements under EMIR which apply to NFC+s.
The issue is compounded due to the indirect effect on non-EU funds which will now be regarded as equivalent to an FC and so will potentially be subject to the clearing obligation and will be subject to the mandatory margin requirements for uncleared OTCs when trading with EU banks and brokers.
Both FCs and NFCs (as well as their non-EU equivalents who trade with EU banks and brokers) need to take steps now to ensure that they are ready to determine whether they are in-scope for the clearing obligation on the day that EMIR REFIT comes into force on 17 June.
There is a potential indirect impact for banks and brokers with clients and customers who are impacted, even if they are not.
For further advice on the status determinations which are required to be made under EMIR post-REFIT, please get in touch with your usual contact in the Derivatives Group.