EU Moves To Pull EMIR Variation Margin Requirement For FX forwards

Article 11 of EMIR requires in scope entities (including UCITS and AIFs) entering into non-centrally cleared OTC derivative contracts to put in place procedures and arrangements to measure, monitor and mitigate associated operational and counterparty credit risks.

Specifically, such entities must:

1. Obtain timely electronic confirmations of the terms of OTC derivative contracts
2. Put in place a formal risk management process for such OTC derivative contracts
3. Have an agreed dispute resolution process with counterparties
4. Value all OTC derivative contracts daily on a mark-to-market basis (unless market conditions require marking to model)
5. Exchange collateral to cover exposures (i.e. receive and post initial* and variation margin).