European Market Infrastructure Regulation (EMIR) Update

 Following on from the European Commission's recent proposal to amend EMIR, the EU Council (in its most recent compromise text) has suggested taking most physically-settled FX forwards out the scope of EMIR's mandatory variation margin provisions, and not treating securitisation special purpose entities (SSPEs) as financial counterparties (FCs). The European Supervisory Authorities (ESAs) have, in a more recent development, also encouraged regulatory forbearance in respect of the obligation to exchange variation margin on physically-settled FX forwards.

BACKGROUND

On 4 May 2017, the Commission proposed some targeted reforms to improve the functioning of the derivatives market in the EU, particularly in respect of smaller in-scope counterparties. See our briefing on the proposed regulation here.