European Market Infrastructure Regulation (EMIR) is European legislation that focuses on over-the-counter derivatives (OTC derivatives), central counterparties and trade repositories. The legislation promotes transparency in derivatives markets and reduces the risks associated with derivatives. The information on this page is aimed at parties that fall under the EMIR classification ‘non-financial counterparty trading below the clearing threshold’ (NFC-).
Over-the-counter derivatives (OTC) are derivatives that are agreed individually between parties. These derivatives are not traded on the stock exchange.
EMIR applies to any party that enters or has ever entered a derivative transaction. Various classifications of parties are used, with different obligations for each classification:
Most of our customers will qualify as non-financial counterparties operating below a certain clearing threshold. They will then be classified as NFC-. If the clearing threshold is exceeded, the organisation will classify itself as NFC+.
When the nominal value of a counterparty's derivatives portfolio exceeds a certain value, it is assumed that this portfolio could have a certain impact on the overall system. In that case, different requirements under EMIR apply
Derivatives used to hedge operational risks are not included in the determination of the clearing threshold. Since most of our customers use derivatives primarily as hedging instruments, the clearing threshold will not be reached in many cases. For the definition of hedging and the clearing threshold used (per type of derivative), please refer to the AFM website.
Each party with one or more derivative contracts must classify itself. This means that you are also responsible for the classification.
The requirements depend on the classification of your organisation.
The Dutch Autoriteit Financiële Markten (the authority for financial markets) has been designated as the supervisory authority for EMIR supervision of non-financial counterparties.
More information can be found on the website of the Dutch Autoriteit Financiële Markten (AFM).
All new and existing OTC derivative contracts must be reported to a Trade Repository. This is an entity that centrally collects derivative reports in a transaction register accessible to authorities.
Under EMIR, parties entering into OTC derivative transactions with each other must report the details of the contract, including amendments and terminations, to a trade repository (TR). From 18 June 2020, the obligation to report trades involving a non-financial counterparty that is not subject to clearing requirements lies with the bank. The bank will then be the financial counterparty. Most (NFC) customers with derivative transactions have concluded a Delegation of EMIR Reporting of Transactions agreement with BNG. These customers have received an amended Transaction Reporting agreement that regulates the amended reporting obligation.
Under EMIR Refit, a revision aimed at improving and simplifying the regulations, the (NFC) customer may still choose not to have its derivative contracts reported by BNG. This customer must notify BNG of this decision and then actually carry out the reporting itself.
The non-financial counterparty is responsible for providing the reporting data to the financial counterparty, insofar as this cannot reasonably be expected of the financial counterparty. You therefore remain responsible for checking the accuracy and completeness of the data.
In order to limit operational risks, requirements are imposed on the use of risk mitigation measures in the bilateral settlement (direct settlement between two parties) of derivative contracts.
For non-financial counterparties below the clearing threshold (NFCs), this concerns procedures relating to:
Derivatives portfolios must be reconciled periodically, i.e. coordinated between the counterparties. Each year, BNG will send you an overview of your derivatives portfolio for this purpose. The overview contains the terms and conditions of all outstanding derivative transactions as recorded in BNG's accounts. The market value (valuation) of each derivative is also stated. You can use this overview to check your outstanding derivative transactions, thereby ensuring that both your organisation and BNG comply with the EMIR requirements for portfolio reconciliation.
When reporting, each party is required to enter a Legal Entity Identifier (LEI). This allows regulators to trace which positions parties have against each other, but also how many derivatives a large organisation has outstanding, regardless of which bank or other party is the counterparty. The customer will have to renew the LEI every year as long as there are outstanding derivative transactions. An LEI can be requested from the Kamer van Koophandel (the Dutch Chamber of Commerce), and the annual renewal is also done through the Kamer van Koophandel.