What this chapter covers
The European Market Infrastructure Regulation (EMIR), Regulation (EU) No 648/2012, entered into force on 16 August 2012 and applies directly across the EU. It answers the G20 commitments made after the 2008 crisis with three aims: more transparency in OTC derivatives, less counterparty credit risk and less operational risk. Cyprus has no separate EMIR law; CySEC enforces it for the firms it supervises. The first notes cover the framework and the duty to report derivatives to trade repositories.
The middle notes cover the clearing obligation, which applies only to declared classes and to counterparties in scope, and the risk mitigation techniques for OTC derivatives that are not centrally cleared: confirmation, reconciliation, compression, dispute resolution and the exchange of collateral.
The last group deals with central counterparties: their capital, how large exposure limits treat exposures to them, their liquidity and the limits on procyclical margins, and what they must disclose. The exam material covers EMIR up to the Refit changes of 2019 and 2020. Each note teaches what the exam tests and then the rule that applies today, including the changes made by EMIR 3 from 24 December 2024.
The 7 topics
Each note starts with a short answer and a table of the facts to remember.
EMIR basics
- What is EMIR for, and how has it changed since 2012?EMIR's three aims and the tools that serve them, trade repositories, the main amending acts, and CySEC's role and fines.€350,000 / €700,0007 min
- Who must report derivatives to a trade repository, and who is liable?Who reports which derivatives, by when and to whom, who is liable when a financial counterparty trades with a small non-financial counterparty, and the reporting standards since 2024.Next working day5 years8 min
Clearing and risk mitigation
- Which OTC derivatives must be centrally cleared, and by whom?The classes declared for clearing, who is in scope, the clearing thresholds, the four-month phase-in, active accounts and the exemptions.4 months9 min
- How must uncleared OTC derivatives be confirmed, reconciled and collateralised?Confirmation, reconciliation, compression and dispute resolution for uncleared trades, daily valuation, and variation and initial margin.€8 billion8 min
Central counterparties
- How much capital must a CCP hold, and how do large exposure limits treat CCPs?A CCP's minimum and ongoing capital, its skin in the game, and how bank and investment-firm large exposure limits treat exposures to CCPs.€7.5 million25%8 min
- How must a CCP manage liquidity, and how can margins fuel leverage?How a CCP measures exposures, the credit lines and liquidity stress test it needs, its cover standards and the tools that limit procyclical margins.25%8 min
- What must a CCP disclose, to whom, and when can a breach stay private?What a CCP and its clearing members make public, what goes to ESMA and the competent authority, and when a member's breach stays private.7 min
The numbers to know
Every figure in this chapter, with the note that explains it.
| Figure | What it is | Note |
|---|---|---|
| Next working day | Latest time for reporting a derivative to a trade repository after it is concluded, modified or terminated | Topic 2: Who must report derivatives to a trade repository, and who is liable? |
| €1bn · €3bn · €4bn | Clearing thresholds in gross notional: €1 billion for credit and for equity, €3 billion for interest rate and for FX, €4 billion for commodity and other derivatives | Topic 3: Which OTC derivatives must be centrally cleared, and by whom? |
| 4 months | Time after notifying a threshold breach before a counterparty must clear new trades in declared classes | Topic 3: Which OTC derivatives must be centrally cleared, and by whom? |
| €8 billion | Uncleared notional that both parties, or their groups, must exceed before initial margin has to be exchanged | Topic 4: How must uncleared OTC derivatives be confirmed, reconciled and collateralised? |
| €7.5 million | Minimum permanent and available initial capital a CCP needs to be authorised | Topic 5: How much capital must a CCP hold, and how do large exposure limits treat CCPs? |
| €350,000 · €700,000 | CySEC's maximum fines for an EMIR breach, the higher one for a repeated breach; or up to twice a larger proven benefit | Topic 1: What is EMIR for, and how has it changed since 2012? |