What is EMIR for, and how has it changed since 2012?

The 2008 financial crisis exposed serious weaknesses in over-the-counter (OTC) derivatives markets: supervisors could not see who was exposed to whom, and distress at one large participant could spread through a web of bilateral exposures. At their Pittsburgh summit in September 2009, the G20 leaders agreed that standardised OTC derivatives should be cleared through central counterparties (CCPs) and that OTC derivatives should be reported to trade repositories. EMIR, Regulation (EU) No 648/2012, puts those commitments into effect in the EU. It entered into force on 16 August 2012, so the exam material is right to date it to 2012, and as a regulation it applies directly in every Member State.

The exam material gives EMIR three aims: more transparent OTC derivatives markets, lower credit risk and lower operational risk. The credit risk meant is counterparty credit risk. Refit and EMIR 3 restate the same purpose, and behind all three lies the wider goal of reducing systemic risk. Each aim has its own tools. Transparency comes from reporting every derivative contract to a trade repository. Credit risk falls when standardised, liquid classes are cleared through CCPs, which meet strict prudential rules, and when uncleared OTC trades are backed by collateral. Operational risk, including fraud and human error, falls when contract terms are confirmed promptly, electronically where possible, and portfolios are reconciled. EMIR mitigates these risks; it does not remove them. Powers to restrict or ban financial products are not among its tools: they belong to MiFIR, as explained in What does MiFIR cover, and whom does it apply to?

Article 9 requires counterparties and CCPs to report the details of every derivative contract they conclude, and of any change to it or its termination, no later than the working day after. The duty covers exchange-traded as well as OTC derivatives, and it attaches to the concluded contract, whatever its size, not to an unfilled order. Counterparties keep a record of each contract for at least five years after it ends; CCPs keep theirs for at least ten (Article 29). For a UCITS's OTC contracts, the management company reports. Who reports for whom, and the standards used since 29 April 2024, are explained in Who must report derivatives to a trade repository, and who is liable?

A trade repository centrally collects and keeps these records and gives supervisors direct and immediate access to them. It must also regularly publish aggregate positions for each class of derivatives reported to it; because exchange-traded and OTC contracts are both reported, the figures cover both, as the exam material says. The exam material describes ESMA's role with the words 'surveillance' and 'accreditation'. In the Regulation's terms, ESMA registers EU repositories (Article 55), supervises them and can withdraw their registration (Article 71). A third-country repository can be used only once ESMA has recognised it (Article 77), which needs a Commission equivalence decision, an international agreement and cooperation arrangements (Article 75); it stays supervised at home. EMIR reporting is separate from MiFIR transaction reporting: see Which transactions must be reported to CySEC, by when, and how?

Three amending packages stand out. EMIR Refit, Regulation (EU) 2019/834, entered into force on 17 June 2019, with later parts applying from 18 December 2019, 18 June 2020 and 18 June 2021. It changed who must clear, allowed the clearing obligation to be suspended, shifted reporting duties onto financial counterparties and fund managers, and required clearing services on fair, reasonable, non-discriminatory and transparent (FRAND) terms. EMIR 2.2, Regulation (EU) 2019/2099, in force since 1 January 2020, reshaped CCP supervision, adding a CCP Supervisory Committee within ESMA and splitting third-country CCPs into Tier 1 and Tier 2. EMIR 3, Regulation (EU) 2024/2987, has applied since 24 December 2024. It adds an active account requirement, drops equivalence from the intragroup exemptions, creates new exemptions, requires approval of initial margin models and tightens reporting, CCP transparency and liquidity rules; its new clearing-threshold method waits for technical standards.

In Cyprus, Law 65(I)/2014 amended Law 73(I)/2009: it added EMIR to the legislation CySEC applies (section 2) and named CySEC as competent authority for it (section 25). CySEC applies EMIR to the firms it supervises, and its EMIR circulars also go to non-financial counterparties. For a bank or an insurer, the competent authority is that firm's own sectoral supervisor (Article 2(13)). EMIR's Article 12 requires Member States to set penalties that include at least administrative fines. Under section 37 of Law 73(I)/2009, CySEC may fine up to €350,000 for a breach, or up to €700,000 for a repeated breach; where the offender gained a proven benefit larger than that, the fine may reach twice the benefit. EMIR 3 has added penalties of its own, for example for repeated systematic reporting errors. No CCP is authorised in Cyprus.