This document provides a short overview and history of EMIR, the European Market Infrastructure Regulation. It discusses how EMIR developed over four years in response to the 2008 financial crisis and G20 commitments. Key requirements of EMIR include mandatory clearing, risk mitigation techniques, reporting to trade repositories, and a harmonized framework for central counterparties. The timeline outlines the path of ESMA regulations and guidelines on topics like clearing thresholds, risk mitigation requirements, and when various obligations take effect. Open issues remain around the precise scope of requirements and how they will be implemented.

1. Short overview and history of EMIR
Workshop EMIR and the new challenges for commodity risk management
13th December 2012, Düsseldorf
Riccardo Rossi – Regulatory Affairs

2. Agenda
 EMIR, an history of more than four years
 Short overview of EMIR requirements
 Open issues
 The timeline
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3. An history of more than four years
2009 2010 2011 2012 2013
The financial crisis
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4. An history of more than four years
2009 2010 2011 2012 2013
The G20 Agreement
 “All standardized OTC derivative contracts should be traded on exchanges or
electronic trading platforms, where appropriate, and cleared through central
counterparties by end-2012 at the latest. OTC derivative contracts should be
reported to trade repositories. Non-centrally cleared contracts should be subject
to higher capital requirements.
 “OTC derivative contracts should be reported to trade repositories”
 “Non-centrally cleared contracts should be subject to higher capital
requirements” G20 – Pittsburgh
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5. An history of more than four years
2009 2010 2011 2012 2013
Commission proposal for a regulation on OTC
derivatives, central Counterparties and trade
repositories [15 Sept 2010]
 Mandatory clearing for 'standardised OTC
derivatives‘, including systemic relevant non-
financial counterparties
 Risk mitigation techniques and margining
for non-cleared OTC derivatives
 Harmonised framework for CCPs: licensing,
margin calculation and collateral posting,…
 Trade Repositories and reporting of
derivative transactions
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6. An history of more than four years
2009 2010 2011 2012 2013
 The political debate has taken place
throughout 2011 and part of 2012
 EMIR finally approved on 4 July 2012, entered
into force on 16 August 2012
 ESMA has published
 Discussion Paper in February 2012
 Consultation on draft RTS in June 2012
 Final Report on draft RTS in Sept 2012
 ESAs published joint DP on RMTs
 IOSCO BCBS published consultative
document
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7. Agenda
 EMIR, an history of more than four years
 Short overview of EMIR requirements
 Open issues
 The timeline
7

8. EMIR at a glance
 Reporting to Trade Repositories of
all transactions in derivatives
 Clearing threshold Reporting of  Timely confirmation
approach for non- derivative  Dispute resolution
transactions  Portfolio
financials
 Exclusion of ‘risk- OTC derivatives Risk mitigation reconciliation
reducing’ OTC mandatory techniques  Portfolio
derivatives clearing compression
 Intragroup exemption CCPs  Collateralization
framework  Mark-to-market
 Margin calculation
 Default Fund
 Default Waterfall
 Collateral accepted

9. The clearing obligation
 ‘Eligible OTC derivatives’: bottom up & top down
 B-up: CA authorise CCP  CA notifies ESMA  ESMA develop
RTS (6months, including consultation)  RTS submitted to the
Commission [class/date/maturity]  Commission adopts RTS  if
no phase-in, the clearing obligation takes effect as of the day of
notification.
 T-down: ESMA initiative
 ESMA to establish, maintain and keep up to date the
public register with eligible contracts
 The clearing obligation procedure may take up to one
year: at the earliest the clearing obligation will be
effective in H2.2013

10. NFCs and the clearing threshold approach
 The calculation shall take into account derivatives
concluded by all NFCs within the same group
 To be accounted against the threshold OTC derivatives
‘which are not Objectively Measurable As Reducing
Risks directly relating to the commercial activity or
treasury financing activity of the NFC or of that group’
 NFCs are subject to the clearing obligation for future
contracts within 4months, if exceeding the threshold
 If the rolling average position does not exceed the
clearing threshold the NFC is no longer subject to the
clearing obligation
 Regulatory standards by ESMA to define Objectively
Measurable…and values of the clearing thresholds
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11. Objectively measurable when…
 …It covers risks arising from the potential change in the
value of…that the non-financial counterparty or its
group…
 …it covers the risks arising from the potential indirect
impact on the value of …resulting from fluctuation of
interest rates, inflation rates, foreign exchange rates or
credit risk;
 …it qualifies as a hedging contract pursuant to
International Financial Reporting Standards (IFRS)…
ESMA Final Report on Draft RTS under Reg.648/2012/EC | 27 September 2012
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12. The level and the metrics of the thresholds
 All outstanding OTC derivatives non-Objectively…
 Gross Notional Value relevant
 Level defined per asset class
 €1bn: credit; equity derivatives
 €3bn: interest rate; FX; commodity and other derivatives
 Breaching one threshold mandates to clear in all asset
classes
But EMIR says CT “determined taking into account the
systemic relevance of the sum of net positions and
exposures per counterparty and per class of OTC
derivatives
ESMA Final Report on Draft RTS under Reg.648/2012/EC | 27 September 2012
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13. Risk mitigation techniques
 Additional techniques apply to reduce operational, credit
and legal risk when dealing in OTC derivatives
Timely Max Standard timing for confirmation of Phased-in: from t+7 to t+2,
confirmation OTC derivative transactions depending on type of CP
counterparties
Portfolio 6months later; If two CPs
Analyze the possibility to conduct
Apply to all
have >500 outstanding
compression portfolio compression twice a year derivative contracts
Portfolio Reconcile portfolios, frequency 6months later; depending on
type of CP and number of
reconciliation depending on #outstanding derivatives outstanding contracts
Dispute Agree detailed procedures and processes 6months later; possible
delegation; reporting of
resolution in relation to disputes on derivatives disputes >15M€ for >15BD
Risk-management procedures requiring
NFC crossing the
Regulatory Standards still
Collateralization timely, accurate and appropriately pending; Global
segregated exchange of collateral convergence
threshold
on a daily basis outstanding contracts, mark-to-model is allowed
Mark-to-Market where market conditions are in place subject to specific conditions
Exempted under certain conditions from Subject to notification and
Intragroup mandatory clearing and collateralization disclosure requirements
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14. Obligation to collateralize OTC derivatives
 Timely, accurate and appropriately segregated exchange
of collateral for OTC derivative contracts entered into on
or after the clearing threshold is exceeded with
systemic relevant counterparties
 ESMA, EIOPA, EBA (ESAs) to develop common RTS
specifying: procedures, levels and type of collateral and
segregation arrangements;
 Draft RTS to the EU Commission due by 30.09.2012 
on hold, waiting for global proposals: IOSCO and BCBS
Margin requirements for non-centrally-cleared derivatives
(July - Sept 2012)
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15. BCBS/IOSCO proposals
 Appropriate margining practices in place for all derivative
transactions not cleared by CCPs
 All FC and systemically-important NF (NFC+) must exchange
initial and variation margin as appropriate
 Assets collected should be highly liquid and should hold their
value in a time of financial stress
 Transactions between a firm and its affiliates (intragroup)
subject to variation margin arrangements to prevent the
accumulation of significant current exposure
 Regulatory regimes should interact so as to result in sufficiently
consistent and non- duplicative regulatory margin requirements
for non-centrally-cleared derivatives across jurisdictions.
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16. BCBS/IOSCO proposals
 Appropriate margining practices in place for all derivative
transactions not cleared by CCPs
 All FC and systemically-important NF (NFC+) must exchange
initial and variation margin as appropriate
 Assets collected should be highly liquid and should hold their
value in a time of financial stress
 Transactions between a firm and its affiliates (intragroup)
subject to variation margin arrangements to prevent the
accumulation of significant current exposure
 Regulatory regimes should interact so as to result in sufficiently
consistent and non- duplicative regulatory margin requirements
for non-centrally-cleared derivatives across jurisdictions.
16
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17. BCBS/IOSCO proposals
 Appropriate margining practices in place for all derivative
transactions not cleared by CCPs
 All FC and systemically-important NF (NFC+) must exchange
initial and variation margin as appropriate
 Assets collected should be highly liquid and should hold their
value in a time of financial stress
 Transactions between a firm and its affiliates (intragroup)
subject to variation margin arrangements to prevent the
accumulation of significant current exposure
 Regulatory regimes should interact so as to result in sufficiently
consistent and non- duplicative regulatory margin requirements
for non-centrally-cleared derivatives across jurisdictions.
17
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18. Harmonised regulatory framework for CCPs
 Margin calculation: initial margin calculation to cover exposures
over specific time period and with specific confidence intervals (99.5%
OTC derivatives, 99%other FIs)
 Portfolio Margining:
 allowed if significant and reliable correlation and covered by the same
default fund
 margin reductions < 80% combined VS individual calculation, 100% only if
CCP not exposed to any potential related risk
 Default Fund: minimum size based on policy framework reflecting
the risk profile of the CCP
 Default Waterfall: margins defaulting CM default fund contribution
defaulting CM  own dedicated resources (25% of Min Capital) 
DF contribution of non-defaulting CM…
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19. Highly liquid collateral for margining…
Collateral for margining accepted under certain conditions
 Cash, financial instruments, Transferable securities and money-market
instruments, gold and…
 Bank guarantees can be used, but
– Only for NFCs
– Low credit risk and specific currency
– Irrevocable, unconditional without legal or contractual exemption
– Not issued by an entity providing services critical to functioning of
the CCP
–…
– Fully backed by collateral not subject to wrong way risk and the
CCP has prompt access to it  ‘grace period’ of 3years following
the entry into force of related RTS
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20. Transaction Reporting obligation
 Nearly 70 data fields for each derivative transaction
 Details covering counterparty data, contract type, details
of the transaction, confirmation reporting, clearing, asset
specific section, options, modifications…
 Expected timeline for commodity derivatives
2014 2015 2016 2017
Start of Info on collateral
transaction for transactions Directly report to Back-loading
reporting on (for FC/NFC+) ESMA if NO TR of derivatives entered into
commodity is available after 16.08.2012 and not
derivatives* outstanding at kick-in date
(at the earliest) Back-loading for reporting
of derivatives entered into
after 16.08.2012 and (3years)
outstanding at kick-in
date for reporting
*Starting of transaction reporting linked to the registration of a Trade Repository.
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In general, the obligation starts 90 days after the registration

21. Agenda
 EMIR, an history of more than four years
 Short overview of EMIR requirements
 Open issues
 The timeline
21

22. Some of the regulatory issues under debate
 Scope: Definition of derivatives: legal definition VS ‘real world’
 Clearing obligation:
 Single Asset Class VS all asset classes
 Clearing threshold:
 EMIR states ‘sum of net positions and exposures per counterparty’
 Is it the calculation of notional values clear for all types of derivatives?
 When intragroup deals be considered non-risk reducing?
 How to consider centrally cleared OTC derivatives?
 Possible to avoid the clearing obligation if average positions again below
threshold before the clearing obligation becomes effective?
 Who is who? How to know which NFCs are ‘systemic relevant’?
 RMT: Bilateral margining practices  ESAs RTS expected in 2013.
What the final content will be?
…
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23. Agenda
 EMIR, an history of more than four years
 Short overview of EMIR requirements
 Open issues
 The timeline
23

24. ESMA estimations on regulatory timeline
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25. What’s next?
 Endorsement of ESMA RTS by Commission Dec 2012
 ESAs consultations on margining/RMT Q1/2013
 Entry into force of ESMA RTS Mar 2013
 Kick-in of the (first) clearing obligation Jun-Jul 2013
 Applicability of delayed RMT in ESMA RTS Sept 2013
 ESAs final RTS on margining/RMT Q3-4/2013
 Reporting obligation starting (at earliest) Jan 2014
…
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26. Thank You For Your
Attention
Short overview and history of EMIR
Workshop EMIR and the new challenges for commodity risk management
13th December 2012, Düsseldorf
Riccardo Rossi – Regulatory Affairs