EMIR Alert: Margin Clarity Ahead

December 23, 2019

Earlier this month, the ESAs1 published a final report2 on proposed updates to the existing EMIR margin rules3 (the “Margin RTS Updates”).

Although not yet final, the absence of a public consultation and fast approaching deadlines mean progress through the European legislative process is expected to be swift. Once in effect the updates will bring welcome clarity to the operation of the European regulatory margin rules.

What do they do? 

The following changes are proposed:

  • FX. No regulatory variation margin (VM) required for physically-settled FX forwards and swaps. The only exception to this is trades between two systemically important entities. This will clarify a subject which has been uncertain for some time4.
  • Initial Margin (IM). The IM “Phase 5” (1 September 2020) AANA5 threshold will be raised to €50 billion and a new “Phase 6” (1 September 2021) introduced with an AANA threshold of €8 billion6.
  • Options. One year extension to 4 January 2021 of the temporary IM and VM exemption for single-stock equity options and index options. 
  • Intra-Group Transactions. One year extension to 21 December 2020 of the deferred margin rules for intra-group transactions with a third-country entity.

On the same day the ESAs made a separate announcement clarifiying that amendments to trades for the sole purpose of incorporating benchmark fall-back language will not trigger the exchange of mandatory EMIR VM, or the EMIR clearing requirement7.

Who is affected?

  • FX. Any counterparty subject to the EMIR IM and VM requirements except relevant FX between two “institutions” (defined as credit institutions, investment firms and third country equivalents).
  • IM. Those counterparties in-scope for EMIR IM8.
  • Options. Parties engaging in single-stock equity options or index options.
  • Intra-Group Transactions. Intra-group transactions with a third-country entity in respect of which there has been no equivalence decision.


Put simply, international harmonisation. In particular the VM exemption for physically-settled FX forwards and swaps will harmonise the scope of EU VM requirements with the more flexible regimes of other jurisdictions. This is of particular note for those in scope of the U.S. rules.


A number of procedural steps remain before the Margin RTS Updates are finalised. Since the current exemptions will almost certainly expire before the new rules are finalised, the ESAs have stated that in the meantime they expect competent authorities to apply the EU framework in a risk-based and proportionate manner.

What Next?

European Commission endorsement. Once endorsed, there will be a period of non-objection from the European Parliament and the Council before the Margin RTS Updates are published in the Official Journal and come into force. 

With momentum building on benchmark reform, the go-live of SFTR9 reporting and the implementation of the changes to the EMIR reporting requirements next June10, together with expected progress on Brexit, 2020 promises to be a busy year for European derivatives.  At the time of publication the new Master Regulatory Reporting Agreement covering delegated reporting pursuant to both EMIR and SFTR had just been released11.  More on this from us early in the new-year.

Read EMIR Alert: Margin Clarity Ahead.


1) The European Supervisory Authorities comprising the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority.
2) See here. These updates are subject to endorsement by the European Commission and a non-objection period by the European Parliament and Council, therefore any legal certainty surrounding these updates can only be confirmed after these steps have been completed and the updates have been published in the Official Journal.
3) As set out in Commission Delegated Regulation (EU) No 2016/2251 of 4 October 2016 which can be found here.
4) The ESAs previously published related draft RTS in December 2017. Earlier in December 2017, the Financial Conduct Authority (FCA) had also made a related announcement.
5) Aggregate average notional amount.
6) These changes to the initial margin (IM) deadlines and thresholds are in-line with the July 2019 IOSCO and Basel Committee Statement, which can be found here.  Separately, the report confirms that the ESAs do not consider further changes to the IM rules are required following the March 2019 IOSCO statement on documentation requirements if the IM required does not exceed €50million.  That March 2019 IOSCO/BCBS statement can be found here.
7) The ESA Statement can be found here.
8) EMIR Financial Counterparties (‘FCs’), Non-Financial Counterparties above the clearing threshold (‘NFC+s’) , and so called ‘third country’ FCs and NFC+s when those entities transact with an EMIR FC or NFC+.
9) The Securities Financing Transactions Regulation, Regulation (EU) 2015/2365 of the European Parliament and of the Council of 25 November 2015 on transparency of securities financing transactions and of reuse and amending Regulation (EU) No 648/2012.  Find our previous OnPoint on SFTR reporting here.
10) Our Summer 2019 OnPoint relating to the EMIR Refit can be found here.
11) See press release from ISDA of 19 December 2019, which can be found here.

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