FCA supervisory priorities arising from EMIR

During 2015, areas of focus for FCA will include:

  • counterparties complying with the requirements for trade reporting, including having established connectivity or appropriate delegated reporting arrangements, internal systems to ensure the accuracy of reports, and having both acquired  Legal Entity Identifiers and ensured that they are renewed annually;
  • non-financial firms assessing and monitoring their status against the clearing threshold in line with EMIR;
  • clearing members complying with the EMIR Article 39 requirements around segregation, account offering and disclosure of risks and costs associated with the clearing services they offer to clients; and
  • readiness of financial firms and non-financials above the clearing threshold for the clearing obligation and for collateralisation of non-centrally cleared OTC derivatives.

From 2015 onwards, FCA will start gradually integrating EMIR regulatory requirements into business-as-usual supervision. The supervisory approach will be risk based, taking into account the position of particular firms and the markets in which they operate.

A number of EMIR obligations have already been in force since 2013/2014, and new ones will continue to come into force at various points from 2015 onwards. In respect of each EMIR obligation, FCA approach has been, and continues to be, to:

  • confirm with major derivative market participants and relevant industry bodies the delivery of implementation plans and discuss any issues arising
  • follow-up on any issues of concern, with individual firms or on an industry-wide basis and
  • sample across a range of firms for an indication of the level of compliance and any issues to be addressed.

FCA then gradually integrates supervision of EMIR obligations into the Firm Systematic Framework, which is outlined in Section 2.5 of the FCA Business Plan 2013/14, and follow the general approach to supervision, as outlined in Section 1 of the FCA Business Plan 2014/2015.

In 2015, FCA supervision of EMIR requirements will focus on the reporting of derivative contracts to trade repositories, clearing members’ Article 39 obligations in relation to the clearing services they offer to clients, and readiness of relevant market participants for the clearing obligation and the bilateral margin requirements for non-cleared trades.

More information is available via the following link.