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Need to Identify AIFs Within Fund Structures for Emir

By Isobel Wright and Nora Bullock
Published July 10, 2014 Hedge Funds Review

The European Market Infrastructure Regulation (Emir) came into force on August 16, 2012, and sets out new requirements, including clearing obligations, risk mitigation techniques for uncleared trades and trade reporting, for all over-the-counter derivatives. The extent to which the new requirements will apply will depend on how parties are classified under Emir.

This article looks at how these requirements may affect alternative investment funds that enter into derivatives transactions and the interaction between Emir and the alternative investment fund managers directive (AIFMD). In the UK, existing alternative investment fund managers have been able to rely on a one-year transitional period, but need to be AIFMD-compliant by July 22, 2014. Under AIFMD, an internal or external AIFM must be appointed for each fund. 

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Citi Paper Warns Hedge Funds on Collateral Management and Rising Financing Costs

Published July 1, 2014 COOConnect

Hedge funds must optimise the way in which they manage their collateral following reforms of the over-the-counter (OTC) derivatives markets while the cost of financing is going to rise exponentially in light of Basel III capital requirements, a new study from Citi Prime Finance has said.

There is widespread speculation that a collateral shortfall could emerge as more OTC derivatives are increasingly cleared through central counterparty clearing houses (CCPs) as mandated under Dodd-Frank in the US and the European Market Infrastructure Regulation (EMIR).

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SGSS Launches EMIR Compliant Reporting Service

Published June 27, 2014 The Trade

Société Générale Securities Services (SGSS) has launched a new service providing reporting of OTC derivative transactions to trade repositories as required by the European markets infrastructure regulation (EMIR).

The reporting service covers multi-counterparties and multi-asset classes and, as mandated by the European Securities and Markets Authority (ESMA), the SGGS service supports OTC derivatives users in the EU through the entire trading process. SGSS reports details for derivatives transactions to the London-based DTCC Derivatives Repository on a D+1 basis for all counterparties and covers all derivative asset classes.

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Dealers Rail at 'Absurd' EU Margin Rules

By Matt Cameron
Published June 25, 2014 Risk

European banks have reacted with dismay after regulators confirmed they would be expected to collect margin from non-EU corporates when executing uncleared trades – a requirement that does not apply to their rivals, and would also not affect trades with European corporates. Critics argue the draft rules – which are the EU version of internationally agreed standards on compulsory bilateral margining - will result in third-country corporates shunning European banks.

"It is absurd and would effectively disincentivise third-country non-financial entities from trading with EU counterparts," says one derivatives risk manager at a US bank in New York.

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LCH.Clearnet Wins Emir Approval for UK

By Anish Puaar
Published June 12, 2014 Financial News

LCH.Clearnet has become the first UK-based clearing house to receive approval under incoming European derivatives rules, as the region continues to prepare for the introduction of mandatory swap clearing.

LCH.Clearnet Limited, the UK arm of the clearing house which is majority-owned by the London Stock Exchange, is the biggest clearer of interest rate swaps globally and becomes the seventh clearing house to receive approval under Emir.

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Collateral and Valuation Hurdles Trips the Buy Side

Published May 28, 2014 DerivSource

Market participants have barely caught their collective breadth from meeting the first trade reporting deadline in February under the European Market Infrastructure Regulation (EMIR). The process did not go smoothly and no one expects the next hurdle - collateral and valuation - on 12 August to be any easier. Regulators are still hammering out the final details while questions remain as to whether sell-side firms will offer a helping hand to their buy-side counterparts. 

The hope is that brokers and banks will extend the delegated services offered for trade reporting to the next phase which involves submitting daily reports to trade repositories with mark to market valuations of outstanding exposures to their counterparties as well as reporting on the collateral that has been exchanged, either for individual contracts or on a portfolio basis. 

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EU Regulators Concerned by CFTC's Foreign CCP Rules

By Lukas Becker
Published May 23, 2014 Risk

European regulators are warning that planned US rules for foreign clearing houses that would bar them from accepting US clients could prevent US central counterparties (CCPs) being approved under Europe's own rules.

The prospect of an authorisation tug-of-war stems from the European Market Infrastructure Regulation (Emir), which states that a country's clearing regulation can only be deemed equivalent if it has a reciprocal regime for authorising European and other third-country clearers

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Banks Breach EU and US Reporting Rules to Avoid Privacy Clash

By Fiona Maxwell
Published May 23, 2014 Risk

Two dealers have told Risk they are breaching European and US derivatives reporting rules in order to avoid a clash with some countries' privacy laws, which make it illegal to reveal customer identities.

Under the European Market Infrastructure Regulation (Emir), as well as in reporting rules from the Commodity Futures Trading Commission (CFTC), dealers are required to fill in a number of fields that allow regulators to see identifying information of the counterparty to each trade, including the legal entity identifier (LEI), a 20-character alphanumeric code that is unique to each participant. 

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End-Users Prep for EMIR Clearing

By Christopher Whittall
Published May 17, 2014 IFR

European swaps users are signing up to clearing arrangements well ahead of a regulatory mandate to shift over-the-counter derivatives into central counterparties, in a bid to avoid the kind of last-minute scramble that was witnessed among US firms in mid-2013.

The CFTC’s phased-in approach helped to smooth the transition for thousands of clients clearing swaps for the first time last year, but this did not prevent an eleventh-hour rush from many end-users to get the necessary documentation in place.

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Repositories Call on Esma to Help Fix Emir Reporting Problems

By Fiona Maxwell
Published May 14, 2014 Risk

The European Securities and Markets Authority (Esma) needs to help fix the region's still-new derivatives reporting regime, according to two of Europe's six authorised trade repositories (TRs).

Speaking at the annual conference of the Association of Corporate Treasurers in Glasgow today, repository executives said the number of trades that could be matched was still "very, very low" where counterparties have chosen to send their side of the transaction report to different venues – the result of widespread confusion over the unique trade identifiers (UTIs) that are supposed to help pair up the reports.

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