Significant changes to the derivatives market are being introduced by EU Regulation No. 648/2012 on OTC derivatives, central counterparties and trade repositories ("EMIR") which entered into force on 16 August 2012. In particular, EMIR introduces a generalized duty to report derivatives transactions to trade repositories, as well as the obligation to use central clearing for specific transactions in central clearing counterparties (CCPs).

The purpose of these obligations is to help achieving EMIR's principal goals, i.e. ensuring a greater transparency of derivatives transactions, mitigating counterparty risk, and strengthening the clearing requirements and mitigating operational risk.

The new obligations are of universal application and affect not only financial counterparties (inter alia, banks, insurance companies, investment firms which manage UCIT investment funds and alternatives), but also non-financial counterparties.

Obligation to report transactions to the trade repository

The obligation to report information on derivative transactions (e.g. options, swaps, etc.) applies to all non-financial counterparties (regardless of the volume of derivative transactions), except for natural persons (even if they conduct a business activity).

The reporting obligation applies to each derivatives contract concluded, as well as all changes or termination of a contract, and concerns derivatives contracts concluded both in a regulated market and in OTC trading (i.e., outside the regulated market). Importantly, reporting obligations also apply to credit linked derivatives, i.e. inter alia, derivatives contracts hedging/transferring credit risk, are subject to reporting. Outstanding derivative contracts entered into or in force before 16 August 2012 should be reported (back-loading), as well as all contracts entered into on or after 16 August 2012.

The counterparty or CCP may delegate the task of reporting the transaction to another entity (e.g. the other party to the contract).

Reporting derivatives contracts is presently optional, but will become mandatory once the first repository is registered with the European Securities and Markets Authority (ESMA). This is expected to happen in the second half of September 2013.

Initially, the reporting obligation will concern only credit and interest rate derivative contract; with regard to remaining derivatives this obligation will enter into force on 1 January 2014 (assuming that the first repository is registered with ESMA by 1 October).

Krajowy Depozyt Papierów Wartościowych S.A. (KDPW) – trade repository

Under the recently amended Polish Act on Trading in Financial Instruments, the function of trade repository in Poland is performed by KDPW. Detailed information about obtaining the status of participant, access, as well as about reporting to the repository may be found on KDPW's website in the section "Trade Repository".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.