The introduction of EMIR 3 on 24 December 2024 marks a turning point for the EU’s derivatives market, with significant implications for post-trade processes. In a detailed briefing by Allen & Overy Shearman, the firm highlights how the regulation brings long-term changes to margin exemptions, reporting standards, and counterparty classification. While much of the public discussion has revolved around clearing obligations, the updates to uncleared derivatives reveal key challenges and opportunities for the post-trade ecosystem.
One of the standout updates is the permanent exemption from margin requirements for single-stock options and equity index options. For years, the industry relied on temporary extensions that added uncertainty to collateral and settlement operations. This permanent exemption brings clarity and simplifies the post-trade workflows for firms handling these instruments, reducing the need for frequent system updates and compliance checks.
Clearing threshold adjustments
Changes to clearing threshold calculations for non-financial counterparties (NFCs) address longstanding inefficiencies in post-trade operations. By excluding OTC derivatives cleared through authorised CCPs, EMIR 3 reduces the complexity of determining regulatory obligations for NFCs. Additionally, the removal of the “group test” streamlines reporting and collateral processes by limiting the scope of intra-group transactions that need to be factored into post-trade compliance.
These changes are particularly relevant for firms trading on UK-regulated markets post-Brexit, where transactions had previously been categorised as OTC. This update alleviates unnecessary operational burdens in post-trade workflows tied to classification requirements.
Data quality
With data quality becoming a regulatory focal point, EMIR 3 imposes stricter requirements for post-trade reporting accuracy. NFC+ entities benefiting from intragroup exemptions must now submit weekly position reports to regulators. Systemic or repeated errors in reporting can result in penalties of up to 1per cent of daily turnover, underscoring the importance of robust post-trade governance frameworks.
To meet these standards, firms must ensure their trade repositories, data validation systems, and operational controls are equipped to handle the increased scrutiny. This shift reflects the broader regulatory trend of emphasising transparency and resilience in post-trade operations.
Cross-border exemptions
EMIR 3’s removal of equivalence requirements for intragroup margin exemptions streamlines cross-border post-trade operations. Firms no longer need to navigate the administrative complexities of securing equivalence decisions, as exemptions are now granted unless counterparties are based in flagged jurisdictions. This change reduces operational delays and improves efficiency in collateral exchange processes across borders.
Post-trade implications for the industry
While EMIR 3 is already in effect, certain provisions remain contingent on technical standards expected by 2025. For post-trade teams, the regulation demands adjustments to processes, systems, and compliance frameworks. Firms must proactively adapt to the new requirements to ensure smooth operations in reporting, collateral management, and risk mitigation.
