The European Union has introduced significant updates to its clearing rules with the publication of EMIR 3 (EU Regulation 2024/2987) in the EU Official Journal on 4 December. This regulation amends the European Market Infrastructure Regulation (EMIR) and imposes new requirements for active clearing accounts, adjusts clearing thresholds, and revises exemptions for certain transactions. These changes are part of a broader effort to address the EU’s post-Brexit financial landscape.
One of the central changes under EMIR 3 is the introduction of an “active account” requirement, explain Vlad Maly and Michal Chajdukowski from law firm McDermott Will & Emery. Financial counterparties (FCs) and non-financial counterparties (NFCs) subject to EMIR clearing obligations and exceeding thresholds in specific derivatives must now maintain an active account with a central counterparty (CCP) established in the EU. This applies to those dealing in interest rate derivatives denominated in EUR or PLN, as well as short-term interest rate derivatives in EUR. Credit default swaps denominated in EUR, initially included in the proposal, are excluded from the final requirement.
Additionally, counterparties holding at least €6 billion in open positions must clear a minimum of five trades per derivative class through their active EU accounts during a designated reference period. The European Securities and Markets Authority (ESMA) will issue further guidance on how this requirement will be implemented.
Responding to post-Brexit clearing concerns
EMIR 3 was developed in response to ongoing concerns about EU counterparties continuing to clear their trades with UK-based CCPs after Brexit. An earlier proposal to require all affected counterparties to clear exclusively through EU CCPs faced significant criticism from market participants, who argued it would undermine competitiveness. The final regulation has scaled back these obligations, targeting only specific entities and derivative classes.
The regulation also addresses challenges related to clearing threshold calculations. Before EMIR 3, OTC derivatives were defined as contracts not traded on EU-regulated markets or equivalent venues. This definition became problematic after Brexit, as UK trading venues lost EU equivalence. EMIR 3 now defines OTC derivatives based on whether they are cleared through EU or EU-equivalent CCPs, reflecting the EU’s recognition of UK CCPs as equivalent.
Changes to exemptions
EMIR 3 introduces several updates to exemptions. The EU pension scheme exemption now extends to transactions involving non-EU pension schemes authorised under national law. A new exemption covers market-neutral post-trade risk reduction transactions. Additionally, uncleared single-stock and equity index options are permanently exempted from margin requirements. Meanwhile, the scope of the reporting exemption for intra-group trades by NFCs has been narrowed, excluding NFC+ entities that are subject to clearing obligations.
