Web Trader MT5
EU regulation governing OTC derivatives, central counterparties, and trade repositories, introduced to address the opacity and counterparty risk exposed in OTC markets during the financial crisis. Three core obligations apply to derivatives participants.
First, mandatory central clearing: standardised OTC derivatives interest rate swaps, credit default swaps must clear through authorised CCPs rather than bilaterally. Second, mandatory reporting: all derivative contracts must be reported to a registered trade repository, giving regulators full market visibility. Third, risk mitigation for uncleared derivatives: including margin exchange, reconciliation requirements, and dispute resolution procedures.
EMIR has been revised periodically to address unintended consequences and reduce compliance burden on smaller participants and non-financial corporates.
Example: A European bank executing an interest rate swap with a corporate must report the trade to a registered repository the same day, clear it through an authorised CCP if it meets the clearing threshold, and exchange variation margin daily. The compliance cost is significant, but the regulatory objective eliminating hidden bilateral credit exposures that accumulated silently before the financial crisis is clearly visible in the reduced systemic risk profile of post-EMIR European derivatives markets.
