EMIR Margin Rules - documenting procedures and enforceability review

Amidst the ongoing excitement of the Variation Margin repapering exercise, derivative users should not lose sight of the other EMIR margin requirements.

While updating your contracts with derivative counterparties is clearly key to compliance, EMIR also imposes other, internal, obligations. The most important of these are the requirements to (a) document your internal risk management procedures relating to collateral (Article 2(1) Commission Delegated Regulation (EU) 2016/2251 supplementing EMIR (the “Margin RTS”)) and (b) perform an independent legal review of the enforceability of your collateral agreements (Article 2(3) Margin RTS).

To help with these, Macfarlanes has created two products:

  • A skeleton risk management handbook, to help document the various processes specified in the margin rules.
  • A low-cost legal opinion, addressed to you, which covers one or more specified collateral agreements and confirms whether or not they would be enforceable for the purposes of the margin rules. This could be refreshed periodically and would cover CSAs, whether or not we negotiated them on your behalf.

Anyone directly subject to the EMIR margin rules (as set out on page 1 of our earlier note below) must deal with these requirements.

Please get in touch with anyone in our Financial Services Regulation or Derivatives and Trading teams if these products would be of interest, or if you would like to discuss these obligations and ways of complying with them more generally.