On December 19, 2012, the European Commission adopted technical standards on the European Markets Infrastructure Regulation (EMIR) as well as a Delegated Regulation supplementing the Directive on Alternative Investment Fund Managers (AIFMD) (called "Level 2 measures"). These two measures have been under formulation and consideration since 2010, and the technical standards adopted on December 19 meet important preconditions to implementing EMIR and AIFMD throughout all EU member countries.
EMIR
The European Commission adopted
nine regulatory and implementing technical standards to complement the obligations defined in EMIR, which was adopted on July 4 and entered into force on August 16, 2012. The technical standards were developed by the European Supervisory Authorities and have been endorsed by the European Commission. Because this is an EU Regulation, the provisions will be legally binding in all Member States without implementation into national law from the day of entry into force.
EMIR technical standards on risk mitigation techniques for non-centrally cleared trades are subject to the Basel Committee on Banking Supervision and International Organization of Securities Commissions work on margin requirements, which is anticipated by the end of December 2013.
Key elements of the EMIR technical standards are:
OTC (over-the-counter) Derivatives. The regulatory technical standards specify the provisions of the European Market Infrastructure Regulation (EMIR) related to indirect clearing arrangements, the clearing obligation procedure, the public register, access to a trading venue, non-financial counterparties, and risk mitigation techniques for OTC derivatives contracts not cleared by a CCP.
Central Counterparties (CCPs). The regulatory technical standards specify the provisions of EMIR related to the requirements for CCPs, as well asthe capital, retained earnings and reserves of a CCP. The implementing technical standards specify the format of the records to be maintained by CCPs.
Trade Repositories. The regulatory technical standards specify the provisions of EMIR related to the minimum details of the data to be reported to trade repositories, the details of the application for registration as a trade repository, as well as the data to be published and made available by trade repositories and operational standards for aggregating, comparing and accessing the data. The implementing technical standards specify the format and frequency of trade reports to trade repositories and the format of applications for registration of trade repositories.
Effective Date and Implementation. The regulatory technical standards will be published in the Official Journal of the European Union immediately following the receipt of 'non-objection' from the European Parliament and Council. The European Parliament and Council have one month to exercise their right of scrutiny, with this period extendable by an additional one month at their initiative. The regulatory technical standards will then enter into force on the twentieth day following that of their publication.
The implementing technical standards are not subject to the right of scrutiny of the European Parliament and Council. They will therefore be published in the Official Journal of the European Union right after their adoption and will enter into force on the twentieth day following that of their publication. Nevertheless, the provisions under the implementing technical standards will only take effect once the associated regulatory technical standards enter into force, since the provisions defined in the implementing acts complement provisions defined in the related regulatory technical standards and are not stand-alone obligations.
AIFMD
On the same day, the European Commission also adopted
delegated acts supplementing AIFMD regarding depositaries, exemptions, general operating conditions, leverage, transparency, and supervision. The goal of AIFMD is to create a comprehensive and effective regulatory and supervisory environment for alternative investment fund managers in the EU. This latest Delegated Regulation is a precondition for the application of the AIFMD in EU member countries and supplements certain elements of the AIFMD. These rules concern the:
- conditions and procedure for the determination and authorisation of AIFMs, including the capital requirements applicable to AIFMs;
- operating conditions for AIFMs, including rules on remuneration, conflicts of interest, risk management, liquidity management, investment in securitisation positions, organisational requirements, rules on valuation;
- conditions for delegation;
- rules on depositaries, including the depositary's tasks and liability;
- reporting requirements and leverage calculation;
- rules for cooperation arrangements.
The delegated acts will now be transmitted to the European Parliament and the Council of the European Union, which then have three months to object to the acts or to revoke the delegation. If neither the European Parliament nor the Council of the European Union objects to the act within the three month period, the delegation will be published in the Official Journal of the European Union and enter into force on the twentieth day following its publication.