EMIR — ESMA requests clarity on the definition of derivative

The European Securities and Markets Authority (ESMA) has written to the European Commission requesting that the definition of ‘derivative’ or ‘derivative contract’ in Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR) is clarified. This is to ensure that EMIR is applied in a consistent manner in all member states of the EU, which is one of the stated aims of EMIR.

EMIR applies to financial instruments that it categorises as a ‘derivative’ or ‘derivative contract’ and defines these as financial instruments as set out in points (4) to (10) of Section C of Annex I to Directive 2004/39/EC on markets in financial instruments (MiFID).

MiFID took the form of a directive, which meant that member states had a degree of discretion in how MiFID was incorporated into domestic law. This has resulted in differing views and approaches between member states on what constitutes a derivative and may prevent the uniform application of EMIR across all member states…

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