EMIR — ESMA requests clarity on the definition of derivative

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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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