ISDA® Updates EMIR Classification Letter | Practical Law

ISDA® Updates EMIR Classification Letter | Practical Law

ISDA published an updated version of its classification letter that enables counterparties to notify each other of their status for clearing and other regulatory requirements under the Regulation on OTC derivative transactions, central counterparties and trade repositories, as well as an updated explanatory memorandum.

ISDA® Updates EMIR Classification Letter

Practical Law Legal Update w-001-8953 (Approx. 3 pages)

ISDA® Updates EMIR Classification Letter

by Practical Law Finance
Published on 14 Apr 2016 • USA (National/Federal)
ISDA published an updated version of its classification letter that enables counterparties to notify each other of their status for clearing and other regulatory requirements under the Regulation on OTC derivative transactions, central counterparties and trade repositories, as well as an updated explanatory memorandum.
On April 13, 2016, ISDA® published an updated version of its classification letter that enables counterparties to notify each other of their status for clearing and other regulatory requirements under the Regulation on over-the-counter (OTC) derivative transactions, central counterparties (CCP) and trade repositories ((EU) 648/2012) (EMIR). ISDA also published an updated explanatory memorandum. For more information on the original version of the EMIR classification letter, see Legal Update, ISDA Publishes EMIR Classification Letter and for more information on clearing under EMIR see Practice Notes EMIR: Overview and EMIR: Requirement to Clear OTC Derivative Contracts Through a CCP.
EMIR imposes a number of regulatory obligations on counterparties in the derivatives market. The application of the EMIR requirements depends on how counterparties are classified (see Practice Note, EMIR: Overview: Who is Within Scope of EMIR?). The EMIR classification letter has been prepared as a bilateral version of the classification tools that currently exist on ISDA Amend (see Legal Update, ISDA: May 2015 Publications) and is intended to facilitate compliance with EMIR by allowing counterparties to communicate their status by answering a series of questions.
The EMIR classification letter has been updated by:
  • Aligning the definition of Category 1 Entity to that used in the final version of the regulatory technical standards (RTS) on the clearing obligation for OTC interest rate derivatives denominated in EUR, GBP, JPY or USD ((EU) 2015/2205).
  • Giving entities the ability to make classifications in respect of the draft RTS on the clearing obligation for interest rate derivatives denominated in Norwegian krone, Swedish krona and Polish zloty and the draft RTS on the clearing obligation for credit default swap index classes.
  • Removing from question one of Appendix I the forward looking statement about classification in respect of future classes of OTC derivatives that become subject to mandatory clearing, together with removing the related notice attached as Appendix IV.
For information about EMIR clearing obligations, see Practice Note, EMIR: Requirement to Clear OTC Derivative Contracts Through a CCP.
The documents are available on the ISDA website.
For information on ISDA documentation, see Practice Note, ISDA Documents: Overview.
"ISDA" is a registered trademark of the International Swaps and Derivatives Association, Inc. (ISDA). ISDA is not a sponsor of Practical Law and had no part in the development of this resource.