Comprising a Regulation amending EMIR, and a Directive amending the UCITS Directive, the CRD IV Directive, and the Investment Firms Directive, EMIR 3.0 was published in the Official Journal on 4 December 2024.

Member States must transpose the Directive by 25 June 2026.

The Regulation will apply directly in Member States from 24 December 2024, save for certain provisions that depend on certain regulatory technical standards (RTS) being finalised.

Several concerns expressed by industry associations in September 2024, when they called on the European Commission / European Supervisory Authorities to clarify that market participants shouldn’t be required to comply with the Level 1 text before the Level 2 RTS apply, haven’t yet been addressed by way of clarification from those authorities.

However, the EBA did publish a ‘no action letter’ on 17 December 2024 stating that competent authorities shouldn’t prioritise any supervisory or enforcement action in relation to the processing of applications for initial margin (IM) model authorisation received as a result of the entry into force of EMIR 3.0.  EMIR 3.0 requires counterparties to apply to their competent authorities for authorisation before using, or changing, a model for IM calculation.  Having validation and authorisation requirements for IM models in place by 24 December 2024 was expected to pose difficulties for competent authorities and counterparties.  The ‘no action letter’ will apply until the EBA sets up its central validation function and until the draft RTS on initial margin model valuation and the related guidelines on the application and authorisation process are in place.

The requirement for firms that are subject to the clearing obligation to clear at least a portion of certain systemic derivatives through active accounts at EU CCPs is the most high-profile change in EMIR 3.0.

Certain financial counterparties (FCs) and non-financial counterparties (NFCs) will have to have an active account at an EU CCP through which they will need to clear trades in certain categories of “derivatives of substantial systemic importance” (initially interest rate derivatives denominated in euro and Polish zloty, and short-term interest rate derivatives denominated in euro).  For more information on the active account requirement, read our insights here: EMIR 3.0 Update and the Active Account Requirement.  In-scope FCs and NFCs must set up an active account by 25 June 2025.

Notably, ESMA (which is required by EMIR 3.0 to further specify the conditions of the active account requirement in RTS by 25 June 2025) opted to publish its consultation on those RTS before EMIR 3.0 was published in the Official Journal given the timing constraints.  That consultation closes on 27 January 2025.

Other key aspects of EMIR 3.0 include (but aren’t limited to) the following:

• Exemption of intragroup transactions from clearing obligation and margin requirements: Simplifying the intragroup transactions framework by replacing the need for an equivalence decision with a list of third countries for which an exemption shouldn’t be granted in respect of an affiliate in that third country – those are high-risk third countries for AML / CFT purposes, or third countries where the Commission sees increased risks due to issues identified in their legal, supervisory and enforcement arrangements.
• Clearing: An exemption from the clearing obligation where an EU FC or NFC+ transacts with a pension scheme arrangement (PSA) established in a third country where that PSA is exempt from the clearing obligation under that country’s laws.
• Clearing: Only derivatives that aren’t cleared at an EU CCP or through a recognised third country CCP will be included by NFCs when calculating the uncleared positions under Article 10 (and derivatives that are objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity of the NFC or of the group it belongs will not be included).
• Clearing: ESMA will review and clarify the RTS relating to the hedging exemption.
• Clearing: A conditional exemption from the clearing obligation for post-trade risk reduction services. ESMA must prepare RTS further specifying those conditions (to be submitted to the Commission by 25 December 2025).
• Clearing: Allowing bank and public guarantees to be considered eligible as highly liquid collateral (this is intended to benefit NFCs such as energy companies).
• Margin: NFCs that become subject to the margin obligation for the first time will have a 4-month implementation period.
• Margin: An exemption from bilateral margining requirements for single-stock options and equity index options (with a provision for the European Supervisory Authorities to monitor this every 3 years).
• CCPs: Additional transparency obligations on CCPs, including requirements to provide better visibility and predictability on margin calls, to give clear explanations of their initial margin models, and to continuously revise margin levels to take account of market conditions.

Please get in touch with your usual contact in our Derivatives, Treasury and Market Infrastructure Group to discuss the impact of EMIR 3.0 on your business.