UK EMIR: Margin exemption for single-stock equity and index options

The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have decided to extend the temporary exemption from the UK EMIR bilateral margining requirements for single-stock equity and index options by a further two years. The exemption was set to expire on 4 January 2024 but will now be available until 4 January 2026. The regulators will, during this temporary exemption period, gather information on current market practices and risks in order to create a permanent UK regime.

The regulators have also decided not to implement a supervisory pre-approval requirement at this stage for using initial margin models. The PRA will continue to use the existing framework to ensure models and practices meet requirements. The FCA will continue to use existing supervisory powers to engage with firms on their models where necessary to ensure modelling requirements are met.

Further detail on both decisions as well as the technical standards which give effect to the exemption extension are set out in policy statement (PS) ‘Margin requirements for non-centrally cleared derivatives: Amendments to BTS 2016/2251’ (PRA PS18/23 and FCA PS23/19) published on 18 December 2023.