Top 10 things you need to know about EMIR 3

An updated version of our article exploring 10 key questions on EMIR 3, including the active account requirement, from a buy-side derivatives perspective

January 2025

Introducing EMIR 3

EMIR 3¹ was published in the Official Journal of the EU on 4 December 2024 and entered into force on 24 December 2024.

One of the key changes for the buy-side to be aware of is the introduction of a brand new obligation known as the active account requirement (AAR). EMIR 3 also introduces AAR related obligations (such as additional reporting), as well as amending various other provisions of EMIR which could impact buy-side derivatives counterparties.

This article explores 10 key questions:

1. Why is EMIR being amended again?

2. What is the current status of EMIR 3?

3. What is the active account requirement?

4. Who will the active account requirement apply to and could it apply to non-EU entities?

5. What categories of derivatives will the active account requirement apply to?

6. What steps should buy-side market participants consider taking to prepare for the active account requirement?

7. What would be the consequences of non-compliance with the active account requirement?

8. What were the views of industry associations on the active account requirement proposals during the legislative process?

9. Is EMIR 3 exclusively about active accounts, or does it make other changes?

10. Are any similar changes being proposed to UK EMIR?

^{1 Regulation (EU) 2024/2987 of the European Parliament and of the Council of 27 November 2024 amending Regulations (EU) No 648/2012, (EU) No 575/2013 and (EU) 2017/1131 as regards measures to mitigate excessive exposures to third-country central counterparties and improve the efficiency of Union clearing markets (the "amending Regulation") and Directive (EU) 2024/2994 of the European Parliament and of the Council of 27 November 2024 amending Directives 2009/65/EC, 2013/36/EU and (EU) 2019/2034 as regards the treatment of concentration risk arising from exposures towards central counterparties and of counterparty risk in centrally cleared derivative transactions (the "amending Directive").}

1. Why is EMIR being amended again?

The aim of EMIR 3 is to increase the safety and efficiency of EU central counterparties (CCPs) by improving their attractiveness, encouraging clearing in the EU and enhancing the cross-border consideration of risks. This is with a view to addressing excessive reliance on systemically important third country CCPs (Tier 2 CCPs) such as LCH Limited (see ESMA's latest list).

Consequently, a large part of the proposed reforms relate to the processes for authorisation and supervision of CCPs.

However, EMIR 3 does not stop there - a number of amendments to EMIR may directly impact derivatives counterparties. Chief among them is the introduction of an active account requirement.

2. What is the current status of EMIR 3?

The EMIR 3 amending Regulation and amending Directive were published in the Official Journal of the EU on 4 December 2024 and entered into force 20 days later, on 24 December 2024. The amending Regulation has direct effect in EU Member States and most provisions apply from its entry into force (though note the deferred application of changes to the clearing threshold calculations, and the no-action Opinion issued by the European Banking Authority (EBA) in relation to the initial margin model authorisation provisions - discussed further in Question 9 below). The amending Directive must be transposed into local laws and EU Member States have been given until 25 June 2026 to complete this exercise. This follows the extensive trilogue negotiations, with provisional political agreement announced on 7 February 2024 .

A number of EMIR 3 provisions, including those relating to the active account requirement, require further detailed work in Level 2 technical standards. There is concern in the industry that the Level 2 will not have been finalised prior to the Level 1 obligations starting to apply, requiring preparation for compliance to start well before there is certainty over the detail.

3. What is the active account requirement?

At a high level, this is a requirement for counterparties that are subject to AAR (see Question 4 below) to hold, for certain categories of derivatives (in this article, we refer to these as AAR categories - see Question 5 below) at least one active account at an EU authorised CCP and, where the representativeness obligation applies (see Question 4 below), clear at least a representative number of trades in the active account.

Where a counterparty becomes subject to AAR, it must notify ESMA and its competent authority, and must establish an active account (and comply with the associated conditions) within six months of becoming subject to AAR.   

Operational conditions

The Level 1 EMIR 3 text sets out three operational conditions that must be satisfied in relation to the active account:

(a)         the active account must be permanently functional, including with legal documentation, IT connectivity and internal processes associated to the account being in place;

(b)         the counterparty must have systems and resources available to be operationally able to use the active account, even at short notice, for large volumes of derivative contracts in AAR categories at all times and to be able to receive, in a short period of time, a large flow of transactions from positions held in a clearing service of substantial systemic importance pursuant to Article 25(2c) of EMIR; and

(c)          all new trades of the counterparty in derivative contracts in AAR categories can be cleared in the account at all times.

What do counterparties need to do in order to comply with these operational conditions? ESMA has been mandated to produce technical standards on the operational conditions, and has started this process by publishing a Consultation Paper on the Conditions of the Active Account Requirement on 20 November 2024 (the ESMA AAR Consultation). Given the tight timescales involved, counterparties that are or may be in scope for AAR will need to start their preparations for compliance pretty promptly. The ESMA AAR Consultation provides an initial view of what the final technical standards may look like and it will be important to engage with this, as well as to monitor for developments as work on Level 2 progresses.

Stress-testing of operational conditions

The operational conditions must be stress-tested regularly, at least once a year. Again, the detail of this is to be set out in Level 2 technical standards. The ESMA AAR Consultation sets out ESMA's initial proposals on this (note in particular the proposal for more frequent stress-testing for counterparties clearing more than EUR 100 billion in notional clearing volume outstanding in derivatives in AAR categories).

Representativeness obligation

Where a further threshold (notional clearing volume outstanding of EUR 6 billion or more in derivatives in AAR categories) is met, counterparties must also clear in the active account trades which are representative of the derivative contracts in AAR categories that are cleared at a Tier 2 CCP. More specifically, at least five trades in each of the most relevant subcategories per class of derivative contracts and per reference period are to be cleared in the active account on an annual average basis.

This is a particularly complex aspect of the AAR with the specifics to be set out in Level 2 technical standards. Counterparties in scope for the representativeness obligation are encouraged to start reviewing ESMA's initial proposal on this in the ESMA AAR Consultation, in detail, as part of their compliance preparations.

AAR reporting

Under new Article 7b (Monitoring of the active account obligation) EMIR, counterparties subject to AAR are required to:

• calculate their activities and risk exposures in AAR categories,

• report every six months to their competent authorities the information necessary to assess compliance with AAR, including, where relevant, with the representativeness obligation (this information will be shared by the competent authorities with ESMA),

• use the information from their EMIR Article 9 reporting where relevant, and

• include in the report a "demonstration to the competent authority that the legal documentation, IT connectivity and internal processes associated to the active accounts are in place".

Additionally, counterparties subject to AAR which hold, for derivatives in AAR categories, accounts at a Tier 2 CCP in addition to active accounts, are subject to an additional reporting obligation. Every six months they must report to their competent authority information on the resources and systems that they have in place to ensure that the operational condition (b) (relating to the operational ability to handle a ramp up of clearing volumes at the active account on short notice).

The competent authorities will share the AAR reporting with ESMA.

Once more, detail will be set out in Level 2 technical standards and the ESMA AAR Consultation sets out ESMA's initial proposals on this.

Exemptions

Counterparties subject to AAR that already clear at least 85% of their derivative contracts in AAR categories at an EU CCP will be exempt from the operational conditions and aspects of the AAR reporting requirement.

In relation to the representativeness obligation, where the resulting number of trades exceeds half of the total trades for the preceding 12 months, the representativeness obligation is commuted to one trade in each of the most relevant subcategories per class of derivative contracts per reference period. Furthermore, the representativeness obligation is stated not apply to the provision of client clearing services, and the calculation of the notional clearing volume outstanding in relation to a counterparty (which is relevant to determining the applicable reference period for the representativeness obligation) shall not include its client clearing activities.

Looking to the future

The effectiveness of AAR in mitigating financial stability risks represented by the exposures of EU counterparties to Tier 2 CCPs offering services of substantial systemic importance will be assessed by 25 June 2026 and this could result in further legislative proposals from the Commission six months later - and potentially, proposals for the introduction of quantitative requirements (see commentary in Question 8 below for a sense of the controversy around quantitative AAR).   

4. Who will the active account requirement apply to and could it apply to non-EU entities?

Broadly, the AAR will apply to financial counterparties (FC) and non-financial counterparties (NFC) that are subject to the clearing obligation under EMIR and exceed the clearing thresholds in any individual AAR category (see Question 5 below) or in aggregate across the AAR categories. This operates as a double condition.

Whilst not entirely clear from the Level 1 EMIR 3 text, the ESMA AAR Consultation indicates that, initially, the applicable clearing threshold for this purpose will be the clearing threshold for OTC interest rate derivative contracts set out in Commission Delegated Regulation (EU) No 149/2013, which is currently EUR 3 billion in gross notional value.

Where an FC/NFC belongs to a group subject to consolidated supervision in the EU, in determining its AAR obligations, it is required to consider all derivative contracts in AAR categories that are cleared by that FC/NFC or by other entities within its group, with the exception of intragroup transactions.

In relation to non-EU entities, it is wise to remember that the application of EU EMIR is nuanced in the case of alternative investment funds (AIFs). Non-EU AIFs can fall within the definition of financial counterparty under EU EMIR if they have EU AIFMs. EU AIFs will still be financial counterparties even if they have non-EU AIFM. Also worth a mention is that even funds with an investor base 100% outside the EU could be caught here, if the fund is an EU AIF or is a non-EU AIF with an EU AIFM. So a Cayman fund with an EU AIFM could potentially by caught by the active account requirement. Likewise, an EU fund in e.g. Luxembourg or Ireland but with a UK/US manager and potentially no EU investors might also be caught. This sort of territorial application does not seem to have been considered.

It is also worth noting for managers who have funds in different jurisdictions with similar investment objectives/strategies that those funds may no longer be able to be managed together in the same way, as the EU fund may be subject to the active account requirement. This may affect pricing in the EU firms and create basis between equivalent strategies.

5. What categories of derivatives will the active account requirement apply to?

The categories of derivative contracts subject to the AAR are any of the following:

• interest rate derivatives denominated in Euro or Polish zloty;

• short-term interest rate (STIR) derivatives denominated in euro.

In this article, we refer to the categories on this list as "AAR categories" and each an "AAR category".

This list may be amended in the future by a Commission delegated act. EMIR 3 sets out a process for this, which is linked to ESMA's assessment of the systemic importance of services or activities by Tier 2 CCPs. Helpfully, ESMA would need to submit a thorough and comprehensive cost-benefit analysis to the Commission, including effects on other EU currencies, and assessing the possible effects of extending the active account obligations to the new types of contracts. We would therefore expect there to be some lead time prior to any changes.

6. What steps should buy-side market participants consider taking to prepare for the active account requirement?

The critical first step will be for firms to determine whether or not they or any of the funds under their management are subject to AAR (see Question 4 above) and, if they are, whether they are also subject to the representativeness requirement. Note also the requirement to notify ESMA and the relevant national competent authority (see Question 3 above). For multi-manager funds and separately managed accounts, discussion may be needed to establish who will be making the determination and to ensure they have access to all the necessary information. Policies and procedures should also, of course, be updated to reflect EMIR 3 and any existing EMIR related delegation arrangements (e.g. within investment management agreements) should be considered.

The biggest impact will, of course, be felt by firms who are subject to AAR or who manage funds that are subject to AAR.

In these cases, we would suggest that existing clearing arrangements are reviewed as soon as possible to see whether they already connect to an EU CCP like Eurex - if not, then taking steps to establish the active account should be a top priority (and we would emphasise that it can take some time to put new clearing arrangements in place).

However, AAR is much more than a requirement to open an account at an EU CCP. Policies and procedures will need to be put in place to ensure that the operational conditions can be met and that the stress-testing and associated reporting can be complied with. For counterparties that are also in scope for the representativeness obligation, assessing what exactly is required is going to be challenging (the details are complex) and will require careful consideration. AAR reporting would also need to be complied with and it is worth emphasising that this is additional to Article 9 EMIR reporting. Note also the penalties proposed for non-compliance with the active account requirement (see Question 7 below).

We would also suggest that firms consider engaging with their trade associations, if they are not already doing so, particularly as the Level 2 technical standards (the content of which will be critical for counterparties that are subject to AAR) are still under development.

7. What would be the consequences of non-compliance with the active account requirement?

A specific penalty regime is being introduced to address non-compliance with AAR. If a counterparty breaches its AAR obligations, its competent authority is required to impose administrative penalties or periodic penalty payments (or request that the relevant competent judicial authorities do so). The periodic penalty payment must be "effective and proportionate" and not exceed a maximum of 3% of the average daily turnover in the preceding business year. It would be imposed for each day of delay, and calculated from the date stipulated in the decision imposing the penalty. It would be calculated for a maximum period of six months following the notification of the competent authority's decision (though it must be reviewed and extended if necessary thereafter). The text also provides that this penalty regime is without prejudice to the right of EU Member States to provide for and impose criminal penalties.

8. What were the views of industry associations on the active account requirement proposals during the legislative process?

In September 2023, eleven trade associations (including EFAMA, FIA and ISDA) co-signed a Joint Trade Association Statement on Active Accounts. They expressed their support for many of the measures proposed in the Commission's EMIR 3 text (including the simplification of procedures for CCPs to launch products and change models). However, they strongly recommended the deletion of the proposed active account requirement for a number of reasons, including that it would:

• introduce fragmentation and loss of netting benefits and make the EU less resilient to market stresses;
• create a competitive disadvantage for EU firms compared to third-country firms, which would remain able to transact in global markets without restriction. They note that the introduction of quantitative thresholds in the active account requirement would be especially damaging and could lead to a large, volatile and unpredictable price difference between CCPs (called a basis), which would significantly increase the cost and risk of hedging for EU clients;
• make the EU one of the only advanced capital markets with such a policy. They draw a comparison with the US, where clearing participants are significantly exposed to Tier 2 CCPs, since the majority of US-dollar-denominated IRS are cleared outside the US; and
• severely challenge the principle of best execution toward the end client, as EU clients required to clear on an EU CCP to comply with the active account requirement threshold would be forced to accept an uncompetitive price wherever the price available at an EU CCP is higher than the price available at a Tier 2 CCP - while their third-country competitors would be able to trade at the best available price.

We do note, however, that the joint statement pre-dated the publication of the Council text and Parliament text on EMIR 3 in December 2023 and that the Commission's December 2022 EMIR 3 proposal was for a quantitative active account requirement - see Question 3 in our previous version of this article for more discussion on qualitative versus quantitative active account requirements.

9. Is EMIR 3 exclusively about active accounts, or does it make other changes?

EMIR 3 includes a suite of other amendments. Let's take a look at some of the changes that may be particularly relevant from a buy-side perspective.

• Information on the provision of clearing services; additional transparency on margin requirements

Clearing members and clients that provide clearing services both through EU CCPs and recognised third country CCPs will be required to inform their clients of the possibility to clear through an EU CCP. This information must be provided when they establish a clearing relationship with a client, and at least on a quarterly basis.   

Clearing members and clients that provide clearing services to clients must also disclose, for each CCP at which they provide clearing services, the fees to be charged to clients for the provision of clearing services and any other fees charged including fees charged to clients which pass on costs, and other associated costs related to the provision of clearing services. The type of information required will be further specified in Level 2 technical standards.

In relation to margin, of particular interest to the buy-side is the requirement for clearing members (and clients that provide clearing services) to inform their clients of the way the margin models of the CCP work, including in stress situations, and provide clients with access to a simulation of the margin requirements that they might be subject to under different scenarios (and a related obligation on CCPs to provide information to its clearing members). The simulation would need to include both the margins required by the CCP and any additional margins required by the clearing members themselves. Further detail is to be set out in Level 2 technical standards and this detail will be determinative of how helpful these simulations will be in practice for clients looking to estimate their margin requirements and prepare themselves for margin calls.

We would also point to the recent BCBS-CPMI-IOSCO consultative report on transparency and responsiveness of initial margin in centrally cleared markets (January 2024). This report sets out a range of policy proposals, including that margin simulation tools should be made available by all CCPs to all clearing members and their clients and that the tools should include a specified minimum functionality. We think it is likely, therefore, that we will see more global developments in this area, not just in the EU.

• Information on clearing activity in recognised third country CCPs (additional reporting obligation)

Clearing members and clients that clear contracts through a recognised third country CCP are required to provide reports with information (on an annual basis) on such clearing activity as follows:

(a) where they are established in the EU but not part of a group subject to consolidated supervision in the EU, they shall report to their competent authorities;

(b) where they are part of a group subject to consolidated supervision in the EU, the EU parent undertaking of that group shall report such clearing activity on a consolidated basis to its competent authority.

The report must contain information on the scope of the relevant clearing activity on an annual basis specifying: the type of financial instruments or non-financial instruments cleared; the average values cleared over one year per Union currency and per asset class; the amount of margins collected; the default fund contributions; and the largest payment obligation.

The content and level of detail required will be further specified in Level 2 technical standards.

• Collateral acceptable to CCPs from NFCs

A provision is added to EMIR allowing CCPs in certain circumstances to accept public guarantees, public bank guarantees or commercial bank guarantees  in relation to NFCs. This will replace current forbearance.

• Equity options exemption from bilateral margining requirement

EMIR 3 introduces a more permanent exemption from the bilateral margining requirements for single-stock options and equity index options. ESMA (in cooperation with EBA and EIOPA) is tasked with monitoring regulatory developments in other jurisdictions and reporting to the Commission at least every three years, and the Commission has the power to revoke the exemption (following an adaption period of no longer than two years).

We note that the existing temporary exemption technically expired on 4 January 2024 but a further extension was proposed by the European Supervisory Authorities and a no-action Opinion issued in the meantime, which you can read more about in our article here. EMIR 3 will replace this forbearance.

The industry has long been advocating for a permanent exemption for these products instead of the uncertainty that can be created by cliff edge expiry dates of temporary exemptions. This would better align with the US where equity options are not in scope for the SEC or CFTC margin regimes. 3.0 goes some way towards this.

• Clearing thresholds

EMIR 3 amends the clearing threshold calculations for FCs and NFCs, however these amendments have expressly been stated not to apply until the date of entry into force of the related Level 2 technical standards. 

For FCs, the key change is that, instead of a single calculation there will be two separate calculations - one calculation for uncleared positions (OTC derivative contracts not cleared at an authorised or recognised CCP), and a separate calculation for aggregate positions (cleared and uncleared OTC derivative contracts). The FC will become subject to the clearing obligation (and the related requirement to notify ESMA and its competent authority) if either calculation exceeds the relevant threshold or it chooses not to run the calculation.

For NFCs, there remains a single calculation but the methodology is changing - firstly, only those OTC derivative contracts that are not cleared at an authorised or recognised CCP will be included in the calculation and, secondly, only OTC derivatives contracts entered into by the NFC itself need to be included (though it remains possible to exclude contracts that are objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity of the NFC or of its group (known as the hedging exemption). ESMA is also mandated to develop technical standards relating to the hedging exemption. as well as the designation of thresholds. We note that the existing criteria has caused difficulties for certain NFCs in practice, particularly for NFCs whose core activity is financial in nature (e.g. certain SPVs). Clear, actionable guidance which takes into account feedback from the market and resolves existing areas of uncertainty would likely be a welcome development. However the devil will be in the detail - further technical standards could create additional interpretative questions.

• Reporting obligation

The headline change here is the introduction of a specific reporting penalty regime whereby competent authorities will impose administrative penalties or periodic penalty payments (or request competent judicial authorities to do so), on the entities subject to the reporting obligation where the details reported repeatedly contain systematic manifest errors. The periodic penalty payment would not exceed a maximum of 1% of the average daily turnover in the preceding business year and would apply for every day that the infringement continues, until compliance is established or restored. It would be calculated for a maximum period of six months. The text also provides that this penalty regime is without prejudice to the right of EU Member States to provide for and impose criminal penalties. Like many aspects of EMIR 3, further detail will be specified in Level 2 technical standards but the provision technically starts to apply on the entry into force of EMIR 3, creating a degree of uncertainty.  

Other changes are also being made in relation to the reporting obligation, including:

• FCs, NFCs and CCPs subject to the EMIR Article 9 reporting obligation will be required to put in place appropriate procedures and arrangements to ensure the quality of the data they report (detail to be further specified in Level 2 technical standards).

• The existing requirement to report correctly and without duplication is being amended to clarify that this includes where the reporting has been voluntarily delegated. 

• In relation to NFCs, where an NFC+ benefits from the intragroup reporting exemption, the EU parent undertaking of that NFC+ will be required to report the net aggregate positions by class of derivatives of that NFC+ to its competent authority on a weekly basis.

• Changes to the intragroup exemptions.

• New (separate) reporting obligations associated with clearing and compliance with the active account requirement are also being introduced and we have discussed these separately above.

• Initial margin model validation (IMMV)

Many counterparties use industry-wide initial margin models (notably ISDA SIMM) to comply with initial margin requirements for non-cleared OTC derivatives and, therefore, a co-ordinated approach to validation makes sense. EMIR 3 creates a key role for the European Banking Authority (EBA) setting up a central validation function and assisting competent authorities in their approval processes. and fees will be charged by the EBA to cover its costs.

Counterparties that are in scope for initial margin requirements will be required to apply for authorisation from their competent authorities before using, or adopting a change to, a model for initial margin calculation. The competent authorities have six months to grant or refuse an authorisation of a new model, or three months for a change to an already authorised model. However, where the model is a pro-forma model (and as we have discussed, this is common), competent authorities may grant authorisation only where the pro forma model has been validated by the EBA (and the counterparties using pro-forma models are also required to apply to the EBA). Therefore, whilst the obligation to apply for authorisation technically seems to apply from the entry into force of EMIR 3, it would be challenging to comply and we understand that the industry has been advocating to receive some comfort on this point (and others). We note that when the EBA launched its related survey back in October 2024, it indicated that, closer to the EMIR 3 publication, it expected to publish on its website operational clarifications aimed to ensure a smooth, convergent entry into force of EMIR 3 requirements. Helpfully, the EBA has since published a no-action Opinion in relation to initial margin model authorisation.   

EMIR 3 also introduces a framework for the supervision of IM models with greater focus on larger counterparties - with details to be specified in technical standards.

• Four month implementation period for NFCs becoming subject to margin obligations for the first time

EMIR 3 introduces a four month implementation period for NFCs when they become subject for the first time to the obligation to exchange collateral for uncleared derivatives. This change will be welcomed by NFCs, allowing more time for negotiation and testing of their collateral arrangements.

• Clearing exemption for third country pension scheme arrangements

EMIR 3 introduces an exemption from the clearing obligation where a FC+ or NFC+ enters into a transaction with a pension scheme arrangement established in a third country and operating on a national basis, provided that it is authorised, supervised and recognised under national law and where its primary purpose is to provide retirement benefits and it is exempted from the clearing obligation under that national law. Under UK EMIR, the clearing obligation exemption for pension schemes was extended to 18 June 2025 and is expected to be maintained beyond this, for the longer term (see Question 10 below). EMIR 3 will therefore enable certain UK pension schemes to trade otherwise mandatorily clearable OTC derivatives with EU dealers on an uncleared basis (in contrast with EU pension schemes facing EU dealers, which would be subject to the EU EMIR mandatory clearing obligations).

• Clearing exemption for post-trade risk reduction services

EMIR 3 adds a specific clearing exemption for transactions resulting from qualifying post-trade risk reduction services (PTRR). The PTRR service provider must be independent from the counterparties and authorised under MiFID and a large number of additional requirements would need to be satisfied - this would require much careful review if counterparties are considering using the exemption and, again, many details remain to be specified in Level 2 technical standards.

• Intragroup transactions and equivalence decisions

Intragroup transactions may benefit from certain exemptions under EMIR. For transactions between an EU entity and a third country entity within a group,  EMIR 3 replaces the intragroup transaction requirement for an equivalence decision to have been made in respect of the relevant third country with a simpler requirement - the third country must not be on a list of jurisdictions for which an exemption cannot be granted (includes: high-risk third countries that have strategic deficiencies in their regimes on anti-money laundering and counter terrorist financing, jurisdictions which are non-cooperative for tax purposes; and any others identified by the Commission). It is uncertain, however, how these changes will interact with existing use of intragroup exemptions.

Changes are also being made to the substituted compliance provisions set out in Article 13 of EMIR.

• UCITS and MMF counterparty exposure limits

Included within the EMIR 3 package are amendments to the UCITS Directive (2009/65/EU) and the Money Market Funds Regulation (Regulation (EU) 2017/1131). One of the key changes in both is the lifting of existing counterparty limits in relation to OTC derivatives that are cleared at an authorised or recognised CCP under EU EMIR. However, we note that the text also expands the scope of the current limits applicable to 'OTC derivatives' to the broader 'derivatives'. This could bring exchange-traded derivatives (ETD) into scope of the derivatives counterparty exposure limits to the extent that they are not cleared at an authorised or recognised CCP under EU EMIR (the current treatment of ETD exposure in UCITS is somewhat ambiguous, given earlier CESR guidance). These changes are being made by the EMIR 3 amending directive which EU Member States have been given until 25 June 2026 to transpose, so note that they will not be effective immediately.

10. Are any similar changes being proposed to UK EMIR?

No active account proposals have been made in relation to UK EMIR. However, beyond active accounts, we would note the following:

• Equity options exemption - In December 2023, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) 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 is now be available until 4 January 2026. The regulators noted that they will, during this temporary exemption period, gather information on current market practices and risks in order to create a permanent UK regime. See our article here. We are expecting to see a consultation on this in Q1 2025.
• Initial margin model validation (IMMV) - In December 2023, the PRA and the FCA 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. See our article here.
• Pension scheme arrangements -Following a November 2023 call for evidence (see our article here), the government has decided that the pension fund clearing exemption under UK EMIR should be maintained for the longer-term and it will now take forward legislation to ensure that the exemption does not expire on 18 June 2025 as currently scheduled and to remove any further time limit on the exemption (HM Treasury call for evidence response).
• Additional transparency from CCPs and Clearing Members - We would highlight the BCBS-CPMI-IOSCO consultative report on transparency and responsiveness of initial margin in centrally cleared markets (January 2024). This report sets out a range of policy proposals, including that margin simulation tools should be made available by all CCPs to all clearing members and their clients and that the tools should include a specified minimum functionality. We think it is likely, therefore, that we will see more global developments in this area.

If you would like to discuss the active account requirement or any other aspect of EMIR 3 with us, please do get in touch.