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{{a|repack|}}EMIR regulates the infrastructure of | {{a|repack|}}[[EMIR]] regulates the infrastructure of European financial markets, and one of its main jobs is to mandate the exchange of [[Variation margin|variation]] and [[initial margin]] for [[Uncleared derivatives margin - EMIR Provision|uncleared derivatives]] — a sort of cack-handed [[behavioural psychology]] play to nudge OTC derivatives trading onto exchange. Hasn’t worked. Anyway, we digress. | ||
Posting cash to a counterparty for mark-to-market moves is a painful, and [[When variation margin attacks|in some respects, stupid]] thing to do, and market participants are not well set up to do it, others for which the scale of their trading means it is not worth the bother — and many for which both is true. These are the so-called “[[Non-financial counterparties - EMIR Provision|non-financial counterparties]]” — businesses not designed primarily for the financial services industry, and whose incidental activity in OTC derivatives markets does falls below [[EMIR clearing thresholds|specified thresholds]]. | |||
Non-financial firms whose derivative activity falls below those thresholds are labelled “[[NFC-]]” and are out of scope for EMIR [[regulatory margin]]. | |||
===[[EMIR]] “Hedging exemption”=== | ===[[EMIR]] “Hedging exemption”=== | ||
The question may arise as to whether an SPV is a [[non-financial counterparty]] and, if it is, whether article {{emirprov|10.3}} of EMIR means you don’t have to engage in all that tedious measuring of notionals to ensure you stay small enough to count as an [[NFC-]]. Here’s what the [[hedging exemption]] says: | The question may arise as to whether an SPV is a [[non-financial counterparty]] and, if it is, whether article {{emirprov|10.3}} of EMIR means you don’t have to engage in all that tedious measuring of notionals to ensure you stay small enough to count as an [[NFC-]]. Here’s what the [[hedging exemption]] says: |