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{{a|repack|}}===[[EMIR]] “Hedging exemption”=== | {{a|repack|}}EMIR regulates the infrastructure of european financial markets, and one of its main jobs is to mandate the mandatory exchange of variation and initial margin for 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 in some respects, stupid thing to do, and there are certain entity types who are not well set up to do it, and some where 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 not exceed specified thresholds (EUR1bn for rates and currencies; EUR3bn for credit, commodities and other asset classes). 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”=== | |||
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: | ||
{{quote|3. In calculating the positions referred to in paragraph 1, the non-financial counterparty shall include all the OTC derivative contracts entered into by the non-financial counterparty or by other non-financial entities within the group to which the non-financial counterparty belongs, which are not objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity of the non-financial counterparty or of that group.}} | {{quote|3. In calculating the positions referred to in paragraph 1, the [[non-financial counterparty]] shall include all the OTC derivative contracts entered into by the non-financial counterparty or by other non-financial entities within the group to which the non-financial counterparty belongs, which are not objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity of the non-financial counterparty or of that group.}} | ||
====Repackaging SPVs==== | ====Repackaging SPVs==== | ||