Hedging exemption: Difference between revisions

{{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]].