Six trade repositories were authorised in the EU at the end of 2016. Since February 2014, EMIR has required counterparties and central counterparties to report to these trade repositories when derivative contracts are entered into, amended, or terminated. The reporting requirement applies to both OTC and exchange-traded derivative transactions. Together with ESMA and the other European supervisory authorities, BaFin is working to improve the quality of the data in order to enhance their usefulness.

Since 21 June 2016, there has been a requirement for market participants that are already members of a CCP to have standardised derivatives cleared centrally; this applies to certain interest rate derivatives in the four benchmark currencies (US dollar, euro, yen and sterling). This clearing obligation will gradually be extended to other market participants and derivative classes in the coming years. In this context, BaFin assessed whether the requirements were being met as and when needed. This process revealed that transactions had often been categorised ambiguously or incorrectly, thus making it seem as though the clearing obligation had been breached.

Since the clearing obligation came into force, the companies affected have also had the option to get exemption from the clearing obligation for transactions conducted within a consolidated or supervisory group. BaFin received a total of 140 notifications and applications to this effect in 2016 (see Table 23).

Table 23 Notifications and applications

Notifications and applications

Source: BaFin

As part of its market surveillance, BaFin conducted risk-based investigations to establish to what extent financial counterparties, such as insurance undertakings, investment firms, banks and funds, comply with the requirements for OTC derivative transactions. Under section 20 of the Securities Trading Act, non-financial counterparties whose derivative position exceeds certain thresholds are required to provide evidence that they comply with the key requirements of EMIR by producing an auditor-issued certificate. Where any deficiencies were identified, BaFin investigated further (41 cases in 2016).

In addition, Commission Delegated Regulation (EU) 2016/2251 entered into force on 4 January 2017, providing further details of the requirement to collateralise bilateral OTC derivative transactions.¹ Under this regulation, financial counterparties and non-financial counterparties whose volume of derivatives exceeds a certain threshold have to provide collateral for non-centrally cleared OTC derivative contracts.² In 2016, BaFin accompanied the market participants as they implemented the provisions and discussed relevant interpretive issues with the companies and at the European level.

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