The Cyprus Securities and Exchange Commission issued a Circular (No. C115 dated on the 15 February 2016) in order to remind the Regulated Entities of their obligations as determined by the European Market Infrastructure Regulation (EMIR – European Regulation No. 648/2012) and to inform them about the latest developments.
As a reminder, the objective of the EMIR is to consolidate and ensure the stability of the over-the-counter (OTC) derivative markets in the EU member states.
The CySEC Circular is addressed to:
- the CIFs,
- the UCITS and Management Companies
- AIFs managed by AIFMs in Cyprus
The objective of the Circular is to remind them of their clearing and reporting obligations concerning OTC derivative contracts regarding the classes of OTC derivatives that are subject to clearing obligations. Please note that the clearing must be carried out through an authorized or recognized Central Counterparty
(According to Art. 2(1) of the EU Directive Central Counterparty (CCP) “means a legal person that interposes itself between the counterparties to the contracts traded on one or more financial markets, becoming the buyer to every seller and the seller to every buyer”. For the list of the authorized/recognized CCPs, you can refer to site of the European Securities and Markets Authority.)
CySEC advises the Regulated Entities to take the following actions:
- Identify which of their products are (or will be in the future) subject to clearing obligation;
- Establish the required clearing arrangements as soon as possible;
- Determine their counterparty category and identify which of their counterparties will be within scope;
- Assess compliance with conditions permitting the regulated entities to use an exemption from the clearing obligation, if they choose to be exempt (cf. 4(2) of the EMIR.)
- Cease immediately any cooperation regarding clearing services from third country CCPs that have not applied to the European Securities and Markets Authority (ESMA) for recognition.
The regulated entities must provide CySEC with a report/questionnaire on their clearing and reporting obligations under the EMIR by Thursday, 8th of March 2016.
For further information and the exact guidelines on how to fill the said form (which can be found on CySEC’s website), we advise you to refer directly to the Circular or get in touch with our Regulatory Advisory Team.