European Market Infrastructure Regulation (EMIR)

Reducing risk in the European market

The European Markets and Infrastructure Regulation (EMIR) is a European Union law that aims to reduce the risks posed to the financial system by derivatives transactions. It impacts European and non-European financial institutions and corporates.

Overview

Introduction

The European Markets and Infrastructure Regulation (EMIR) is a European Union law that aims to reduce the risks posed to the financial system by derivatives transactions in the following three main ways:

  1. Reporting of derivatives trades to an authorised trade repository
  2. Clearing derivatives trades above a certain threshold; and
  3. Mitigating the risks associated with derivatives trades by, for example, reconciling portfolios periodically and agreeing dispute resolution procedures between counterparties

EMIR impacts market participants in the EEA (European Economic Area) and market participants outside of the EEA trading with an EEA counterparty.

EMIR may also have extra-territorial impact on trading between two non-EEA counterparties where;

i) Both counterparties trade through branches located within the EU; or,
ii) Either counterparty has a qualifying guarantee for OTC derivative activity from an EU Financial Counterparty (FC)

This is one of the largest regulatory projects being undertaken in Europe.

Are you impacted by EMIR?

When you enter into derivative products with HSBC, including options, forwards or swaps relating to (amongst other things) foreign exchange, interest rate protection, credit, commodities or equities, you become a ‘counterparty’ to HSBC in these transactions. EMIR applies to transactions between all counterparties and the EMIR requirements are different depending on the country where your entity is established.

Considering the complexity of EMIR regulations and the intricacies around the extra-territorial reach of EMIR, we strongly recommend you seek guidance from your usual legal advisors with respect to your obligations under EMIR.

Counterparty Classification

Entering into derivative transactions identifies you as a ‘counterparty’.

EMIR introduces two sets of counterparties:

  • Financial Counterparties (FC) include banks, investment managers, insurance companies or brokers
  • Non-Financial Counterparties (NFC) include all entities that are not Financial Counterparties

EMIR identifies two sub-categories of Non-Financial Counterparties (NFC).

Depending on the volume of derivatives a counterparty enters into, ESMA (European Securities and Markets Authority) has defined a set of clearing thresholds for each class of derivative and NFCs are classified relative to these thresholds.

Important: calculation is based on gross notional values of positions, excluding cash products, spot foreign Exchange (FX ) and that are ‘objectively measurable as reducing risks directly related to its commercial activity or treasury financing activity or that of its group (‘hedging derivatives’).

Clearing thresholds by class:
Credit: EUR1billion
Equity: EUR1 billion
Interest Rates: EUR3 billion
Foreign Exchange: EUR3 billion
Commodities and others: EUR3 billion
The regulatory obligations imposed on NFCs that are subject to EMIR are different depending upon the NFC sub-categorisation.

You are classified as a ‘Non-Financial Counterparty above the threshold’ or NFC+, when your rolling average position over 30 working days exceeds the threshold in any non-hedging derivative class. You must immediately notify ESMA and your competent authority. As a result you will have to apply NFC+ regulations to all your derivatives contracts regardless of their class.

You are classified as a ‘Non-Financial Counterparty below the threshold’ or NFC-, as long as your rolling average position over 30 working days doesn’t exceed the thresholds in any derivative classes.

The ESMA website provides forms for counterparties to notify the authority when their classification changes.

ESMA notifications should be returned via email to EMIR-notifications@esma.europa.eu

Considering the complexity of EMIR regulations and the complexity of interpretation and inputs into the calculation of these thresholds, we strongly recommend you seek guidance from your usual legal advisors with respect to your obligations under EMIR.

EMIR calendar

Please refer to the calendar below as estimation based on current interpretation of the EMIR implementation timeline.

EMIR estimated calendar
  NFC- NFC+/FC
In Force Counterparty classification
Timely Confirmations
Market to market/model valuation  
In Force Timely Confirmations (tighter deadlines)
In Force Portfolio Reconciliation
Dispute Resolution
Portfolio Compression (for 500 or more outstanding contracts)
In Force Trade repository reporting (Credit and Interest Rates)
Trade repository reporting (FX, Equities, Commodities)
In Force Timely Confirmations (new tighter deadlines)  
In Force Timely Confirmations (final regulatory deadlines)
In Force Central Clearing (phased implementation ending 2019)  
In Force Margining (phased implementation ending 2020)  

Last updated: 11 April 2017

Clearing

EMIR Clearing

Introduction to the EMIR Clearing requirements

Under the European Markets Infrastructure Regulation (EMIR), financial counterparties and certain non-financial counterparties with large derivatives exposures have to clear derivatives contracts subject to the clearing obligation when traded Over-the-Counter (OTC) with effect from the relevant clearing start date. Some counterparties will also have to clear trades by the relevant start date when these trades have been executed or novated after a certain date but before the date of application of the clearing obligation – so-called “frontloading”. More detail on each of these is set out below.

Important information for Non-Financial Counterparties (NFCs)

The EMIR Clearing obligation does not apply to ‘Non-Financial Counterparties below the threshold’ or ‘NFC-‘. An entity is an NFC- as long as their rolling average position over 30 working days doesn’t exceed the EMIR thresholds in any derivative classes. For more information on counterparties and the classification thresholds as defined by EMIR go to the HSBC EMIR Overview page.

EMIR clearing requirements

The frontloading requirement

Frontloading is only applicable to trades executed by Category 1 and Category 2 financial counterparties. The frontloading requirement is the obligation to clear in-scope OTC derivative contracts executed or novated after a certain date but before the date of application of the clearing obligation. At the latest, when bilaterally executed during the frontloading period, such trades must be submitted for clearing on the relevant clearing obligation start date.

In scope Products

To discover which products are in scope of EMIR Clearing rules, please download ESMA's Public Register for the Clearing Obligation under EMIR document

Important notes:

  • Additional characteristics must be present in order for a trade to be subject to the clearing obligation. Please refer to Annex I of the relevant RTS for full details.
  • All products listed as in-scope are dependent on each particular RTS and therefore subject to change.

EMIR clearing categories

Category 1

You are a category 1 counterparty when you are a clearing member of at least one central counterparty (CCP) which is authorised or recognised under EMIR to clear one or more classes of derivatives which are subject to the RTS, provided your clearing membership allows you to clear one or more of those classes of derivatives.

Click here to discover your responsibilities and clearing starting dates relative to interest rates derivatives

Category 2

You are a category 2 counterparty when you are:

  • a Financial Counterparty not included in Category 1 and belonging to a group whose aggregate month-end average notional amount of uncleared derivatives is above EUR 8 billion for the 3-month period comprised between 1 January 2016 and 31 March 2016; or
  • an Alternative Investment Fund (AIF) that is an NFC+, not included in Category 1 and belonging to a group whose aggregate month-end average notional amount of uncleared derivatives is above EUR 8 billion for the 3-month period comprised between 1 January 2016 and 31 March 2016.

Click here to discover your responsibilities and clearing starting dates relative to interest rates derivatives

Category 3

You are a category 3 counterparty when you are:

  • a Financial Counterparty not included in Category 1 or 2; or
  • an Alternative Investment Fund (AIF) that is an NFC+, not included in Category 1 or 2.

Click here to discover your responsibilities and clearing starting dates relative to interest rates derivatives

Category 4

You are a category 4 counterparty when you are a Non-Financial Counterparty above the EMIR Clearing Threshold not included in Category 1, 2 or 3.

Click here to discover your responsibilities and clearing starting dates relative to interest rates derivatives

How to disclose your EMIR clearing category?

HSBC Bank plc requests all clients to confirm their clearing category by one of the two options detailed below.

Option 1: ISDA Amend

ISDA Amend is a joint service provided by Markit and the International Swaps and Derivatives Association, Inc. With ISDA Amend, swap dealers and clients can classify their trading entities as well as amend and share multiple ISDA master agreements using a single online tool. This helps to ensure clients are compliant with new requirements related to EMIR. Please visit Markit's dedicated webpage to access and sign up to ISDA Amend.

If you have already completed ISDA Amend in relation to the Title VII of the Dodd Frank Act you will still be required to register for EMIR Clearing. Although there are similar obligations under Title VII of the Dodd Frank Act and EMIR Clearing, they are separate regulatory regimes requiring separate documentation.

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Option 2: ISDA Categorisation Letter

Please click here to download the ISDA Categorisation Letter and return it to the following email address: regulatory.business.support.europe@hsbc.com. You can find ISDA guidance notes here.

Please note the following HSBC entities categories for the purpose of clearing in-scope interest rate derivatives under EMIR:

  • HSBC Bank plc (LEI: MP6I5ZYZBEU3UXPYFY54) is a category 1 counterparty.
  • HSBC Bank USA, National Association (LEI: 1IE8VN30JCEQV1H4R804) is a category 1 counterparty.
  • The Hongkong and Shanghai Banking Corporation Limited (LEI: 2HI3YI5320L3RW6NJ957) is a category 1 counterparty.
  • HSBC France S.A. (LEI: F0HUI1NY1AZMJMD8LP67) is a category 1 counterparty.
  • Trinkaus & Burkhardt AG (LEI: JUNT405OW8OY5GN4DX16) is a category 2 counterparty.
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Clearing obligations in the EU and outside the EU

What is the EMIR Clearing obligation when at least one counterparty is established in the EU?

Trades in contracts which have been declared subject to the clearing obligation must be cleared when they involve Financial Counterparties or Non-Financial Counterparties above the threshold (NFC+) where at least one counterparty is established in the EU.

For more information on counterparties as defined by EMIR go to the HSBC EMIR Overview page

What is the EMIR Clearing obligation when neither counterparty is established in the EU?

Trades in contracts which have been declared subject to the clearing obligation must be cleared, even if neither counterparty is in the EU, in the following cases:

  • Two non-EU (third country) entities that would be subject to the clearing obligation if they were established in the EU, where they are both trading through EU branches;
  • Two non-EU (third country) entities that would be subject to the clearing obligation if they were established in the EU, where one of them has a qualifying guarantee from an EU financial counterparty covering its OTC derivatives activities.

What if you are already subject to the clearing rules in the US?

The EMIR clearing requirements overlap significantly with clearing rules established by the United States Commodities and Futures Trading Commission under Title VII of the Dodd Frank Act. In the event that we already clear certain trades with you in accordance with those rules, we will continue to work closely with you in the coming months to agree how to accommodate the similarities and differences between the two sets of rules.

For more information on counterparties as defined by EMIR go to the HSBC EMIR Overview page

Clearing account segregation

Where HSBC Bank plc (HSBC) provides derivatives clearing services as a clearing member of a central counterparty (CCP) which is authorised or recognised under EMIR, we will:

  1. Disclose the levels of client protection CCPs offer in respect of each account type, the consequent degree of segregation associated with each account type and its associated costs.
    Please review the HSBC Risk Disclosure Document.
  2. Offer you a choice between omnibus client segregation and individual client segregation, as described in the above HSBC Risk Disclosure Document.
    Please provide your choice of account by completing the Account Election Form and returning it to emir.clearing@hsbc.com. Absent and pending your election, we will continue to use your existing account structure or select an omnibus account for your business.
  3. Disclose the costs and fees HSBC charges for its derivatives clearing services, together with details of any discounts and rebates available in respect of those costs and fees and the circumstances in which such may apply.

Please see the HSBC Derivatives Clearing Services Fees Disclosure document.

This webpage is the property of and written by HSBC Bank plc (“HSBC”). HSBC is authorised by the Prudential Regulation Authority (“PRA”) and regulated by the Financial Conduct Authority (“FCA”) and the Prudential Regulation Authority and is a member of the HSBC Group of companies (“HSBC Group”).

The costs provided are indications provided for convenient reference and information purposes only and are intended solely for the use of the original recipient. All requests for cost indications will be considered on a case-by-case basis and you should be aware that HSBC may not always be able to respond affirmatively to each such request. This webpage is not intended as an offer or solicitation of the purchase or sale of any instrument or service referred to herein. Should you wish to undertake transactions in any instrument or make use of any service, please refer to your local sales contact at HSBC.

The costs provided do not represent: (i) the actual terms at which new transactions or provision of services could be entered into now or in the future or; (ii) the actual terms at which existing transactions or provision of services could be liquidated or unwound or; (iii) the calculation or estimate of any amount that would be payable following the designation or occurrence of: (A) an Early Termination Date under Section 6(e) of any ISDA Master Agreement or any ISDA Interest Rate and Currency Exchange Agreement; or (B) a similar date or event under another master agreement or master agreement terms, including Exchange Traded Futures and Options Terms of Business.

The cost indications may have been derived from proprietary models based upon well recognised financial principles and reasonable estimates about relevant future market conditions and may reflect certain other financial factors such as anticipated profit or hedging, transactional, and other costs. Cost indications based on other models or different assumptions may yield different results. Except in the case of fraudulent misrepresentation, HSBC expressly disclaims any responsibility to you or any third party for (i) the accuracy of the models or estimates used in deriving the indications, (ii) any errors or omissions in computing or disseminating the cost indications, (iii) any uses to which the cost indications are put and (iv) any loss or damage arising out of the provision or use of this information (including, without limitation, direct or indirect, incidental or consequential damages, loss of profit or other losses). No part hereof may be reproduced, distributed or published by you for any purpose without the prior written consent of HSBC Bank plc.

This webpage is a “financial promotion” within the scope of rules of the FCA.

Last updated: 20 January 2016

IRS Clearing

IRS Clearing

This section highlights the responsibilities and the starting dates for the clearing obligations relevant to each category of counterparty.
Click on the 'Clearing' tab for an overview of the EMIR Clearing rules, including the list of in scope products.

In scope interest rate derivatives products

To discover which interest rate derivatives products are in scope of EMIR Clearing rules, please download ESMA's Public Register for the Clearing Obligation under EMIR.

Interest rates derivatives clearing calendar

G4 currencies

The Regulatory Technical Standards (RTS) for the EMIR clearing rules applying to certain interest rates derivative contracts denominated in G4 currencies (GBP, EUR, JPY and USD) were published in the Official Journal on 1 December 2015.

The rules entered into force on 21 December 2015, which determines the starting dates for the frontloading and clearing obligations relevant to each category of counterparty as stated in the table.

Additional currencies

The Regulatory Technical Standards (RTS) for the EMIR clearing rules applying to certain interest rate derivative contracts denominated in NOK, PLN and SEK were published in the Official Journal on 20 July 2016.

The rules entered into force on 9 August 2016, which determines starting dates for the frontloading and clearing obligations relevant to each category of counterparty as stated in the table.

When does the clearing obligation begin?

As detailed in the table below, the clearing obligation will start on different dates depending not only on when the relevant classes of OTC derivatives are declared subject to the clearing obligation, but also depending on the counterparty classification.

In any transaction between counterparties in different categories, the clearing obligation applies on the later date (e.g. a trade between Category 1 and Category 2 must be cleared within the deadline applicable to Category 2 counterparties).

Category Frontloading requirement start date Clearing obligation start date

Category 2

G4 currencies: 21 May 2016
Additional currencies: 9 October 2016

G4 currencies: 21 December 2016
Additional currencies: 9 August 2017

Category 3

Frontloading does not apply to Category 3

G4 currencies: 21 June 2017
Additional currencies: 9 February 2018

Category 4

Frontloading does not apply to Category 4

G4 currencies: 21 December 2018
Additional currencies: 9 August 2019

Requirements relevant to all FC and NFC+ clients

HSBC Bank plc requests all FC and NFC+ clients to confirm their clearing category by one of the two options detailed below.

Option 1: ISDA Amend

ISDA Amend is a joint service provided by Markit and the International Swaps and Derivatives Association, Inc. With ISDA Amend, swap dealers and clients can classify their trading entities as well as amend and share multiple ISDA master agreements using a single online tool. This helps to ensure clients are compliant with new requirements related to EMIR.

Please visit Markit's dedicated webpage to access and sign up to ISDA Amend.

If you have already completed ISDA Amend in relation to the Title VII of the Dodd Frank Act you will still be required to register for EMIR Clearing. Although there are similar obligations under Title VII of the Dodd Frank Act and EMIR Clearing, they are separate regulatory regimes requiring separate documentation.

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Option 2: ISDA Categorization Letter

Please click here to download the ISDA Categorisation Letter and return it to the following email address:
regulatory.business.support.europe@hsbc.com. You can find ISDA guidance notes on the letter here.

Please note the following HSBC entities categories for the purpose of clearing in-scope interest rate derivatives under EMIR:

  • HSBC Bank plc (LEI: MP6I5ZYZBEU3UXPYFY54) is a category 1 counterparty.
  • HSBC Bank USA, National Association (LEI: 1IE8VN30JCEQV1H4R804) is a category 1 counterparty.
  • The Hongkong and Shanghai Banking Corporation Limited (LEI: 2HI3YI5320L3RW6NJ957) is a category 1 counterparty.
  • HSBC France S.A. (LEI: F0HUI1NY1AZMJMD8LP67) is a category 1 counterparty.
  • Trinkaus & Burkhardt AG (LEI: JUNT405OW8OY5GN4DX16) is a category 2 counterparty.
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Requirements relevant to Category 1 counterparties

You are a category 1 counterparty when you are a clearing member of at least one central counterparty (CCP) which is authorised or recognised under EMIR to clear one or more classes of derivatives which are subject to the RTS, provided the clearing membership allows the counterparty to clear one or more of those classes of derivatives.

Disclose your EMIR Clearing Category.

Please disclose your EMIR clearing category as soon as you have determined this.

Important: Since 21 February 2016, HSBC Bank plc requires all in scope interest rate derivative trades with category 1 counterparties to be cleared.

Since EMIR Clearing rules permit voluntary clearing during the frontloading period, HSBC policy is to stop bilateral trading of products subject to the clearing obligation with Category 1 counterparties from the beginning of the frontloading period.

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Requirements relevant to Category 2 counterparties

You are a category 2 counterparty when you are:

  • a Financial Counterparty not included in Category 1 and belonging to a group whose aggregate month-end average notional amount of uncleared derivatives is above EUR 8 billion for the 3-month period comprised between 1 January 2016 and 31 March 2016; or
  • an Alternative Investment Fund (AIF) that is an NFC+, not included in Category 1 and belonging to a group whose aggregate month-end average notional amount of uncleared derivatives is above EUR 8 billion for the 3-month period comprised between 1 January 2016 and 31 March 2016.

Category 2 counterparties (without direct clearing access)

The frontloading requirement

Frontloading is only applicable to trades executed by Category 1 and Category 2 financial counterparties. The frontloading requirement is the obligation to clear in-scope OTC derivative contracts executed or novated after a certain date but before the date of application of the clearing obligation. At the latest, when bilaterally executed during the frontloading period, such trades must be submitted for clearing on the relevant clearing obligation start date. HSBC will support bilateral execution of trades subject to the frontloading requirements provided clients execute an ISDA Additional Termination Event (ATE) agreement.

1. Disclose your EMIR Clearing Category.

Please disclose your EMIR clearing category as soon as you have determined this.

2. Return your ISDA Additional Termination Event (ATE) agreement.

Please execute and return your ATE shortly after the end of the EUR 8bn threshold calculation period (31 March 2016) or prior to this date when possible to the following email address: regulatory.business.support.europe@hsbc.com.

Please include evidence of signing authority in your response.

If you have not received this document from us, please contact us at regulatory.business.support.europe@hsbc.com.

The ATE is required if your entity is a Financial Counterparty and does not have a clearing arrangement in place by the time the clearing obligation takes effect. Should this happen, any trades which are subject to the frontloading obligation (and therefore are required to be submitted for clearing) will have to be torn up, i.e. terminated shortly in advance of the date on which the clearing obligation takes effect. The ATE sets out the basis on which any such termination would be effected.

In the absence of an executed ATE with HSBC, we may stop bilateral trading of interest rates derivatives products subject to the EMIR clearing obligation with your entity from 21 May 2016.

3. Return your CDEA.

Please execute and return your CDEA by PDF shortly after the end of the EUR 8bn threshold calculation period (31 March 2016) or prior to this date when possible to the following email address: regulatory.business.support.europe@hsbc.com.

Please include evidence of naming signing authority in your response.

If you have not received this document from us, please contact us at regulatory.business.support.europe@hsbc.com.

The ISDA/FIA Europe Cleared Derivatives Execution Agreement ("CDEA") governs the process around the submission of over-the-counter derivative transactions for clearing and the options available to the parties in the event that a transaction fails to clear. Where the parties are unable to clear a transaction they can agree to accept it as a bilateral trade or terminate it.

HSBC Bank plc requires all counterparties who intend to trade in scope interest rate derivative transactions to which the EMIR Clearing obligation applies, to enter into the CDEA agreement before their clearing obligation start date.

In the absence of an executed CDEA with HSBC, we may stop trading interest rates derivatives products subject to the EMIR clearing obligation with your entity from 21 December 2016.

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Category 2 counterparties with indirect clearing access

Since EMIR Clearing rules permit voluntary clearing during the frontloading period, HSBC policy is to stop bilateral trading of products subject to the clearing obligation with Category 2 counterparties with clearing access from the beginning of the frontloading period. From 21 May 2016, HSBC Bank plc will require all in scope interest rate derivative trades with category 2 counterparties with indirect clearing access to be cleared.
Please contact us before 21 May 2016 at regulatory.business.support.europe@hsbc.com, should you wish to continue bilateral trading of clearable trades until the starting date of the clearing obligation (21 December 2016).

1. Disclose your EMIR Clearing Category.

Please disclose your EMIR clearing category as soon as you have determined this.

2. Execute and return your CDEA.

Please execute and return your CDEA by PDF shortly after the end of the EUR 8bn threshold calculation period (31 March 2016) or prior to this date when possible to the following email address: regulatory.business.support.europe@hsbc.com.

Please include evidence of signing authority in your response.

If you have not received this document from us, please contact us at regulatory.business.support.europe@hsbc.com.

HSBC Bank plc requires all counterparties who intend to trade in scope interest rate derivative transactions to which the EMIR Clearing obligation applies, to enter into the CDEA agreement before their clearing obligation start date.

The ISDA/FIA Europe Cleared Derivatives Execution Agreement (?CDEA?) governs the process around the submission of over-the-counter derivative transactions for clearing and the options available to the parties in the event that a transaction fails to clear. Where the parties are unable to clear a transaction they can agree to accept it as a bilateral trade or terminate it.

In the absence of an executed CDEA with HSBC, we may stop trading interest rates derivatives products subject to the EMIR clearing obligation with your entity 21 May 2016.

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Requirements relevant to Category 3 counterparties

You are a category 3 counterparty when you are:

  • a Financial Counterparty not included in Category 1 or 2; or
  • an Alternative Investment Fund (AIF) that is an NFC+, not included in Category 1 or 2.

Disclose your EMIR Clearing category
Please disclose your EMIR clearing category shortly after the end of the EUR 8bn threshold calculation period (31 March 2016) or prior to this date when possible.

HSBC will stop bilateral trading of interest rates derivatives products subject to the EMIR clearing obligation with your entity from 21 June 2017.

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Requirements relevant to Category 4 counterparties

You are a category 4 counterparty when you are a Non-Financial Counterparty above the EMIR Clearing Threshold not included in Category 1, 2 or 3.

Disclose your EMIR Clearing category
Please disclose your EMIR clearing category as soon as you have determined this.

HSBC will stop bilateral trading of interest rates derivatives products subject to the EMIR clearing obligation with your entity from 21 December 2018.

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Last updated: 27 September 2016

CRS Clearing

CDS Clearing

This section highlights the responsibilities and the starting dates for the clearing obligations relevant to each category of counterparty.
Click on the 'Clearing' for an overview of the EMIR Clearing rules which includes the list of in scope products.

In scope interest rate derivatives products

To discover which interest rate derivatives products are in scope of EMIR Clearing rules, please download ESMA's Public Register for the Clearing Obligation under EMIR.

Interest rates derivatives clearing calendar

CDS

The Regulatory Technical Standards applying to in scope CDS (iTraxx Main/Crossover EUR 5y Series 17 onwards) entered into force on 9 May 2016. This determines the starting dates for the frontloading and clearing obligations relevant to each category of counterparty as stated in the table.

When does the clearing obligation begin?

As detailed in the table below, the clearing obligation will start on different dates depending not only on when the relevant classes of OTC derivatives are declared subject to the clearing obligation, but also depending on the counterparty classification.

In any transaction between counterparties in different categories, the clearing obligation applies on the later date (e.g. a trade between Category 1 and Category 2 must be cleared within the deadline applicable to Category 2 counterparties).

Category Frontloading requirement start date Clearing obligation start date

Category 1

Credit Default Swaps: 9 October 2016

9 February 2017

Category 2

Credit Default Swaps: 9 October 2016

9 August 2017

Category 3

Frontloading does not apply to Category 3

9 February 2018

Category 4

Frontloading does not apply to Category 4

9 February 2019

Last updated: 30 September 2016

Reporting

EMIR reporting obligations

Trade repository reporting is one of the key requirements of EMIR. The objective is to provide regulatory authorities with transparency in the derivatives markets to facilitate identification and mitigation of systemic risk.

EMIR requires the reporting of all derivatives contracts to a Trade Repository (TR). TRs are entities regulated by ESMA that centrally collect and maintain the records of all derivatives trade related data.

In-scope counterparty types for Trade Reporting include:

  • NFC- (Non-Financial Counterparty below the clearing threshold).
  • NFC+ (Non-Financial Counterparty above the clearing threshold).
  • FC (Financial Counterparty).

Non-EEA (European Economic Area) counterparties generally do not have to report their side of the trades (whereas the EEA counterparties have to report their side) under EMIR.

In-scope products for Trade Reporting include:

  • Over-The-Counter (OTC) derivative products including both cleared and uncleared.
  • Exchange Traded Derivatives
  • HSBC is including Foreign Exchange (FX) physically settled forwards as in scope until further guidance is issued

Unique Trade Identifier (UTI)

In connection with the reporting requirements under EMIR, counterparties are required to generate and agree UTIs in respect of the derivative contracts to be reported. Accordingly, each derivative transaction requires a UTI which is unique to each trade and applies throughout that trade’s existence. The UTI will enable the trade to be clearly identified and matched.

If you are only subject to reporting under EMIR (please see below in respect of UTI generation for swaps that are also subject to Title VII reporting), we need to know how you intend to agree and exchange UTIs with us. The form below should have been completed and emailed to emir.client.support@hsbc.com by 1 February 2014. If we did not hear from you by this date, we have assumed that you would like HSBC to generate UTIs and notify you of such UTIs.

Where a given derivative contract between you and HSBC is also a swap that is required to be reported pursuant to Title VII of the US Dodd-Frank Wall Street Reform and Consumer Protection Act (“Title VII”), the unique swap identifier (USI) will be used for the EMIR version of the trade report. In this case, the USI should be generated by the counterparty required to submit the Title VII trade report, which could either be you or HSBC, depending on the trade. Where trades are not executed on a middleware platform, an e-platform or other means where UTI generation is agreed at the outset, UTIs will be generated in accordance with ISDA Logic, which is a set of best practice tie-breaker rules used to determine the generating party and may result in you or us generating a UTI for a given trade. Details relating to ISDA Logic can be accessed using this link.

What trades need to be reported?

Historic trades (‘backloading’)

Trades entered into after 16 August 2012 and still outstanding on the reporting start date should have been reported by the reporting start date of 12 February 2014.

Trades entered into on or prior to 16 August 2012, which were outstanding on 16 August 2012, and which were still outstanding on the reporting start date of 12 February, need to be reported within 90 days of the reporting start date (i.e. by 13 May 2014). Additionally, HSBC was backloading these prior to 12 February 2014.

Trades entered into before 16 August 2012 which were still outstanding on 16 August 2012, or which were entered into on or after 16 August 2012, and which are not outstanding on the reporting start date need to be reported within three years of the reporting start date (12 February 2017).

An important prerequisite for backloading is the allocation and agreement of a Unique Trade Identifier (UTI) for all eligible trades in your current portfolio.

Your usual contacts in HSBC Operations will be in touch with you about this. They will explain the relevant varying processes for Foreign Exchange (FX), Rates, Equities and Credit (as applicable to your portfolio).

New trades: trades entered into on or after 12 February 2014

New contracts, changes to existing contracts (including confirmation), and early termination of contracts need to be reported no later than the working day following the relevant event (T+1).

How can you report?

What data is reported?

When subject to EMIR reporting requirements, an EEA counterparty to a trade is required to send two blocks of data electronically to the Trade Repository of its choice:

  • Counterparty data (seller or buyer data block): this block of data includes a total of 16 fields such as the counterparty’s broker ID, beneficiary ID or the ‘directly linked to commercial activity or treasury financing’ (’hedging’) information
  • Common data: this block of data includes a total of 59 fields amongst them the UTI, Product ID, notional amount, currency and other trade static and economic data. These data fields are identical for both counterparties.

How can you report?

LEI or pre-LEI

ESMA expects all counterparties to provide a Legal Entity Identifier (LEI) or an interim ‘pre-LEI*’. Many Local Operating Units (LOUs) are able to provide global pre-LEIs which means they are able to generate a pre-LEI for clients from any country.

You can find more on LEI and pre-LEI on The Legal Entity Identifier Regulatory Oversight Committee (LEIROC) website

*Pre-LEIs are accepted as reporting identifiers before they are officially endorsed by the LEI Regulatory Oversight Committee (ROC).

Please use the following HSBC LEIs for your trade reporting requirements:
HSBC Bank PLC MP6I5ZYZBEU3UXPYFY54
HSBC Bank Polska Spó?ka Akcyjna 3IOL70HIEQ2FWND3JI79
HSBC Bank Malta Plc 549300X34UUBDEUL1Z91
Trinkaus & Burkhardt AG JUNT405OW8OY5GN4DX16
HSBC France S.A. F0HUI1NY1AZMJMD8LP67
HSBC Bank USA, National Association 1IE8VN30JCEQV1H4R804
The Hongkong and Shanghai Banking Corporation Limited 2HI3YI5320L3RW6NJ957

HSBC will help you overcome Trade Reporting challenges

EMIR Trade Repository reporting obligations are a challenge for most companies.

Fortunately, the EMIR legislation enables a counterparty to delegate the reporting of its trades to the other counterparty. This capability is called ‘delegated reporting’.

HSBC understands there are client needs in this area and is offering a full delegated reporting model, where we report both counterparty data and common data on your behalf.

Learn more about HSBC Delegated Reporting Service.

Last updated: 6 May 2014

Delegated Reporting

Delegated Reporting

HSBC Delegated Reporting Service

In order to facilitate adherence with trade reporting requirements for in-scope derivatives, EMIR permits counterparties to delegate the reporting of their trades to the other counterparty.

To help our clients to meet their reporting obligations HSBC offers a Delegated Reporting Service. The HSBC Delegated Reporting Service applies to relevant transactions entered into between your EEA entities and HSBC sites.

Learn more about HSBC Delegated Reporting Service

Last updated: 9 June 2016

Risk mitigation

Introduction to Risk Mitigation

EMIR requires counterparties to apply stringent risk mitigation processes and techniques for uncleared OTC derivative trades: new confirmation deadlines, execution of portfolio reconciliation and compression, dispute resolution procedures, daily mark-to-market valuation, initial and variation margining, capital requirements.

Timely confirmation

Counterparties must establish ‘appropriate procedures and arrangements’ to ensure the timely confirmation of the terms of all non-cleared OTC derivative contracts, within specified deadlines. These confirmation deadlines depend on the class of derivative you are trading and your classification (FC, NFC+ or NFC-) as per the table below. All counterparties should use electronic means (platforms or systems but not emails) where possible.

Non-Financial Counterparties (NFC) T+2
Financial Counterparties (FC) and Non-Financial Counterparties above the clearing thresholds (NFC+) T+1

Portfolio reconciliation and dispute resolution

When you enter into any new OTC derivative contract with an HSBC entity established in the European Economic Area (EEA) (the relevant HSBC entity being referred to as “HSBC”), you will have to agree in writing on the arrangements under which portfolios will be reconciled and under which disputes will be identified, monitored and resolved to be able to continue trading in-scope products with HSBC.

The frequency of reconciliation depends on the counterparty classification and the volume of outstanding OTC contracts with HSBC as set out in the table below.

You are an FC or an NFC+ Reconciliation Frequency
500 or more contracts with HSBC Each business day
51-499 contracts with HSBC Once per week
50 or fewer contracts with HSBC Once per quarter
You are an NFC- Reconciliation Frequency
More than 100 contracts with HSBC Once per quarter
100 or fewer contracts with HSBC Once per year

In accordance with the requirements of EMIR, HSBC requests its EEA and non-EEA clients to have agreed procedures and processes to identify, record and monitor disputes relating to contract recognition or valuation and exchange of collateral; and to resolve disputes in a timely manner to be able to continue trading.

In the event that you have not agreed portfolio reconciliation and dispute resolution with us, please download and complete HSBC's EMIR Portfolio Reconciliation, Dispute Resolution and Disclosure Agreement. Please scan the entire document and email it to emir.portfolio.reconciliation@hsbc.com.

Portfolio compression

Portfolio compression is recognised under EMIR as a risk mitigation technique for the purposes of reducing counterparty credit risk. Whether counterparties are required to engage in such a portfolio compression exercise depends on circumstances such as counterparty classification and number of Over The Counter (OTC) derivative contracts outstanding.

Benefits from performing portfolio compression exercises include a reduction in the number of trades and a reduction in exposure to specific counterparties.

EMIR requires both Non-Financial Counterparties (NFCs) and Financial Counterparties (FCs) to have in place a procedure to perform, at least twice a year, a process to analyse the possibility to conduct a portfolio compression exercise. In order to analyse such possibility, HSBC will, at least twice a year:

  • Determine whether counterparties are eligible for such an exercise, i.e. do the counterparties have 500 or more OTC derivatives contracts outstanding with HSBC that are not centrally cleared; and
  • Analyse portfolios in order to decide whether such OTC derivatives contracts can be compressed.

To comply with above, HSBC is following the EMIR Portfolio Compression market practice guidance provided by the International Swaps and Derivatives Association (ISDA) as published on 18 October 2013.

HSBC will be using Tri Reduce for the purposes of meeting the multilateral portfolio compression requirements.

If you would like further information or would like to undertake a portfolio compression exercise, please speak to your usual HSBC representative.

Mark-to-market valuation

FCs and NFC+s must mark-to-market on a daily basis the value of outstanding contracts. Mark-to-model can be used in certain circumstances (e.g. inactive markets).

Initial and variation margining

When contracting a product that is not subject to the clearing obligation, FCs and NFC+s are expected to have to apply initial and variation margining requirements to all uncleared derivative contracts.

Capital requirements

Financial counterparties have to hold an appropriate and proportionate amount of capital to manage risk not covered by exchange of collateral when trading an uncleared product.

Last updated: 28 May 2014