What is a non financial counterparty?
• Non Financial Counterparty (NFC) – defined as an entity established in the EU that is not a FC. An example of a NFC. is an Irish fund managed by a US manager. NFCs can be either a NFC+ which is subject to the clearing obligation, or a NFC- which is not subject to the clearing obligation.
What is an NFC counterparty?
Non-Financial Counterparty (“NFC”):A NFC is defined as an undertaking established in the EU other than those defined as a FC or a Central Counterparty (“CCP”), like the Clearing Houses. NFCs have lesser obligations than FCs.
What are financial counterparties?
A counterparty is the other party that participates in a financial transaction, and every transaction must have a counterparty in order for the transaction to go through. More specifically, every buyer of an asset must be paired up with a seller who is willing to sell and vice versa.
What is a small financial counterparty Emir?
Small financial counterparties EMIR Refit creates a new category of FC known as the small financial counterparty (SFC). An SFC is exempted from the clearing obligation but remains subject to risk mitigation obligations, including margin requirements.
What is the clearing threshold?
The Clearing Threshold is an amount set by class of OTC derivative contracts. It is set by regulatory technical standards and will be reviewed on a regular basis following public consultation.
What is an NFC in finance?
Non-financial counterparty (NFC) under the EMIR Regulation is an undertaking established in the European Union other than a financial counterparty (FC) or a CCP. The term “non-financial counterparty” is defined within Article 2(9) EMIR.
What is NFC in finance?
What is a clearing threshold?
Who acts as legal counterparty to all trades?
Central counterparty clearing houses (CCPs) perform two primary functions as the intermediary in a transaction: clearing and settlement. A CCP acts as a counterparty to both sellers and buyers, collecting money from each, which allows it to guarantee the terms of a trade.
Who does EMIR apply to?
EMIR applies to all derivatives identified in Annex 1 Sections C (4) to (10) of The Markets in Financial Instruments Directive (MiFID). The main obligations apply to transactions in over-the-counter (OTC) derivatives but some, for example the reporting obligation, apply to both OTC and exchange-traded derivatives.
What is a clearing obligation?
The clearing obligation applies to contracts between any combination of financial counterparties (FCs) and non-financial counterparties who exceed the relevant clearing thresholds as prescribed in UK EMIR (for NFCs) and UK EMIR REFIT (for FCs), subject to certain exemptions.
What are the clearing thresholds under EMIR?
The clearing thresholds for the SFC exemption under EMIR Refit to apply are:
- €1 billion in gross notional value for credit derivatives contracts;
- €1 billion in gross notional value for equity derivatives contracts;
- €3 billion in gross notional value for interest rate derivative contracts;
What is the clearing obligation?
The clearing obligation applies to EU firms that are counterparties to an OTC derivative contract including interest rate, foreign exchange, equity, credit and commodity derivatives.
What is a counterparty agreement?
Counterparty is a legal and financial term. It means a party to a contract or a the other party to a financial transaction. A counterparty is usually the entity with whom one negotiates on a given agreement, and the term can refer to either party or both, depending on context. Any legal entity can be counterparty.
Who is subject to EMIR reporting?
EMIR establishes the reporting obligation on both counterparties that should report the details of the derivative trades to one of the trade repositories (TRs), i.e. the buying party should report and the selling party should report. This obligation covers both financial and non-financial counterparties.