EMIR: Variation Margin Obligations – time to implement

For trustees with uncleared derivatives in their investment portfolio, there may be a need to take action before 1 March 2017.

The European Market Infrastructure Regulation (“EMIR”) imposes obligations on counterparties in respect of non-centrally cleared OTC derivative transactions (“Transactions”). The regulatory technical standard on margin for Transactions (the “RTS”) is expected to be approved and published soon. It is anticipated that pension fund trustees will need to comply with the variation margin obligations for new Transactions entered into from 1 March 2017.

The new rules will require amendments to existing collateral documentation to address, inter alia, haircuts, minimum transfer amounts, thresholds, timing of collateral calls, settlement and dispute resolution. Trustees will need to put in place collateral documentation that complies with the RTS to cover all Transactions entered into from 1 March 2017. There are a number of different ways to do this and trustees should consider as soon as possible (with help from their investment managers and legal advisers) on the most appropriate method for them.

For more information please see the article in our recent Investor Agenda or contact your usual Linklaters contact.