Publication
EMIR 3
Commission adopts regulatory technical standards on the clearing thresholds regime
EMIR 3
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Publication
Commission adopts regulatory technical standards on the clearing thresholds regime
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While EMIR 3 came into force on 24 December 2024, the provisions amending the methodology for both financial counterparties (FCs) and non-financial counterparties (NFCs) to determine whether they exceed clearing thresholds do not yet apply. Those provisions will only start to apply once Level 2 regulatory technical standards relating to the new clearing thresholds come into force.
Following a consultation last year, ESMA published its Final report and draft regulatory technical standards setting out proposed amendments to the EMIR clearing thresholds regime on 25 February 2026.
The draft technical standards have now been adopted by the Commission, without significant amendment, and will be scrutinised by the Council and Parliament. Although the timing of entry into force of these technical standards, and consequently the revised clearing threshold calculation methodology under EMIR 3, is not yet clear, it appears unlikely that these changes will apply before Q4 2026.
ESMA has confirmed that counterparties should not be required to recalculate their positions on entry into force of the technical standards. Instead, counterparties will be required to apply the new calculation methodology and clearing thresholds no later than their first annual calculation date following entry into force of the RTS (for most counterparties, this is expected to be June 2027). Counterparties may, however, choose to recalculate their positions earlier, following entry into force of the RTS, to benefit from the changes sooner. The Commission has also acknowledged ESMA’s approach to implementation in light of burden reduction and simplification initiatives in the explanatory memorandum to the adopted delegated regulation.
In the meantime, the existing clearing thresholds and calculation methodologies continue to apply.
This note outlines the changes to the clearing threshold calculation methodology and revised clearing thresholds, and the practical implications for counterparties.
Currently, the thresholds for determining whether an NFC is at or above the thresholds (NFC+) or below the thresholds (NFC-) are calculated annually, taking into account the annual average month end value over the preceding 12 months of all OTC derivatives, whether cleared or uncleared, of non-financial entities in the group (but excluding derivatives for hedging purposes).
Exchange-traded derivatives (ETDs) that are traded on venues not determined as “equivalent” to EU venues (which includes UK venues) are categorised as OTC derivatives. Therefore, they need to be included in the calculation (unless for hedging purposes), which is problematic. Another challenge can be identifying which entities globally form part of the “group” so that their derivative positions are included in the calculation. Following EMIR REFIT, an NFC+ is only required to clear derivatives that are in-scope of the clearing obligation if it exceeds the threshold for that particular class of derivatives (for example, interest rate derivatives).
The following helpful changes to the calculation methodology for NFCs are introduced by EMIR 3:
Although EMIR 3 mandates ESMA to review the criteria for establishing when a contract can be excluded from the calculations for NFCs as being for “hedging purposes”, ESMA ultimately decided to leave the criteria unchanged.
While ESMA consulted on the treatment of virtual Power Purchase Agreements, and many respondents supported clarification as to whether these can be entered into for “hedging purposes”, ESMA concluded that any such changes would go beyond its Level 2 mandate to draft technical standards and would instead need to be considered at Level 1.
EMIR REFIT introduced an exemption from the clearing obligation for “small FCs”, whose OTC derivative positions (calculated annually at group level and with no exclusion for hedging contracts) did not exceed any of the clearing thresholds. If any clearing threshold is exceeded, the FC must clear all derivatives that are in-scope of the clearing obligation.
Under EMIR 3, the calculation of positions will remain at group level, and the methodology will be amended to introduce a two-limb test:
ESMA has confirmed that it considers the introduction of an aggregate threshold for OTC derivatives (whether cleared or uncleared) to be necessary to address the risk that FCs, which have large cleared portfolios but remain under the uncleared threshold, would fall outside the scope of the clearing obligation. These thresholds will, however, only apply for those asset classes which are in scope of the clearing obligation, i.e. interest rate and credit derivatives. As the aggregate calculation includes both cleared and uncleared positions, at group level, the draft technical standards provide for the existing clearing thresholds for those asset classes to be retained for this purpose.
The exemption from clearing for small FCs will only apply where positions are below the relevant thresholds for both limbs of the new test.
Funds and pension schemes are not normally part of a “group”, so will run the calculations based on their individual positions (and the specific provisions in EMIR allowing for EU UCITS and AIFs to calculate on a solo basis are retained).
For the purposes of the revised clearing threshold regime, ESMA broadly proposed to retain the existing asset classes, except that the existing class of commodity and other derivatives will be amended to only cover commodity and emission allowance derivatives.
ESMA has decided neither to introduce more granular categories for commodity derivatives at this time, nor to introduce any further asset classes for derivatives (such as crypto-asset derivatives) that may not fall within any of the existing asset classes. Further changes may follow in future as ESMA is required to review the clearing thresholds every two years, or earlier where ESMA identifies significant change in the price evolution of an underlying class of OTC derivatives, or financial stability risks.
Given the changes to the calculation methodology for NFCs (only including uncleared positions of an individual NFC that are not for hedging purposes), retaining the existing thresholds could lead to entities that are currently NFC+ ceasing to be subject to the clearing obligation and to the other provisions in EMIR applying to NFC+s, including regulatory margining and potentially the “active account requirement”. Similar concerns would arise in respect of FCs that may become small FCs.
As noted above, the clearing threshold calculation for FCs will remain at group level, and the second limb will aggregate both cleared and uncleared OTC derivatives.
With a view to ensuring that the current coverage of the clearing obligation is not substantially changed, and based on its analysis of more recent trade repository data as summarised in the Final report, ESMA proposed to revise the applicable clearing thresholds as follows:
| Asset class | Existing clearing thresholds for OTC derivatives* | New clearing thresholds for uncleared OTC derivatives (NFCs** and FCs***) | New aggregate thresholds for cleared and uncleared OTC derivatives (FCs only***) |
| Interest rate derivatives | €3bn | €2.2bn | €3bn |
| Credit derivatives | €1bn | €0.8bn | €1bn |
| Equity derivatives | €1bn | €0.7bn |
|
| FX derivatives | €3bn | €3bn |
|
| Commodity and other derivatives (existing clearing thresholds regime) | €4bn |
|
|
| Commodity and emission allowance derivatives (new clearing thresholds regime) |
| €4bn |
|
* Commission Delegated Regulation (EU) No 149/2013.
** Determined at entity level.
*** Determined at group level.
The threshold for FX derivatives is unchanged from the existing threshold because most of the volume in such derivatives is uncleared, so only including uncleared positions in the calculations will not be a material change from the current situation.
For commodity and emission allowance derivatives, the proposed EUR 4 billion threshold has been increased from the EUR 3 billion threshold proposed in ESMA’s consultation paper. This acknowledges concerns raised by respondents regarding inflationary pressure, growing trading in new products and international competitiveness.
Increases in the thresholds for interest rate derivatives and credit derivatives compared with those proposed at the time of ESMA’s consultation reflect ESMA’s updated analysis based on a more recent data set and awareness of the potential overlap with the aggregate threshold for FCs.
Following adoption by the Commission, the Council and Parliament now have a three month period to raise any objections. The technical standards will then enter into force 20 days after publication in the Official Journal of the European Union.
As noted above, ESMA’s view is that counterparties will not be required to recalculate on entry into force of the technical standards, but will need to apply the revised calculation methodology and clearing thresholds for the purposes of their first annual calculation following entry into force, i.e. the June 2027 calculation followed by many counterparties. Counterparties may, however, choose to recalculate their positions as soon as the technical standards enter into force if they wish to benefit from the revised methodology and clearing thresholds sooner.
Counterparties that currently benefit from NFC- or “small FC” classifications, or that may be able to do so following the entry into force of these amendments, should consider these changes to understand whether they may have any potential impact on their EMIR classification.
Similarly, these changes will be of relevance to third-country entities where EMIR may apply indirectly when transacting with in-scope EU counterparties.
As the calculations are carried out based on values for the preceding 12 months, both FCs and NFCs, and third country equivalents, wishing to run these calculations should ensure that they collect the data needed under the new EMIR 3 calculation methodology.
While there is a degree of divergence between the existing EMIR and UK EMIR clearing threshold regimes, the application of these EMIR 3 changes will result in more significant divergence between the calculations and thresholds applied.
In addition, the FCA recently announced an increase in the commodity clearing threshold under UK EMIR from EUR 3 billion to EUR 6 billion . The increase – beyond the EUR 5 billion threshold proposed in the consultation – reflects concerns raised by the industry regarding rising commodity prices and volatility. The change was announced as a transitional measure while wider amendments to the clearing regime, including potentially to the clearing threshold calculation methodology and thresholds, are considered as part of the ongoing review of UK EMIR.
Capital Markets Partner, London
United Kingdom
Capital Markets Partner, London
United Kingdom
Counsel (Knowledge)
United Kingdom
Capital Markets Counsel, London
United Kingdom
Capital Markets and Banking Partner, Luxembourg
Luxembourg
Financial Regulation Partner, Madrid
Spain
Capital Markets Partner, Berlin
Germany
Financial Regulation and Investment Funds Partner, Paris
France
Global Head of Capital Markets, Head of Finance Germany, Frankfurt
Germany
Counsel, Berlin
Germany
Consultant, Luxembourg
Luxembourg
Senior Associate (Knowledge), Berlin
Germany
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