European Markets Infrastructure Regulation (EMIR) and Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA): A New Revolution of OTC Derivatives towards Transparency

Abstract

Both the European Union (EU) and the United States (US) have now adopted the primary legislation which aims to fulfill the G20 commitments that all standardized over-the-counter (OTC) derivatives should be cleared through central counterparties (CCPs) by end of 2012 and that OTC derivatives contracts should be reported to trade repositories (and the related commitments to a common approach to margin rules for uncleared derivatives transactions). European Securities and Markets Authority (ESMA) in Europe and the Securities Exchange Commission (SEC) as well as the Commodities Futures Trading Commission (CFTC) in the US decide which derivatives are eligible and when the clearing obligation applies. Furthermore, they are also responsible for supervising these new regulations.The US Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in July 2010 and the text of the EU Regulation on OTC Derivatives, CCPs and Trade Repositories (EMIR) was published in the Official Journal in July 2012.There is a significant commonality of approaches between EMIR and the Dodd-Frank Act in relation to the regulation of OTC derivatives markets, but there are also some significant differences. This paper summarizes the way in which the two regimes treat different categories of counterparty and highlights certain other major differences between EMIR and the Dodd-Frank Act in relation to OTC derivatives regulation.