On 25 July 2019, there was published on the legislation.gov.uk website a draft version of the Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment etc and Transitional Provision) (EU Exit) (No 2) Regulations 2019, together with a draft explanatory memorandum.
The draft Regulation is being made using the power in section 8 of the European Union (Withdrawal) Act 2018 (EUWA) in order to address deficiencies in retained EU law in the European Markets Infrastructure Regulation (EMIR), as amended by the EMIR Refit Regulation (EMIR Refit), so that it operates effectively following the withdrawal of the United Kingdom from the European Union. The EMIR Refit came into force on 17 June 2019.
The draft Regulation amends:
- Part 18 of the Financial Services and Markets Act 2000 (FSMA) to provide that EMIR is defined as it has been amended by the EMIR Refit;
- a number of EU Exit instruments made under section 8 of the EUWA as they amended EMIR and related legislation. These instruments addressed deficiencies in EMIR arising as a result of exit, and certain updates are now necessary to ensure the deficiency fixes operate effectively in light of the changes introduced by EMIR Refit; and
- deficiencies in EMIR, as amended by EMIR Refit, and related UK legislation to ensure that the UK continues to have an effective regulatory framework for over the counter derivatives and central counterparties after the UK has left the EU. Principally, these relate to the transfer of functions from the European Securities and Markets Authority; clearing obligation suspension (Regulation 28 of the draft instrument substitutes a new Article 6a in EMIR relating to the suspension of the clearing obligation. This defines the conditions under which the clearing obligation can be suspended. It also ensures the clearing suspension can be deployed effectively in the UK by transferring the function from the European Commission to the Bank of England); pension fund clearing suspension (Regulation 33 of the draft instrument maintains the pension fund exemption, for both UK and EEA funds, after exit); and intragroup transactions (an error is correct in the ‘EMIR 2019 SI’ (SI 2019/335).
Some provisions of EMIR Refit do not become applicable until after 31 October 2019. These provisions will therefore not form part of retained EU law, and therefore not form part of UK law on exit day, if the UK leaves the EU on 31 October 2019. Therefore, the draft Regulation does not make amendments to those provisions.
Parts 1 and 3 of the Regulation come into force on the day after the day on which it is made. Parts 2 and 4 come into force on exit day.
You can track the financial services Brexit EU Exit statutory instruments (as well as gain access to our Brexit resources) on our Brexit Pathfinder hub. Registration is free via the NRF Institute portal. Conformed copies of the EU Exit statutory instruments are available exclusively through our PathfinderPLUS service. To gain access to PathfinderPLUS, please contact Jochen Vester or Simon Lovegrove.