A regulation passed by the EU, which implements the G-20 2009 Pittsburgh Agreement to introduce regulations to reduce systemic risk in the banking system, in a similar fashion to Dodd-Frank. The European Securities and Markets Authority (ESMA) will be the implementing authority. The regulation includes four ‘pillars’:
1) Transparency via trade reporting.
All over-the-counter (OTC) and exchange-traded derivatives (ETD) deals to be reported to registered trade repositories.
2) Clearing. As many standardised OTC derivatives as possible to be cleared via central clearing counterparties (CCPs) or moved to exchange-based trading.
3) Rules on the running of CCPs
4) Risk management. Five measures to reduce risk:
a) timely confirmations
b) portfolio reconciliation
c) portfolio compression
d) dispute resolution
e) mark-to-market/model rules.
EMIR will apply to financial counterparties and non-financial counterparties (NFCs), such as energy traders in different ways. All must report trades. Clearing is likely to only apply to NFCs that are over a ‘threshold’. Each risk management measure differs depending on which type of market participant is being considered.
* see also central clearing counterparty (CCP); Dodd-Frank; G-20 2009 Pittsburgh Agreement; portfolio compression; trade repository
The Energy Risk Glossary, now in its eighth edition, provides an at-a-glance explanation of the myriad specialised terms and acronyms used in energy trading and risk management.
This year, the guide has been updated by Aviv Handler of ETR Advisory. Energy Risk would like to thank him for his input into this edition, which benefits greatly from his valuable experience and insight into energy markets.
The fast-changing nature of these markets means much has changed since our last edition – almost 200 new entries and revisions have been made this year. Reflecting the increasing importance of regulation, definitions of the Markets in Financial Instruments Directive (MiFid) and the Ljubljana-based Agency for the Cooperation of Energy Regulators (Acer) make it into the glossary for the first time. A focus on improving back-office infrastructure and mitigating counterparty risk is also apparent from the inclusion of terms such as ‘portfolio reconciliation’ and ‘portfolio compression’.
The glossary is extensively cross-referenced, making for easy and thorough searches. We hope you find it useful.
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