Risk-mitigation Techniques Under EMIR

Diana Higgins

“We never fail when we try to do our duty, we always fail when we neglect to do it.”
Lord Robert Baden-Powell

Portfolio compression is found in only one article of Dodd-Frank and one in EMIR, although there are other risk-mitigation techniques that companies need to comply with under EMIR. This chapter explains at a high level the risk-mitigation related requirements under the European legislation in force as of 2014. The author does not have hands-on experience with Dodd-Frank, therefore the reader may want to refer to the CFTC ruling itself for more specific information. Nevertheless, the author trusts that the concepts in this book will be useful to address the Dodd-Frank requirements for compressions.

All non-cleared OTC derivatives are required to meet risk-mitigation techniques under EMIR. These requirements apply to all financial counterparties (FC), non-financial counterparties above the clearing threshold (NFC+) and non-financial counterparties below the clearing threshold (NFC–). NFCs may qualify for exceptions. Exceptions or less demanding requirements depend on the type of counterparty and the volume of non-cleared OTC derivatives in the portfolio.

This book