Energy Derivatives Market: Regulations increasing commodity clearing threshold and widening assets eligible for collateral now in force
The following EMIR-related measures proposed by the European Commission on 18 October 2022 in the context of a broad range of measures designed to address volatility in the energy markets have been published in the Official Journal.
- Regulation increasing the commodity clearing threshold from €3 billion to €4 billion, enabling energy companies to enter into more over-the-counter transactions without being subject to margin requirements. This is for the benefit of non-financial counterparties only, and another review of the clearing thresholds may be forthcoming. This measure (Commission Delegated Regulation (EU) 2022/2310) comes into force today (29 November 2022).
- Regulation widening, on a temporary 12-month basis and subject to conditions, the list of eligible assets that can be used as collateral to meet margin calls to include public guarantees and uncollateralised bank guarantees. This may be extended further depending on how the energy derivative markets function over the coming months. This measure (Commission Delegated Regulation (EU) 2022/2311) also comes into force today (29 November 2022).
For more information on the background to these proposals, read our recent update: The liquidity squeeze – Volatility and margin calls impacting pension funds and energy companies.
We’re expecting to see the output from the Commission’s EMIR review during the course of next week (week beginning 5 December 2022).
To discuss any of the above in more detail, please get in touch with Phil Cody of our Derivatives, Treasury and Market Infrastructure Group.