EMIR and MiFID Considerations for US Firms
intermediatePublished: 2026-01-01
EMIR and MiFID Considerations for US Firms
US firms trading derivatives with European counterparties must navigate both the European Market Infrastructure Regulation (EMIR) and the Markets in Financial Instruments Directive II (MiFID II). These regulations impose reporting, clearing, and conduct requirements that apply extraterritorially when US entities trade with EU counterparties.
Definition and Key Concepts
EMIR Overview
European Market Infrastructure Regulation (EMIR): EU regulation governing OTC derivatives, central counterparties, and trade repositories.
| Requirement | Description | Applicability |
|---|---|---|
| Reporting | Report to trade repository | All derivatives |
| Clearing | Use authorized CCP | Certain IRS, CDS |
| Risk mitigation | Timely confirmation, reconciliation | Non-cleared OTC |
| Margin | Exchange IM and VM | Non-cleared OTC |
MiFID II Overview
Markets in Financial Instruments Directive II: EU regulation covering investment services, trading venues, and investor protection.
| Requirement | Description | Applicability |
|---|---|---|
| Trading obligation | Execute on venue | Certain derivatives |
| Pre-trade transparency | Quote disclosure | Trading venues |
| Post-trade transparency | Trade publication | All instruments |
| Best execution | Document execution quality | All client trades |
When US Firms Are Affected
| Scenario | EMIR Impact | MiFID II Impact |
|---|---|---|
| US firm trades with EU bank | EU counterparty reports | Best execution applies |
| US firm has EU branch | Branch subject to EMIR | Branch subject to MiFID |
| US firm clears at EU CCP | EU margin rules apply | N/A |
| US fund marketed in EU | May trigger obligations | Distribution rules apply |
How It Works in Practice
EMIR Reporting for US Firms
Dual-sided reporting: Both counterparties must report under EMIR.
| Counterparty | Reporting Obligation |
|---|---|
| EU financial counterparty | Must report |
| EU non-financial counterparty | Must report (or delegate) |
| Third-country (US) firm | Must report for EU trades |
Reporting timeline:
- Trade date: T
- Reporting deadline: T+1 (next business day)
- Modifications: T+1 from change
Data fields required:
| Field | Example |
|---|---|
| LEI of both parties | 549300XXXXXXXXXXXX |
| UTI (Unique Trade Identifier) | EU-generated UTI |
| Product identifier | ISIN or UPI |
| Notional | EUR 50,000,000 |
| Execution venue | XOFF (off-venue) |
EMIR Margin Requirements
For non-cleared OTC derivatives:
| Counterparty Type | IM Required | VM Required |
|---|---|---|
| EU vs. EU | Yes (above threshold) | Yes |
| EU vs. US (covered) | Yes (above threshold) | Yes |
| EU vs. US (substituted) | CFTC rules apply | CFTC rules apply |
Thresholds:
| Metric | Threshold |
|---|---|
| IM phase-in (current) | EUR 8 billion AANA |
| IM minimum transfer | EUR 500,000 |
| VM minimum transfer | EUR 500,000 |
| IM calculation | ISDA SIMM or schedule |
MiFID II Trading Obligation
Derivatives subject to trading obligation:
| Product | Status |
|---|---|
| EUR IRS (EURIBOR) | Subject to trading obligation |
| USD IRS (SOFR) | Not subject (non-EU reference) |
| EUR CDS indices | Subject to trading obligation |
| FX forwards | Exempt |
Execution venues:
- Regulated markets (RM)
- Multilateral trading facilities (MTF)
- Organized trading facilities (OTF)
Worked Example
US Bank Trading IRS with EU Counterparty
Trade details:
- US bank trades EUR 100M 5Y IRS with German bank
- US bank pays fixed 2.50%, receives 6M EURIBOR
- Executed via voice (off-venue)
- Trade date: January 15, 2025
EMIR Obligations:
Reporting (German bank's obligation):
| Field | Value |
|---|---|
| Report to | DTCC EU Trade Repository |
| Deadline | January 16, 2025 EOD |
| Action type | New trade |
| UTI | DE-XXXXXXXXXXXXXXXXXXXXXX |
US bank's obligation:
| Requirement | Action |
|---|---|
| Reporting | Report if trading >EUR 8B AANA with EU |
| Or delegation | German bank may report on behalf |
| Reconciliation | Quarterly with German bank |
| Confirmation | Within T+1 |
Margin (if non-cleared):
| Component | Calculation |
|---|---|
| AANA (US bank) | $15 billion |
| IM threshold | Exceeded |
| IM amount (SIMM) | EUR 2,400,000 |
| VM (after T+1) | Daily exchange |
Collateral posted:
| Date | IM Posted | VM Flow |
|---|---|---|
| Jan 16 | EUR 2,400,000 | EUR 0 |
| Jan 17 | EUR 2,400,000 | Pay EUR 85,000 |
| Jan 20 | EUR 2,400,000 | Receive EUR 120,000 |
Substituted Compliance
CFTC-ESMA equivalence: US persons may satisfy certain EMIR requirements by complying with CFTC rules.
| EMIR Requirement | Substituted Compliance |
|---|---|
| Clearing (certain IRS) | CFTC clearing satisfies |
| Margin (VM) | CFTC VM rules satisfy |
| Margin (IM) | CFTC IM rules satisfy |
| Reporting | Must still report under EMIR |
Risks, Limitations, and Tradeoffs
Compliance Risks
| Risk | Description | Consequence |
|---|---|---|
| Dual reporting failure | Miss EU and US deadlines | Fines in both jurisdictions |
| Margin mismatch | Different calculation methods | Disputes, reconciliation costs |
| Venue classification | Wrong venue designation | Regulatory violation |
| Entity classification | Incorrect counterparty type | Wrong rules applied |
Common Pitfalls
| Pitfall | Description | Prevention |
|---|---|---|
| LEI expiration | EU requires valid LEI | Annual LEI renewal |
| UTI mismatch | Different UTI from counterparty | Agree UTI generation |
| Wrong TR | Report to wrong repository | Confirm with counterparty |
| Delegation failure | Assumed counterparty reports | Written delegation agreement |
| Threshold miscalculation | Wrong AANA calculation | Regular AANA monitoring |
Regulatory Penalties
| Jurisdiction | Violation | Typical Penalty |
|---|---|---|
| ESMA/NCAs | Late EMIR reporting | EUR 5,000 - 2M per day |
| ESMA/NCAs | Margin violation | EUR 10,000 - 10M |
| ESMA/NCAs | MiFID best execution | EUR 5M or 10% revenue |
| FCA (UK) | Post-Brexit violations | Similar to EU |
Brexit Considerations
UK EMIR vs. EU EMIR
| Requirement | EU EMIR | UK EMIR |
|---|---|---|
| Reporting deadline | T+1 | T+1 |
| Trade repositories | EU TRs only | UK TRs only |
| Clearing | EU CCPs | UK CCPs |
| Margin | EU margin rules | UK margin rules |
For US firms:
- Separate reporting for UK and EU counterparties
- Different LEI requirements may apply
- Clearing at both EU and UK CCPs may be needed
Checklist and Next Steps
EMIR compliance checklist:
- Obtain and maintain valid LEI
- Identify EU counterparties
- Establish trade repository connectivity
- Implement UTI generation/sharing
- Set up margin calculation (SIMM)
- Establish collateral exchange process
- Document delegation agreements
MiFID II compliance checklist:
- Identify covered instruments
- Document execution policy
- Capture pre-trade and post-trade data
- Implement best execution monitoring
- Train relevant staff
- Establish record retention
Ongoing monitoring checklist:
- Track AANA for margin thresholds
- Reconcile reported trades quarterly
- Update LEI annually
- Review regulatory changes
- Audit reporting accuracy
- Test margin calculations
Related articles:
- For US reporting, see Reporting Trades Under Dodd-Frank
- For collateral, see Collateral Optimization Strategies