ISDA EMIR CLASSIFICATION LETTER1 Published On 13th July 2015

isda emir classification letter1 published on 13th july 2015 by the international swaps and derivatives association, inc. _________

ISDA EMIR CLASSIFICATION LETTER1
Published on 13th July 2015
by the International Swaps and Derivatives Association, Inc.
______________________________________________
TO2:
The entity named below (the “Named Entity”) makes the statements in
Appendix I (EMIR Clearing Categorisation) and/or Appendix II (EMIR
Counterparty Classification), as indicated in each appendix, to
provide the recipient of this letter (the “Recipient”) with status
information needed by the Recipient to determine the application of
certain EMIR requirements. The statements in this letter are solely
for the purposes of such determinations.
The Named Entity will notify the Recipient in writing before or as
soon as reasonably practicable following any of the statements made in
Appendix I (EMIR Clearing Categorisation) and/or Appendix II (EMIR
Counterparty Classification), as applicable, ceasing to be true. The
Recipient may rely on the statements given by the Named Entity in
Appendix I (EMIR Clearing Categorisation) and/or Appendix II (EMIR
Counterparty Classification), as applicable, unless and until the
Named Entity notifies the Recipient in writing to the contrary.
[If the Recipient receives classification information from the Named
Entity in the form of this letter and also in corresponding statements
through ISDA Amend and inconsistencies exist between the information
received in the two forms, the information provided [in this
letter]/[through ISDA Amend] prevails.]3 In the event the Named Entity
completes Appendix I and Appendix II to this letter and there is
inconsistency between the statements made by the Named Entity in
Appendix I and Appendix II, the statements made by the Named Entity in
Appendix I prevail.
Capitalised terms used in this letter have the meanings given to them
in Appendix III (Defined Terms).
Where this letter is completed and delivered by an agent on behalf of
one or more Named Entities, this letter should be treated as if it
were a separate letter with respect to each Named Entity listed by the
agent.4
Executed and delivered with effect from:
Date:
Full legal name of the Named Entity:5
LEI/CICI/[Alternative Identifier6] of the Named Entity:
If applicable, full legal name of the agent, acting
on behalf of the Named Entity:7
Signature:
Name of signatory:
Title of signatory:
[Optional] Name of ultimate parent company:
APPENDIX I
EMIR CLEARING CATEGORISATION
If the Named Entity is a Third Country Entity, it should answer
questions 1 and 2 on the basis of what its categorisation would be if
the Named Entity were established in the EU. If the Named Entity is an
entity out of scope for EMIR, it should not answer any of the
questions in this Appendix I.
1 What is your clearing category under the EMIR Interest Rate Products
RTS?8
If the Named Entity is NFC-, it should not answer this question.
In respect of interest rate OTC Derivative Contracts that are the
subject of the Interest Rate Products RTS, the Named Entity is a:
Category 1 Entity;
Category 2 Entity;
Category 3 Entity; or
Category 4 Entity.
As and when further classes of OTC Derivative Contracts are mandated
to be cleared under EMIR, unless and until the Named Entity has
notified the Recipient in writing that its categorisation is different
for any/each such further class of OTC Derivative Contracts (such
notification may be in the form of the notice attached at Appendix
IV), the Named Entity is deemed to have repeated the statement made
above in respect of interest rate OTC Derivative Contracts, in respect
of each such further class of OTC Derivative Contract on the
Frontloading Window Start Date for each such further class of OTC
Derivative Contracts.
2 Are you an Alternative Investment Fund?
Yes; or
No.
3 What type of Pension Scheme Arrangement are you?
The Named Entity should only complete this section if it is a Pension
Scheme Arrangement. Third Country Entities should not complete this
section.
The Named Entity is a:
Pension Scheme Arrangement within the meaning of Article 2(10)(a) of
EMIR;
Pension Scheme Arrangement within the meaning of Article 2(10)(b) of
EMIR;
Pension Scheme Arrangement within the meaning of Article 2(10)(c) of
EMIR; or
Pension Scheme Arrangement within the meaning of Article 2(10)(d) of
EMIR.
4 Use of the Pension Scheme Arrangement Exemption
The Named Entity should only complete this section if it is a Pension
Scheme Arrangement. Third Country Entities should not complete this
section.
The Named Entity makes the statement below as indicated.
All Contracts.
Each OTC Derivative Contract (whenever entered into, and whether or
not any such contract would otherwise be subject to mandatory clearing
under EMIR) is objectively measurable as reducing investment risks
directly relating to the financial solvency of the Pension Scheme
Arrangement and accordingly has the benefit of the Pension Scheme
Arrangement Exemption.
All Contracts To Which Mandatory Clearing Would Otherwise Apply.
Each OTC Derivative Contract which would otherwise be subject to
mandatory clearing under EMIR is objectively measurable as reducing
investment risks directly relating to the financial solvency of the
Pension Scheme Arrangement and accordingly has the benefit of the
Pension Scheme Arrangement Exemption.
No General Statement Made.
(a) Subject to paragraph (b), the Pension Scheme Arrangement makes no
general statement as to whether OTC Derivative Contracts have the
benefit of the Pension Scheme Arrangement Exemption.
(b) The Pension Scheme Arrangement may from time to time request to
enter into OTC Derivative Contracts of a type that are subject to
mandatory clearing under EMIR on the basis that they will not be
cleared in accordance with the EMIR clearing obligation. By making
such request, the Pension Scheme Arrangement makes the statement that
each such OTC Derivative Contract is objectively measurable as
reducing investment risks directly relating to the financial solvency
of the Pension Scheme Arrangement and accordingly has the benefit of
the Pension Scheme Arrangement Exemption.
APPENDIX II
EMIR COUNTERPARTY CLASSIFICATION
If the Named Entity is a Third Country Entity, it should answer
questions 3 and 4 on the basis of what its categorisation would be if
the Named Entity were established in the EU and it should not answer
question 5(b).
1 Third Country Entity
The Named Entity:
is a Third Country Entity (and so the following elections made should
be read in that context); or
is not a Third Country Entity.
2(a) Are you an entity out of scope for EMIR?
Yes; or
No.
2(b) Select the entity type that is out of scope
If you have checked “Yes” in response to question 2(a) above, please
confirm the following.
The Named Entity is fully or partially out of scope of EMIR as it is:
an EMIR Article 1(4)(a) Entity;
an EMIR Article 1(4)(b) Entity;
an EMIR Article 1(4)(c) Entity;
an EMIR Article 1(5)(a) Entity;
an EMIR Article 1(5)(b) Entity;
an EMIR Article 1(5)(c) Entity; or
a Non-Undertaking.
If the Named Entity is out of scope for EMIR, it should not complete
the remaining sections.
3 EMIR Entity Type
The Named Entity is a:
FC; or
NFC.
4 Clearing Threshold
If the Named Entity is a NFC, please confirm the following.
The Named Entity is a:
NFC+; or
NFC-.
5(a) Are you a Pension Scheme Arrangement?
Yes; or
No.
5(b) Do you intend to utilize the Pension Scheme Arrangement
Exemption?
Yes;
No; or
Not decided.
APPENDIX III
DEFINED TERMS
“Alternative Investment Fund” means an alternative investment fund as
defined in Article 4(1)(a) of Directive 2011/61/EU.
“Category 1 Entity” means an entity which, on the date of entry into
force of the Interest Rate Products RTS, is a clearing member, within
the meaning of Article 2(14) of EMIR, for at least one of the classes
of OTC derivatives subject to the clearing obligation as provided in
the Interest Rate Products RTS, of at least one of the CCPs authorised
or recognised before that date in accordance with EMIR to clear at
least one of those classes.
“Category 2 Entity” means an entity which is not a Category 1 Entity
and which belongs to a Group whose aggregate month-end average of
outstanding gross notional amount of non-centrally cleared derivatives
for the assessment period indicated in the Interest Rate Products RTS
is above EUR 8 billion and which is:
(a) a FC; or
(b) an Alternative Investment Fund that is a NFC+.
For the purposes of calculating the group aggregate month-end average
of outstanding gross notional amount, all of the group’s non-centrally
cleared derivatives, including foreign exchange forwards, swaps and
currency swaps, shall be included.
When the entity is an Alternative Investment Fund as defined herein or
a UCITS as defined in Article 1(2) of Directive 2009/65/EC, the EUR 8
billion threshold referred to above shall apply individually at fund
level.
“Category 3 Entity” means an entity which is not a Category 1 Entity
or a Category 2 Entity and which is:
(a) a FC; or
(b) an Alternative Investment Fund that is a NFC+.
“Category 4 Entity” means a NFC+ which is not a Category 1 Entity, a
Category 2 Entity or a Category 3 Entity.
“CCP” means a legal person that interposes itself between the
counterparties to the contracts traded on one or more financial
markets, becoming the buyer to every seller and the seller to every
buyer.
“EMIR” means Regulation (EU) No 648/2012 of the European Parliament
and of the Council on OTC derivatives, central counterparties and
trade repositories dated 4 July 2012.
“EMIR Article 1(4)(a) Entity” means any members of the European System
of Central Banks or other Member States’ bodies performing similar
functions or other European Union public bodies charged with or
intervening in the management of the public debt.
“EMIR Article 1(4)(b) Entity” means the Bank for International
Settlements.
“EMIR Article 1(4)(c) Entity” means any central banks and public
bodies charged with or intervening in the management of the public
debt in the following countries:
(a) Japan; or
(b) United States of America.
“EMIR Article 1(5)(a) Entity” means any multilateral development
banks, as listed under Section 4.2 of Part 1 of Annex VI to Directive
2006/48/EC.
“EMIR Article 1(5)(b) Entity” means any public sector entities within
the meaning of point (18) of Article 4 of Directive 2006/48/EC where
they are owned by central governments and have explicit guarantee
arrangements provided by central governments.
“EMIR Article 1(5)(c) Entity” means each of the European Financial
Stability Facility and the European Stability Mechanism.
“European Union” means the economic and political union established in
1993 by the Maastricht Treaty, with the aim of achieving closer
economic and political union between member states that are primarily
located in Europe.
“FC” means any investment firm authorised in accordance with Directive
2004/39/EC; credit institution authorised in accordance with Directive
2006/48/EC; insurance undertaking authorised in accordance with
Directive 73/239/EEC; assurance undertaking authorised in accordance
with Directive 2002/83/EC; reinsurance undertaking authorised in
accordance with Directive 2005/68/EC; UCITS and, where relevant, its
management company, authorised in accordance with Directive
2009/65/EC; institution for occupational retirement provision within
the meaning of Article 6(a) of Directive 2003/41/EC; and alternative
investment fund managed by alternative investment fund managers
authorised or registered in accordance with Directive 2011/61/EU.
“Frontloading Window Start Date” means, in respect of a class of OTC
Derivative Contracts, the first date on which an OTC Derivative
Contract of such class can be entered into or novated and become
subject to the clearing obligation under Article 4(1)(b)(ii) of EMIR
in accordance with the regulatory technical standards mandating
clearing for such class of OTC Derivative Contracts.
“Group” means the group of undertakings consisting of a parent
undertaking and its subsidiaries within the meaning of Articles 1 and
2 of Directive 83/349/EEC or the group of undertakings referred to in
Article 3(1) and Article 80(7) and (8) of Directive 2006/48/EC.
“Interest Rate Products RTS” means the Commission Delegated Regulation
supplementing EMIR of the European Parliament and of the Council with
regard to regulatory technical standards on the clearing obligation in
respect of interest rate OTC derivatives [expected to be] published []
20159.
“ISDA Amend” means the electronic solution developed to assist
entities with, amongst other things, EMIR status determination and
communication of such determination, which is available at
http://www.markit.com/product/isda-amend.
“Member States” has the meaning given to it in EMIR.
“Named Entity” has the meaning given to it on the first page of this
letter.
“NFC” means an undertaking established in the European Union other
than a CCP or a FC.
“NFC-” means a NFC which is not a NFC+.
“NFC+” means a NFC which meets the conditions referred to in Article
10(1)(b) of EMIR.
“Non-Undertaking” means a natural or legal person who/which is not an
undertaking for the purposes of EMIR.
“OTC Derivative Contract” has the meaning given to it in Article 2(7)
of EMIR.
“Pension Scheme Arrangement” means any:
(a) institutions for occupational retirement provision within the
meaning of Article 6(a) of Directive 2003/41/EC, including any
authorised entity responsible for managing such an institution and
acting on its behalf as referred to in Article 2(1) of that Directive
as well as any legal entity set up for the purpose of investment of
such institutions, acting solely and exclusively in their interest;
(b) occupational retirement provision businesses of institutions
referred to in Article 3 of Directive 2003/41/EC;
(c) occupational retirement provision businesses of life insurance
undertakings covered by Directive 2002/83/EC, provided that all assets
and liabilities corresponding to the business are ring-fenced, managed
and organised separately from the other activities of the insurance
undertaking, without any possibility of transfer;
(d) any other authorised and supervised entities, or arrangements,
operating on a national basis, provided that:
(i) they are recognised under national law; and
(ii) their primary purpose is to provide retirement benefits.
“Pension Scheme Arrangement Exemption” means the temporary exemption
(including any extension thereof) from the clearing obligation, as
described in Articles 89(1) and 89(2) of EMIR.
“Recipient” has the meaning given to it on the first page of this
letter.
“Third Country Entity” means an entity which is not established in the
European Union and which is not a FC10.
APPENDIX IV
FORM OF CLEARING CATEGORY STATUS UPDATE NOTICE
[Date]
[To: []]
1.
Dear Sir or Madam,
2.
RE: the ISDA 2014 EMIR Counterparty Classification Letter (the “Letter”).
3.
Capitalised terms used but not defined in this notice have the
meaning given to them in the Letter.
4.
With reference to the Letter between us and you, this notice is to
inform you that, in respect of [insert product area e.g. CDS or
NDF] OTC Derivative Contracts mandated to be cleared under and in
accordance with Commission Delegated Regulation [insert reference
if available] supplementing EMIR of the European Parliament and of
the Council with regard to regulatory technical standards on the
clearing obligation in respect of [insert product area e.g. CDS or
NDF] OTC derivatives [expected to be] published [on]/[in] [insert
date or expected month], the Named Entity is [a category []
entity]11.
Executed and delivered with effect from:
Date:
Full legal name of the Named Entity:12
LEI/CICI/[Alternative Identifier13] of the Named Entity:
If applicable, full legal name of the agent, acting
on behalf of the Named Entity:14
Signature:
Name of signatory:
Title of signatory:
[Optional] Name of ultimate parent company:
1 While this is headed as a letter, it can of course be sent as an
attachment to an email or pasted into the body of an email, or other
method of communication in writing.
2 Insert the name of the Recipient or simply “To whom it may concern”.
3 The Recipient and the Named Entity should consider relevant
operational processes when deciding on the form of this statement.
4 As this is standard form language only, the parties may wish to make
further amendments to suit their needs such as, where possible, to
address a situation where an agent/manager is signing on behalf of a
client/fund but only in respect of the portion of that client’s
business transacted by that agent/manager.
5 If this letter is being completed by the Named Entity, the Named
Entity should insert its full legal name here. If this letter is being
completed by an agent on behalf of one or more Named Entities, the
agent must clearly identify the full legal name and LEI, CICI or
Alternative Identifier (as applicable) of each Named Entity either on
this page or on an attached sheet. An agent may only list multiple
Named Entities where the elections made in Appendix I and/or Appendix
II by all such Named Entities are identical. Where an agent wishes to
complete this letter on behalf of two or more Named Entities which do
not have identical elections in Appendix I and/or Appendix II, the
agent should complete separate letters for each group of Named
Entities which have identical elections or for each Named Entity.
Similarly, if this letter is being delivered by a trustee on behalf of
one or more trusts or trust funds, the trustee should amend the
signature block to make clear each Named Entity and its identifier and
only list multiple Named Entities where the elections made by each
Named Entity are identical.
6 If you would like to include an alternative identifier, please
describe the type of identifier provided.
7 Only insert the name of the agent if this letter is being completed
by an agent on behalf of one or more Named Entities. If this letter is
being completed by the Named Entity, this line can be left blank,
struck through, marked as not applicable or similar.
8 As this standard form letter is being published before the Interest
Rate Products RTS is published, it is possible that the final,
published form of the Interest Rate Products RTS differs from the
draft on which this letter is based. The parties should satisfy
themselves that the content of this letter accurately reflects the
final form of the regulation, particularly in respect of definitions
such as the clearing categories as these provisions are intended to
track the wording of the regulation as closely as possible. See
further Appendix III (Defined Terms).
9 This standard form letter is being published before the date of the
Interest Rate Products RTS is known. The parties should retain or
delete the square-bracketed text and insert the relevant date, as
appropriate, before using this letter.
10 The words “and which is not a FC” refers to the fact that a non-EU
Alternative Investment Fund can be a FC (in which case, the
Alternative Investment Fund is a FC and is not a Third Country
Entity). If the Named Entity is a Third Country Entity, certain
sections of Appendix I and Appendix II require that the Third Country
Entity answer on the basis of what the Named Entity would be if it
were established in the EU (as indicated in the relevant sections of
Appendix I and Appendix II), this may include the Third Country Entity
indicating that it is equivalent to a FC or a NFC.
11 If the Named Entity knows that it will be a single category in
respect of all further classes of OTC Derivative Contracts (to be)
mandated for clearing, it may amend this letter to make such
statement. Further, as this is standard form language only, the
parties may wish to make further amendments to suit their needs such
as, where possible, to address a situation where an agent/manager is
signing on behalf of a client/fund but only in respect of the portion
of that client’s business transacted by that agent/manager.
12 If this letter is being completed by the Named Entity, the Named
Entity should insert its full legal name here. If this letter is being
completed by an agent on behalf of one or more Named Entities, the
agent must clearly identify the full legal name and LEI, CICI or
Alternative Identifier (as applicable) of each Named Entity either on
this page or on an attached sheet. Similarly, if this letter is being
delivered by a trustee on behalf of one or more trusts or trust funds,
the trustee should amend the signature block to make clear each Named
Entity and its identifier.
13 If you would like to include an alternative identifier, please
describe the type of identifier provided.
14 Only insert the name of the agent if this letter is being completed
by an agent on behalf of one or more Named Entities. If this letter is
being completed by the Named Entity, this line can be left blank,
struck through, marked as not applicable or similar.
10
Copyright © 2015 by International Swaps and Derivatives Association,
Inc.