ESMA Final Report on updated EMIR clearing thresholds regime: what is the impact on derivative end users?

ESMA has published its Final Report¹ (the Final Report) setting out a revised set of clearing thresholds under EMIR. This follows ESMA’s consultation in April 2025 on the changes to the calculation of the clearing thresholds brought in by EMIR 3 and the request for ESMA to develop new clearing thresholds and review the hedging exemption.

Background

EMIR 3, which came into force on 24 December 2024, revised how derivatives counterparties are required to calculate their positions against the clearing thresholds and tasked ESMA with producing final rules and values in respect of the clearing thresholds. In order to signal the benefits of central clearing, EMIR 3 has moved away from the previous approach, which was based on a distinction between exchange-traded derivatives (ETDs) and over-the-counter (OTC) derivatives (with only OTC derivatives counting towards the clearing thresholds), to a framework based on the volume of uncleared OTC derivatives transactions. As a result, the new rules on calculations exclude ETDs and OTC derivatives voluntarily cleared at an authorised or recognised central counterparty (CCP) from those calculations.

What are the main changes?

EMIR 3 has introduced a change to the calculation of the clearing thresholds whereby:

• Financial Counterparties (FCs) must calculate their:
  • uncleared OTC derivative positions; and
  • aggregate OTC exposure of cleared and uncleared derivatives (as against the new aggregate thresholds) for in-scope asset classes;
  • Non-financial Counterparties (NFCs) only need to count their uncleared derivatives trades when calculating the clearing thresholds; and
  • FCs will need to calculate their positions using gross notional values on a group wide basis (with the exception of UCITs and AIFs, which must calculate at fund level rather than group level), whilst NFCs can do this at entity level, disregarding any trades entered in for hedging purposes that will still benefit from the hedging exemption.

Clearing thresholds for aggregate positions (FCs only)

ESMA has concluded that the aggregate thresholds should only apply to asset classes that are already in scope of the clearing obligation, namely interest rate and credit derivatives, with the thresholds set at the existing levels of:

• Interest rate derivatives – EUR 3bn in gross notional value; and
• Credit derivatives – EUR 1bn in gross notional value.

Thie means that the aggregate clearing thresholds for OTC equity, FX and commodity derivatives will no longer apply.

Clearing thresholds for uncleared positions (FCs and NFCs)

Following feedback received to its consultation in April 2025, ESMA increased the thresholds for interest rate, credit and commodities and proposed the following new clearing threshold values for uncleared positions:

• Interest rate derivatives - EUR 2.2bn in gross notional value
• Credit derivatives – EUR 0.8bn in gross notional value
• Equity derivatives – EUR 0.7bn in gross notional value
• FX derivatives – EUR 3bn in gross notional value
• Commodity derivatives and emission allowance derivatives – EUR 4bn in gross notional value

In addition, ESMA considered certain additional thresholds for various categories of derivatives but concluded it would not recommend new thresholds as follows:

• Commodity derivatives – following the request for ESMA to consider more granular clearing thresholds for commodity derivatives, ESMA has recommended not introducing separate thresholds for the various commodity derivatives sub-asset classes (for example, agricultural products, coal and emissions allowances) given concerns that this may reduce flexibility in management of risk exposures and add additional burdens. As a result the fifth bucket has been amended to capture commodity derivatives and emission allowance derivatives only.
• ESG-related derivatives – similarly ESMA did not recommend introducing different thresholds for these derivatives as they would add more complexity and burden.
• Crypto derivatives – ESMA proposed not introducing more granular thresholds given that there is still limited historic data available for such trades and in the interests of reducing additional burdens on market participants. However, ESMA noted that now that EMIR reporting (as amended by EMIR Refit) includes a field to identify crypto-asset related trades, this may need to be reassessed in the future.

Mechanisms triggering the review of the clearing thresholds

In order to implement its recommendations, ESMA has proposed some changes to Article 11 to Delegated Regulation (EU) 149/2013², a draft of which is set out in Annex II of its Final Report (the RTS). A new Article 11b proposes a flexible approach to specifying the mechanisms that may trigger a review of the clearing thresholds. ESMA has taken onboard comments received and also incorporated other factors, including the identification of significant changes in:

• fluctuations and volatility in the prices of the underlyings of OTC credit, equity, interest, FX and commodity and emission allowance derivatives;
• the proportion of OTC derivatives transactions, per asset-class, that are cleared;
• the proportion of entities clearing their OTC derivatives transactions; and
• the inflation rate and geopolitical and economic uncertainties.

ESMA recommends that an assessment of the indicators to identify a significant change should be conducted at least once a year.

Hedging exemption: no change

EMIR 3 also tasked ESMA with reviewing the hedging exemption and, although there was considerable feedback to broaden the hedging exemption, in particular to accommodate virtual power purchase agreements, ESMA has decided not to propose any changes to the existing criteria. ESMA is of the view that any such extension would go beyond its mandate and require Level 1 legislative changes.

ESMA has, however, confirmed that:

• the hedging exemption can continue to be used on a group-wide basis for NFCs; and
• Article 10(1) of EMIR already allows hedging transactions entered into for the hedging needs of another group entity.

When do derivative end users need to recalculate their positions?

Helpfully, counterparties do not need to recalculate their positions when the RTS enters into force, unless they choose to early adopt the new clearing thresholds. Instead, ESMA has said that they can use the new clearing thresholds at the usual annual calculation date. Following EMIR Refit, most counterparties are currently calculating their positions in June and ESMA sees merit in aligning with this, to reduce burdens. If after recalculating their positions using the new clearing thresholds, their status does not change, there is no need to re-notify ESMA or their relevant national competent authority.

Positions must be calculated based on the aggregate month-end average positions for the previous 12 months and the calculation must be performed at least annually. Counterparties will need to have systems in place to monitor whether they are approaching the new clearing thresholds.

If a counterparty exceeds a clearing threshold, they must notify both ESMA and their relevant national competent authority (NCA) and establish clearing arrangements within four months and begin clearing all new OTC derivative contracts in the relevant asset class(es) that are subject to the clearing obligation.

What is the likely impact of these changes on derivatives end users?

• FCs will need to assess their positions carefully against both the aggregate and uncleared thresholds for interest rate and credit derivatives and assess whether their clearing status will change. Although there is now a dual calculation, it is helpful that ESMA has decided to retain the existing aggregate thresholds. In addition, ESMA has listened to feedback received and increased the uncleared thresholds, which should limit the number of new counterparties brought into the scope of the clearing obligation, thereby reducing their regulatory burden.
• For those counterparties that are subject to the clearing obligation and exceed certain thresholds in specified derivatives categories, they will need to hold at least one active account at an EU-authorised central counterparty (EU CCP) and clear a representative number of trades through the EU CCP in accordance with the new rules introduced by EMIR 3. (For more information see our alert: EMIR 3.0: What are the high level changes on the horizon for derivative end users in the EU?)
• For NFCs, the shift to entity-level calculation could be of benefit to those NFCs that previously exceeded the thresholds on a group basis whilst remaining below the thresholds at entity level. It is helpful that the hedging exemption has been retained although end users will need to wait for Level 1 legislative changes for any increased scope of the exemption.

Next steps

The new clearing thresholds are expected to apply once the RTS enters into force. The European Commission has 3 months from the publication of the Final Report in late February in which to adopt the RTS in the Final Report. If adopted, the RTS will then be subject to a three-month scrutiny period by the European Parliament and Council of the EU, a period which can be extended by one month if necessary. The RTS will then enter into force on the twentieth day following its publication in the Official Journal of the EU. In the meantime, the current clearing thresholds will continue to apply.

It is helpful that ESMA has taken a pragmatic approach so that derivatives end users will not need to recalculate their derivatives positions in accordance with the new clearing thresholds until their usual annual calculation date, which is most likely to be in June. Assuming the RTS enters into force after June 2026, this would give relevant counterparties with the June calculation date some time to digest changes prior to the next annual calculations date in 2027.

This note is for guidance only and should not be relied on as legal advice in relation to a particular transaction or situation. Please contact your normal contact at Hogan Lovells if you require assistance or advice in connection with any of the above.

Authored by Jennifer O'Connell, Isobel Wright and Olivia McDonnell.