The document discusses the key points of the European Market Infrastructure Regulations (EMIR), which aims to increase transparency and resilience in derivatives markets after the 2008 financial crisis. EMIR will require most derivatives to be cleared through central counterparties and reported to trade repositories. While pension funds have a temporary exemption from clearing obligations, they will still need to comply with other EMIR requirements like reporting and new rules for non-cleared derivatives. The document provides an overview of EMIR's requirements and timeline, and offers Redington's services to help pension funds analyze how EMIR will impact them and develop strategies for compliance.

1. Private & Confidential European Market Infrastructure Regulations (EMIR) 11 December 2012
EMIR
European Market Infrastructure Regulations – An Introduction
11 December 2012
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2. Private & Confidential European Market Infrastructure Regulations (EMIR) 11 December 2012 2
All standardised OTC
derivatives will be cleared
through central
counterparties (CCPs)
Harmonised framework
for the provision of
clearing services within
Europe
Non-cleared derivatives
will be subject to
strengthened management
requirements, including the
need to collateralise
positions
All OTC and exchange
traded derivatives will be
reported to trade
repositories (TRs)
EMIR: Central Points
EMIR: Preparing for A Changing Market Environment
• In order to enhance the resilience of the financial system
to any future financial crisis and to increase
transparency, European policymakers are introducing
regulation (termed “EMIR”) to reform the swaps market.
The incoming changes will make the swap market more
similar to the futures market, with trades cleared through
a central counterparty (CCP).
• This introduces additional rules and constraints that
pension funds should be aware of and prepare for.

3. Private & Confidential European Market Infrastructure Regulations (EMIR) 11 December 2012 3
Important information for pensions funds:
• Pension Funds enjoy a limited exemption from EMIR’s headline
measure – the requirement to clear OTC derivative contracts – until at
least August 2015. However, for new trades there is no exemption
from Initial Margin, providing more incentive for these trades to be
cleared early rather than make use of the pension fund exemption.
• The other key provision – reporting obligations – will apply to
pension funds. The EMIR obligations will take effect on a phased
basis from the beginning of 2013.
• Initial Margin calculations are likely to be 5-10 day VaR to a high
confidence level of 99.5/99.7.
Key questions for pension funds to consider:
• Are you going to use your exemption from EMIR?
• Are your CSAs dirty or clean?
• Have you considered your collateral adequacy under EMIR?
• Have you evaluated novation, rehypothecation and
recouponing as potential options to manage collateral
adequacy?
• What are you going to do with your legacy book of
derivative trades?
* Timeline based on ESMA estimates
Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
ESMA publication of
draft technical standards
EMIR: Preparing for A Changing Market Environment
Technical standards
come into force
CCP Application
Deadline
NCA Authorisation of
CCPs
ESMA to submit draft
RTS on the clearing
obligation
Notification for the
clearing obligation
Reporting start date
(IRS, CDS)
Reporting start date (all
other asset classes)
Key:
Technical standards – overall set of rules and regulation
Over-the-Counter (OTC) derivatives clearing
Central Counterparty Clearing (CCP) entities
Trade Repositories (TR) – maintains trade records

4. Private & Confidential European Market Infrastructure Regulations (EMIR) 11 December 2012 4
We will guide your pension scheme into this new regulatory environment. Providing:
- An analysis of your legacy derivative portfolio.
- An analysis of your collateral requirements and adequacy under a variety of EMIR transition strategies.
- An analysis of your PV01 exposures under a variety of EMIR transition strategies.
- An analysis of your CSA positioning, where necessary managing the transition from dirty to clean.
- Regular scheme updates that inform you of how the regulations are going to affect your scheme.
EMIR: Redington Offering
- Following this analysis we will create and implement a bespoke strategy for your scheme in partnership with your LDI manager.

5. Private & Confidential European Market Infrastructure Regulations (EMIR) 11 December 2012
13-15 Mallow Street London EC1Y 8RD Telephone : +44 (0) 20 7250 3331 www.redington.co.uk
Contacts
Tom McCartan
Associate
Manager Research
Direct Line: 020 3267 7139
mark.herne@redington.co.uk
5
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The information herein was obtained from various
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