The European Market Infrastructure Regulation (EMIR) body of legislation came into effect in 2012 and specify reporting requirements when trades are made in derivative contracts. It establishes common rules for the main counter parties and trading firms involved in the transactions and defines the risk management strategies that must be applied. The goal of the legislation is to reduce operational risk in order to prevent potential financial system collapses.
Entities that are subject to EMIR regulations must report every derivative contract into which they enter into a trade data repository whenever they enter into a derivative transaction with parties within the European Union and outside it. EMIR also requires derivatives trades to be cleared through central counter parties with all parties providing timely notifications when they approach or exceed specified clearing thresholds. The overall aim EMIR transaction reporting is to manage and avoid the systemic risk potential in derivatives trading.