Schedule 2: Transitional amendments Part 2 – Amendments to the European Market Infrastructure Regulation Paragraphs 28 to 30: CO exemptions for risk reduction services
Paragraph 28 of the Schedule introduces the changes to EMIR made by paragraphs 29 and 30.
	Paragraph 29 of the Schedule inserts Article 6b in EMIR.
	Paragraph 1 of Article 6b gives the Bank of England the power to disapply the clearing obligation, set out in Article 4 of EMIR, from transactions which stem from a post-trade risk reduction service. Post-trade risk reduction services consist of technical trades that reduce the risk of positions that market participants have entered into.
	Paragraph 2 limits the Bank’s use of this rule-making power to circumstances where the Bank considers its use is necessary or expedient for advancing the Bank’s key objective of financial stability under section 2A of the Bank of England Act 1998.
	Paragraph 3 establishes the criteria which risk reduction services must satisfy in order to be eligible for the exemption. Namely, it explains that the services must be post-trade, and must only produce trades which are non-price forming (i.e. which do not contribute to the price discovery process).
	Paragraph 4 specifies that when exercising this power, the Bank has the discretion to:
Specify which risk reduction services are to be eligible for the exemptions with reference to any factors or criteria which it deems to be suitable (within the parameters of paragraph (3)); and
Impose any conditions on, or exceptions to, the disapplication of the CO that the Bank deems appropriate.
	Paragraph 5 clarifies what counts as a risk reduction service for the purposes of this Article (i.e. that it must be a service provided by two or more counterparties for the purpose of reducing non-market risk in derivatives portfolios, such as portfolio compression).
	Paragraph 30 of the Schedule introduces Article 84c into EMIR, which provides how provisions of Part 9A of FSMA 2000 concerning rule-making will apply in relation to Article 6b.