Prudential Regulation Authority and Financial Conduct Authority launch consultation on permanent UK EMIR margin exemption for equity options and initial margin burden reductions

The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have issued a joint consultation proposing changes to the UK European Market Infrastructure Regulation (UK EMIR) bilateral margining regime. The package would make the current temporary exemption for single-stock equity options and index options indefinite, alongside two amendments intended to reduce operational burden in Initial Margin (IM) compliance. The regulators propose to (i) indefinitely exempt single-stock equity options and index options from UK bilateral margining requirements, citing fragmented international implementation and a risk of activity migrating to jurisdictions without equivalent margin rules, while noting these exposures remain subject to capital requirements. They also propose to (ii) remove the obligation to exchange IM on outstanding legacy contracts when a counterparty subsequently falls below the Average Aggregate Notional Amount threshold of EUR 8 billion, and (iii) allow UK firms trading with counterparties subject to margin requirements in another jurisdiction to use that jurisdiction’s threshold assessment calculation periods and entry-into-scope dates to determine whether the transactions are subject to IM. Responses are requested by 27 June 2025. The regulators propose that any changes would take effect when the final technical standards are published.