Published: 30th June 2016

Of Relevance to:

Those entities subject to EMIR


EMIR: Further Clearing Requirements

Article 4 of EMIR (648/2012) imposes a clearing obligation on all OTC derivative contracts meeting the conditions therein, with ESMA being charged with proposing the particular classes of OTC derivatives that will require clearing.

Previous Delegated Regulations have been published which impose the clearing obligation on certain interest rate derivative contracts (see Regulatory Roundup 71) and on certain classes of credit default swaps (Regulatory Roundup 74).

A third tranche of derivative classes subject to the clearing obligation has now been announced by way of a final draft Delegated Regulation (and Annex) published on 10 June.

The following classes of contracts (denominated in Norwegian Krone, Polish Zloty and Swedish Krona) will fall within scope:

  • Fixed-to-float interest rates swaps
  • Forward Rate Agreements

The clearing obligation will be phased in over a period of time depending upon the categorisation of the counterparties – the time period mentioned below after each category definition is when the clearing obligation applies after entry into force (which will be the twentieth day following publication of the Regulation in the Official Journal).

  • Category 1 will include counterparties that are clearing members for at least one of the classes of OTC derivatives set out in this Regulation or in the previous Regulation that also concerned interest rate swaps in EUR, GBP, JPY and USD (see Regulatory Roundup 71) (6 months).
  • Category 2 will capture those counterparties not falling within Category 1 above that are financial counterparties (or AIFs that are non-financial counterparties) and which belong to a group whose aggregate month-end average of outstanding gross notional amount of non-centrally cleared derivatives is above €8bn (12 months).
  • Category 3 will be financial counterparties (or AIFs that are non-financial counterparties) not falling into either of the two categories above (18 months).
  • Category 4 comprises non-financial counterparties not belonging to Categories 1, 2 or 3 above (3 years).

Where counterparties fall into different categories then the clearing obligation will take effect from the later date.

The above is a summary – see Articles 2 and 3 of the Delegated Regulation for the finer detail.

Where the counterparties are AIFs or UCITS then the €8bn referred to in Category 2 above applies individually at fund level.

A reminder that the clearing obligation in respect of the first tranche of OTC derivatives mentioned above (and as detailed in 2015/2205) took effect on 21 June 2016 but only for ‘Category 1’ counterparties, which includes counterparties that are clearing members for at least one of the OTC contracts set out that Annex of at least one of the Central Counterparties authorised or recognised to clear one of those classes.

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