United Kingdom (and EU regulation)

Commission adopts amendments to RTS clearing and derivative trading obligations under EMIR and MiFIR in light of benchmark transition

On 8 February 2022, the European Commission (Commission) published:

Commission Delegated Regulation (EU) /… amending the regulatory technical standards (RTS) laid down in Delegated Regulation (EU) 2015/2205 as regards the transition to new benchmarks referenced in certain over-the-counter (OTC) derivative contracts. This amending Delegated Regulation amends Delegated Regulation (EU) 2015/2205 to reflect the LIBOR transition and is based on a final report that the European Securities and Markets Authority (ESMA) provided to the Commission on 17 November 2021. Article 1 of the Delegated Regulation modifies Article 3 of Commission Delegated Regulation (EU) 2015/2205 regarding interest rate derivative classes, as well as its annex, in the following way:
- Article 3(1a) is added to specify the date from which the clearing obligation shall take effect for certain transactions referencing €STR and SONIA.
- Article 3(1b) is added to specify the date from which the clearing obligation shall take effect for certain transactions referencing SOFR.
- Article 3(2) is replaced by a new one catering for the introduction of new Article 3(1a) and 3(1b).
- Article 3(3) is replaced by a new one catering for the introduction of new Article 3(1a) and 3(1b).
- The annex is replaced to reflect the deletion of old benchmarks and the introduction of new benchmarks.
Commission Delegated Regulation (EU) / …. amending the RTS laid down in Delegated Regulation (EU) 2017/2417 as regards the transition to new benchmarks referenced in certain OTC derivative contracts. The derivatives subject to the derivatives trading obligation (DTO) set out in Article 28 of the Markets in Financial Instruments Regulation are specified in Delegated Regulation (EU) 2017/2417 based on their inclusion in the clearing obligation in accordance with Article 5 of European Markets Infrastructure Regulation and on the average frequency and size at which they are traded as well as the number and type of active market participants that trade the derivative. Subject to the DTO are interest rate swaps (IRS) with 3M or 6M tenors denominated in EUR, USD and GBP and Index Credit Default Swaps (Index CDS). ESMA has reviewed whether or not the conditions for including derivatives in the DTO still apply with regard to the aforementioned instruments and concludes that the DTO should no longer apply with regard to IRS denominated in USD and GBP based on the LIBOR benchmark. Article 1 of the amending Delegated Regulation removes ‘tables 2 and 3’ on USD IRS and GBP IRS from the Annex in Delegated Regulation EU 2017/2417. Article 1 of that Regulation specifies that the derivatives set out in the Annex shall be subject to the DTO. The deletion of these tables will therefore have the effect of removing these benchmarks from the DTO.

The Council of the EU and the European Parliament will now scrutinise the amending Delegated Regulations. If neither object, they will enter into force the day after their publication in the Official Journal of the European Union.