Article 5 of the EU Regulation on derivatives, central counterparties and trade repositories (EMIR) provides that the European Commission (Commission) shall, on the basis of a proposal from the European Securities and Markets Authority (ESMA), determine the types of over-the-counter (OTC) contracts that should be subject to mandatory clearing by a central counterparty.
After submission of draft regulatory technical standards (RTS) to public consultation and following the adoption by the Commission on 6 August 2015 of the RTS on the clearing obligation for interest rate swaps, ESMA adopted draft RTS on the clearing obligation for credit default swaps on 24 September 2015 and submitted them to the Commission on 1 October 2015.
On 1 March 2016, the Commission adopted a Delegated Regulation introducing the clearing obligation for OTC credit default swaps.
The Delegated Regulation is subject to scrutiny by the Council of the EU and the European Parliament. If neither institution objects, the Delegated Regulation will enter into force 20 days after its publication in the Official Journal of the EU. The Commission’s press release adds that the Delegated Regulation will be phased in over three years to give extra time for smaller market participants to comply.