The European Market Infrastructure Regulation (EMIR) introduces the obligation to clear certain classes of over-the-counter (OTC) derivatives in central counterparties that have been authorised or recognised under its framework. EMIR requires the European Securities and Markets Authority (ESMA) to develop draft regulatory technical standards (RTS) in relation to the clearing obligation.
On this issue ESMA has previously issued a discussion paper and four consultation papers. The first consultation paper covered interest rate derivatives denominated in EUR, GBP, JPY and USD (the G4 currencies), the second covered credit default swaps, the third covered foreign exchange non-deliverable forwards and the forth covered interest rate derivative classes denominated in Czech Koruna (CZK), Danish Krone (DKK), Hungarian Forint (HUF), Norwegian Krone (NOK), Polish Zloty (PLN) and Swedish Krona (SEK) (the EEA currencies).
The first RTS on the clearing obligation for certain classes of OTC interest rate derivatives denominated in the G4 currencies were adopted by the European Commission on 6 August 2015.
ESMA has now published a final report on the clearing obligation covering certain classes of OTC interest rate derivatives denominated in the EEA currencies. The structure of the final report follows the earlier consultation paper:
- section 3 provides explanations on the procedural aspects of the clearing obligation;
- section 4 covers the structure of the classes of OTC interest rate derivatives that are proposed for the clearing obligation;
- section 5 addresses considerations on systemic risk;
- section 6 covers the determination of the OTC interest rate derivatives that should be subject to mandatory clearing;
- section 7 presents the approach for the definition of the categories of counterparties, and the proposals related to the dates from which the clearing obligation should apply per category of counterparty; and
- section 8 provides explanations on the approach considered for frontloading and the definition of the minimum remaining maturities of the contracts subject to it.
The final report has been submitted to the Commission for endorsement of the draft RTS that are set out in Annex III. From the date of submission the Commission should make the decision whether to endorse the RTS within three months.