All clear—clearing obligations after EMIR

All clear—clearing obligations after EMIR

What are the clearing obligations for trades of over-the-counter (OTC) derivatives? Lewis Lee, associate at Morrison & Foerster, looks at the latest developments from the European Securities and Markets Authority (ESMA) in relation to centrally clearing interest rate derivatives.

Original news

Four interest rate swap (IRS) classes will need to be centrally cleared under ESMA’s final draft regulatory technical standards (RTS). The RTS define the types of IRS contracts which will have to be centrally cleared, the types of counterparties covered by the obligation and the dates by which central clearing of IRS will become mandatory. ESMA has submitted its final draft IRS RTS to the European Commission, which now has up to three months to endorse the standards.

What is the background to the proposals?

The European Market Infrastructure Regulation (EMIR) places a number of obligations on counterparties to OTC derivative transactions. These include the central clearing of trades deemed to be subject to a ‘clearing obligation’. Although EMIR has been in force for over two years, the clearing requirement has taken time to implement and confirmation of its effective date for different asset classes and counterparties has remained dependent upon a number of factors—not least the requirement for ESMA to determine which classes of derivatives trades should, in accordance with the criteria required to be satisfied under EMIR, be mandatorily clearable. On 1 October 2014, ESMA published its final report co

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