On July 11th 2014 ESMA issued two consultation papers with the aim of drafting regulatory standards ("RTS") on the clearing obligations under Regulation (EU) No 648/2012 on OTC derivatives, central counterparties ("CCPs") and trade repositories ("EMIR").
These first two public consultations relate to the categories of OTC derivative contracts that should be made subject to the mandatory clearing obligations under EMIR.
These long awaited papers, which cover OTC interest rate derivatives, OTC credit derivatives, and OTC equity derivatives aim at providing clarity on the frontloading obligation and the timelines applicable to the different market players in relation to their clearing obligations.
The first paper published on July 11th covers the clearing obligation for certain interest rate OTC derivatives classes. The consultation was closed on August 18th.
The second paper, also published on July 11th, covers the clearing obligation for certain credit OTC Derivatives. This consultation closed on September 18th.
The publication of the final RTS, following endorsement by the European Commission is expected to happen between December 2014 and February 2015 at the latest.
To allow for a smooth process of application, it is suggested that the clearing obligation apply in stages to different market participants following the entry into force of the RTS, as follows:
- Category 1 – Clearing members- grace period of 6 months, clearing to start around June 2015 at the earliest;
- Category 2 – Non-clearing members - grace period of 18 months, clearing to start around June 2016 at the earliest;
- Category 3 – Non-clearing members that are non-financial counterparties - grace period of 36 months, clearing to start around December 2017 at the earliest.
The text of the Consultation Papers and the public responses are
available at:
http://www.esma.europa.eu/consultation/Consultation-paper-Clearing-Obligation-no1-IRS#responses
http://www.esma.europa.eu/consultation/Consultation-paper-Clearing-Obligation-no2-CDS
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
