EUROPEAN UNION: European Commission Regulation Relating to Clearing Obligations for OTC Derivatives Published

Counterparties are categorised according to their level of legal and operational capacity and by their trading activity in relation to OTC derivatives.

In order to ensure a timely and orderly application of the clearing obligation, staggered phase-in periods were applied to those different categories of counterparties.

The date on which the clearing obligation takes effect for counterparties within Category 3 takes into account the fact that the majority of those counterparties can only get access to a central counterparty (CCP) by becoming either a client or an indirect client of a clearing member.

Counterparties with the lowest level of activity in OTC derivatives are comprised in Category 3. Recent evidence suggests that counterparties in that category face significant difficulties in the preparation of necessary arrangements for clearing those derivative contracts. This is due to complexities affecting both types of access to clearing arrangements, namely client clearing and indirect client clearing.

Firstly, in relation to client clearing arrangements, there appears to be little incentive for clearing members to extensively develop their client clearing offer, because of cost issues. This is even more so for counterparties with a limited volume of activity in OTC derivatives. In addition, the regulatory framework on the capital requirements applicable to client clearing activities is being modified, which creates uncertainties that act as impediments to the development of a range of client clearing offerings by clearing members.

Secondly, in relation to indirect clearing arrangements, as a result of the lack of the offer, counterparties are currently unable to access CCPs by becoming an indirect client of a clearing member.

On the basis of those difficulties and in order to provide those counterparties with an additional period of time to finalise the necessary clearing arrangements it is appropriate to postpone the dates on which the clearing obligation takes effect for counterparties within Category 3. However, account has already been taken of the incentives to centralise risk management within a group in relation to intragroup transactions and the postponement of the dates has no impact on those incentives and those dates concerning certain OTC derivatives concluded between counterparties belonging to the same group.

Amendment to Delegated Regulation (EU) 2015/2205 In Article 3(1) of Delegated Regulation (EU) 2015/2205, point (c) is replaced by the following:

•  ‘(c) 21 June 2019 for counterparties in Category 3;’.

In Article 3(1) of Delegated Regulation (EU) 2016/592, point (c) is replaced by the following:

•  ‘(c) 21 June 2019 for counterparties in Category 3;’.

In Article 3(1) of Delegated Regulation (EU) 2016/1178, point (c) is replaced by the following:

•  ‘(c) 21 June 2019 for counterparties in Category 3;’.

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

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