EC Amends Rules on Clearing Obligation for OTC Derivative Contracts
EC, via Regulation 2021/237, is amending the date at which the clearing obligation takes effect for certain types of contracts. In this context, Regulation 2021/237 amends the regulatory technical standards laid down in Regulations 2015/2205, 2016/592, and 2016/1178, which specify the dates from which the clearing obligation is to take effect for contracts pertaining to certain classes of OTC derivatives. The amendments to the three Regulations facilitate certain Brexit-related novations of OTC derivative contracts to EU counterparties during a specific time-window. Regulation 2021/237 shall enter into force on the day following that of its publication in the Official Journal of the European Union.
The Delegated Regulations 2015/2205, 2016/592, and 2016/1178 specify the dates from which the clearing obligation is to take effect for contracts pertaining to certain classes of OTC derivatives. In addition, those Regulations provide for different dates depending on the category of counterparty to those contracts. It is known that UK became a third country on February 01, 2020 and the EU law ceased to apply to and in UK December 31, 2020. However, the clearing obligation laid down in the European Markets Infrastructure Regulation (EMIR: 648/2012) does not take into account the eventuality of a member state withdrawing from EU. To address issues stemming from this, EC is amending the date at which the clearing obligation takes effect for certain contracts. Regulation 2021/237 is based on the draft regulatory technical standards submitted to EC by ESMA.
As part of the key changes, Articles1, 2, and 3 of the amending regulation (2021/237) amend Regulations 2015/2205, 2016/592, and 2016/1178, respectively, specifying that, in respect of contracts pertaining to a class of OTC derivatives (these include certain interest rate OTC derivatives classes and certain credit default OTC derivatives classes) set out in the respective Annexes of the regulations being amended, the clearing obligation shall take effect from February 18, 2022 where the following conditions are fulfilled:
- the clearing obligation has not been triggered by February 18, 2021
- the contracts are novated for the sole purpose of replacing the counterparty established in UK with a counterparty established in a member state
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Effective Date: February 18, 2021
Keywords: Europe, EU, UK, Banking, Securities, Clearing Obligation, OTC Derivatives, Interest Rate Derivatives, CDS, ESMA, EC
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