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05.02.16

Level 2 measures on clearing obligation for OTC derivatives released

On 1st December 2015, the Commission Delegated Act 2015/2225 (the “Delegated Regulation”) was published in the Official Journal of the EU, and introduced a clearing obligation for 4 designated interest rate OTC derivatives:

  • Basic swaps;
  • Fixed to float interest rate swaps;
  • Forward rate agreements;
  • Overnight index swaps.

Counterparties subject to the clearing obligation should be classified into categories in order to ensure an orderly and timely implementation of the clearing obligation; hence, they are divided in four categories as follows:

  • CATEGORY 1: clearing members as of the date of entry into force of this regulation for at least one of the above OTC Derivatives of at least one of the CCPs authorised or recognised before the date to clear at least one of those classes;
  • CATEGORY 2: comprising counterparties not belonging to Category 1 which belong to a group whose aggregate month-end average of outstanding gross notional amount of non-centrally cleared derivatives for January, February and March 2016 is above EUR 8 billion and which are any of the following:

                  (i) Financial counterparties;

                  (ii) AIFs as defined under Article 4(1)(a) of Directive 2011/61/EU (the “AIFMD”) that are non-financial counterparties;

  • CATEGORY 3: comprising counterparties not belonging to Category 1 or 2 which are any of the following:

                  (i) Financial counterparties;

                  (ii) AIFs as defined under Article 4(1)(a) of Directive 2011/61/EU (“the AIFMD”) that are non-financial counterparties;

  • CATEGORY 4: comprising non-financial counterparties that do not belong to Category 1, Category 2 or Category 3.

The clearing obligation shall become applicable as follows:

On 21 June 2016, for Category 1 counterparties;

On 21 December 2016, for Category 2 counterparties;

On 21 June 2017, for Category 3 counterparties;

On 21 December 2018, for Category 4 counterparties.