On October 1, 2014, the European Securities and Markets Authority (“ESMA”) published its final draft regulatory technical standards (“RTS”) for the central clearing of Interest Rate Swaps (“IRS”). The final draft RTS define four classes of IRS contracts which will be subject to central clearing. They also set out a phased-in implementation schedule for counterparties which will be required to clear the relevant IRS. Clearing members will be the first counterparties subject to the obligation and must clear the relevant IRS from six months after the RTS enter into force (category 1). Financial counterparties and alternative investment funds that belong to a group whose aggregate month-end average notional amount of uncleared derivatives for three months preceding the entry into force of the RTS is above EUR 8 billion must clear the relevant IRS from 12 months after the RTS come into force (category 2). Financial counterparties and alternative investment funds whose trading activities to not amount to the above will only need to clear from 18 months from entry into force of the RTS (category 3). Non-financial counterparties will have to clear the relevant IRS from three years after the RTS enter into force (category 4). Market participants should note that the categories have been tweaked from the original proposed categories set out in the draft RTS that ESMA consulted on. The final draft RTS must be adopted by the European Commission and published in the Official Journal of the European Union before they can enter into force. It is currently expected that clearing of the relevant IRS will become mandatory for clearing members around mid-2015.

The final draft RTS are available at:

http://www.esma.europa.eu/news/ESMA-defines-products-counterparties-and-starting-dates-clearing-interest-rate- swaps?t=326&o=home.