The application of the clearing obligation to smaller EMIR financial counterparties has been delayed until 21 June 2019.
This follows the publication, in the EU’s Official Journal, of Commission Delegated Regulation 2017/751 of 16 March 2017 amending Delegated Regulations (EU) 2015/2205, (EU) 2016/592 and (EU) 2016/1178 as regards the deadline for compliance with clearing obligations for certain counterparties dealing with OTC derivatives (here). The Delegated Regulation comes into force 20 days after its publication in the OJ, on 19 May 2017.
The requirement to clear certain over-thecounter (OTC) interest rate derivatives and index credit default swaps by 21 June 2019 will apply to EMIR financial counterparties (FCs) that are:
- not clearing members of a Central Counterparty (CCP) in respect of at least one of the clearing classes, and
- belong to a group whose aggregate month-end average of outstanding gross notional amount of non-centrally cleared derivatives for the relevant assessment period is below €8 billion.
Broadly, FCs comprise EU-authorised investment firms, credit institutions, (re)insurance undertakings, UCITS or UCITS managers, certain institutions for occupational retirement provision and alternative investment funds managed by an EU-authorised or registered alternative investment fund manager.
The Delegated Regulation was prompted by the difficulties smaller FCs are experiencing in establishing clearing arrangements as well as their limited impact on systemic risk. See our previous briefings here and here.
While smaller FCs will no doubt welcome the extension of the clearing date, it seems likely that at least some such FCs will not in fact be subject to the clearing requirement at all by 21 June 2019. Specifically, the European Commission is proposing a number of amendments to EMIR, which, if implemented will mean, among other things, that the clearing obligation will not apply to an FC whose aggregate month-end average position for the months March, April, and May in a calendar year fall below the EMIR clearing thresholds. The clearing thresholds, in gross notional value, are, €1 billion for credit and equity derivatives contracts; €3 billion for interest rate, FX and commodity derivative contracts; and €3 billion for other OTC derivative contracts that do not fall within the previous categories of contracts.
The table below sets out the current and new clearing dates for each of the three classes of OTC derivatives currently covered by the clearing obligation.