The European Commission is proposing to extend the phase-in of the clearing obligation for financial counterparties with a limited volume of over the counter (OTC) derivatives activity and for certain funds that are classified as non-financial counterparties (“Category 3 Counterparties”) until 21 June 2019.
As outlined in our previous briefing here, on 14 November 2016, the European Securities and Markets Authority (ESMA) published a Report in which it proposed prolonging the phase-in period for Category 3 Counterparties, due to the difficulties those counterparties are experiencing in establishing clearing arrangements as well as their limited impact on systemic risk.
Under the current rules, Category 3 Counterparties must begin clearing OTC interest rate derivatives denominated in EUR, GBP, JPY and USD by 21 June 2017. They must start clearing OTC index credit default swaps and OTC interest rate derivatives denominated in NOK, PLN and SEK by 9 February 2018. These rules are set out in three EMIR Delegated Regulations ((EU) 2015/2205, (EU) 2016/592 and (EU) 2016/1178)). See our related briefings here, here, and here.
On 16 March 2017 the European Commission published a delegated regulation which amends the three EMIR Delegated Regulations by substituting a new start date of 21 June 2019 for Category 3 Counterparties in respect of each of the above classes of derivatives. The next step is for the Council of the EU and the European Parliament to consider the Delegated Regulation. If neither of them objects, it will enter into force 20 days after it is published in the Official Journal of the EU (OJ).