EMIR Clearing Standards Published in Official Journal
Information originally drafted December 2015, and updated March 2016
On 1 December 2015 the European Commission
published the G4 Rates Clearing Obligation RTS in the Official Journal.
The RTS enters into force 20 days following the publication (21
Any in scope derivative trading with Royal Bank of Scotland PLC regardless of sales and client
location will be impacted if the counterparty is in scope (ie an FC or
NFC+), meaning US and Asia trading activity will be affected as well as Europe.
Clearing Obligation Dates: the clearing obligation will take
effect on the following dates per counterparty category (with the
obligation applying from the later date where counterparty categories
Category 1 (clearing members) - 21 June 2016
Category 2 (FCs & NFC+ AIFs above €8bn
threshold) - 21 December 2016
Category 3 (other FCs & NFC+ AIFs) - 21 June 2017
Category 4 (other NFC+s) - 21 December 2018
Frontloading: category 1 & 2 counterparties that enter into in
scope bi-lateral contracts with each other during the frontloading
period will be obliged to clear those transactions by the applicable
clearing obligation date. Category 2
clients will be asked to sign an Additional Termination Event (ATE)
agreement to permit breaking of contracts that cannot be cleared by the
required date. Frontloading ('period B') will take effect from:
Product Scope: the instruments covered by the initial clearing
RTS for IRS are:
Vanilla Fixed-Float (EUR, USD, GBP and JPY) 28D-50Y
Basis (EUR, USD, GBP and JPY) 28D-50Y
FRA (EUR, USD and GBP) 3D-3Y
OIS (EUR, USD and GBP) 7D-3Y
Exemptions: eligible pension schemes (those that
can make the necessary representations via the ISDA representation
letter) may make use of the exemption from mandatory clearing until June
2017. The EC may choose to extend this clearing exemption by a
further year to June 2018. Eligible transactions by covered bond issuers
benefit from a permanent exemption from mandatory clearing.
Equivalence with US: on 16 March 2016 the
European Commission (EC) and the
formally accepted the equivalence of their respective regimes for
Central Counterparties (CCPs). This ends the uncertainty regarding the
use of US-based CCPs by European firms. US CCPs must apply for
recognition by EC but the process will be facilitated by cooperation
between the EC and CFTC.
Client Representation on Clearing Categorisation: RBS has
already approached clients in mid 2015 for their clearing categorisation. In January
2016 our Regulatory Comms team went back out to Category 1
counterparties, and in April 2016 following completion of the 3 month
assessment period we will go back out to remaining clients requesting they
respond either via the ISDA bilateral letter or Markit ISDA Amend
service. Please see our earlier
FAQs on clearing categorisation for more information. Please contact
provide RBS with your representation.
Documentation: following provision of clearing category it will be necessary to agree
EU Cleared Derivatives Execution Agreements (CDEA) with all non-clearing
members (ie non Cat 1). EU CDEAs are separate to US version and
must be separately negotiated. This is in addition to the ATE for
frontloading mentioned above.
Other Products Subject to Clearing: mandatory clearing of iTraxx
Index CDS (Main & Crossover, EUR, 5Y) and further classes of interest
rate swaps (in NOK, SEK and PLN) is also to be phased in following the
G4 currencies above, though firm dates are not yet available (CDS RTS
adopted by EC on 1 March 2016).
For further information please see the links below or contact
Markets Regulation team.