Discussion Paper – The Clearing Obligation under EMIR

by Sabrina I. Pacifici on August 8, 2013

“The European Securities and Markets Authority (ESMA) is publishing this discussion paper in order to seek stakeholders’ views on the preparation of the regulatory technical standards ESMA is required to draft under Article 5(2) “Clearing Obligation Procedure” of the Regulation (EU) No 648/2012 of the European Parliament and Council on OTC derivatives, central counterparties and trade repositories (EMIR). The input from stakeholders will help ESMA in the development of the relevant technical standards to be drafted and submitted to the European Commission for endorsement in the form of Commission Regulations, i.e. a legally binding instrument directly applicable in all Member States of the European Union. One essential element in the development of draft technical standards is the analysis of the costs and benefits that those legal provisions will imply. Input in this respect and any supportive data will be highly appreciated and kept confidential where required. The following discussion paper is organised as follows: the first section presents the standard procedure for the determination of the classes of OTC derivatives to be subject to the clearing obligation. The second section presents the CCP-cleared OTC derivatives and the CCPs which clear them, with the objective of identifying the key characteristics to be retained when breaking down the OTC derivative contracts within classes. The third section gives a high level analysis of the current readiness of each asset-class vis-à-vis the clearing obligation, with regards to some of the criteria to be taken into account by ESMA when defining the classes to be subject to the clearing obligation. The fourth section provides a preliminary analysis of the methodology to be used by ESMA when defining the dates from which the clearing obligation should apply, the types of counterparties to which the clearing obligation should apply and the remaining maturity of the contracts to be subject to the clearing obligation. Finally the fifth section addresses specific issues linked to the clearing obligation such as the case of contracts concluded with covered bond issuers or with cover pools for covered bonds, the case of FX OTC derivatives, as well as some issues related to the procedure for the determination of the clearing obligation.”

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