Which derivatives are subject to mandatory clearing? On 1 March 2016, the European Commission made a second mandatory clearing determination under EMIR. The relevant delegated regulation was published in the Official Journal on 19 April 2016. Credit default swaps (“CDS”) linked to iTraxx Europe Main and iTRaxx Europe Crossover (5 years Euro denominated) will be subject to mandatory clearing. The first mandatory clearing determination introduced the clearing obligation to certain interest rate swaps, which will be phased in from 21 June 2016.
When does the clearing obligation take effect for these CDS?
The obligation to clear these CDS will take effect as follows:
- Category 1 (clearing members for at least one of the classes of OTC CDS subject to clearing): 9 February 2017.
- Category 2 (financial counterparties (“FCs”) and alternative investment funds (“AIFs”) that exceed a threshold of Euro 8 billion aggregate month-end average outstanding gross notional amount of all non-centrally cleared derivatives (the “Threshold”1)): 9 August 2017.
- Category 3 (FCs and AIFs that are not clearing members and that do not exceed the Threshold): 9 February 2018.
- Category 4 (non-financial counterparties whose rolling average position over a 30 working day period in OTC derivatives (net of their commercial and treasury financing hedges) exceeds a relevant clearing threshold (known as an NFC+)): 9 May 2019.