On Dec. 1, the European Commission finalized the dates for implementing the first set of mandatory clearing requirements for over-the-counter derivatives. The regulation was published in the Official Journal of the European Union, confirming the effective dates for mandatory clearing for four commonly traded types of interest rate derivatives denominated in four major currencies.
The requirements will be phased in based on type of counterparty as follows:
June 21, 2016: clearing obligation for category 1 counterparties, which consists of firms that are members of clearinghouses. This includes a deadline of Feb. 21, 2016 for a related "front-loading" requirement, under which any transactions in the covered types of derivatives that are entered into after this date will have to be cleared.
Dec. 21, 2016: clearing obligation for category 2 counterparties. This category consists of financial institutions and alternative investment funds, and is limited to firms that have more than eight billion euros (USD$8.46 billion) in gross notional amount of contracts. The deadline for front-loading in this category is May 21, 2016.
June 21, 2017: clearing obligation for category 3 counterparties with no front-loading obligation. This category consists of financial institutions and alternative investment funds with less than eight billion euros in OTC derivatives.
Dec, 21, 2018: clearing obligation for category 4 counterparties, with no front-loading obligation. This category consists of non-financial companies with derivatives positions that are above certain thresholds.
