News: ESMA Publishes a List of Authorised CCPs and OTC Derivatives

27 March 2014 | Bill Hodgson

ESMA has created an official list of authorised CCPs and their products, a list which will grow rapidly during 2014. ESMA announced it thus:

Following the authorisation of Nasdaq OMX Clearing AB as the first EU-based CCP on 18 March 2014, the European Securities and Markets Authority (ESMA) has today published information about Nasdaq OMX Clearing AB and the contracts it is authorised to clear. In accordance with the procedure laid out under Article 5(1) of EMIR, on 18 March 2014 ESMA was notified of Nasdaq OMX Clearing AB’s authorisation including the classes of OTC derivatives cleared by them.
ESMA will propose draft regulatory technical standards (RTS) on the clearing obligation if the classes of OTC derivatives notified to ESMA meet the criteria defined in EMIR. The clearing obligation procedure defined in Article 5(2) of EMIR is triggered every time a new CCP clearing OTC derivatives is authorised. For the clearing obligation, ESMA will only assess the suitability of those classes notified to ESMA.
This means that if CCPs are authorised on different dates, several clearing obligation procedures may run in parallel. For each of these procedures, ESMA has up to six months from the time of the notifications to draft the respective RTS, consult and submit them for endorsement to the European Commission. After the Commission’s endorsement, the RTS are subject to a non-objection period by both the European Council and Parliament, after which the clearing obligation will be phased-in per type of counterparties.



does that mean frontloading window has started in these products?

It means that we know there is a front-loading period from March 18th until OMX are granted mandatory clearing status. front loading can't start until the clearing mandate begins. What isn't clear is which other CCPs will be authorised when the clearing mandate occurs. Bill

Thanks Bill, but assuming EUR IRS is almost certainly going to be mandated for clearing (and NASDAQ OMX clears EUR IRS), is it not fair to say that any EUR IRS entered into starting from 18th of March involving an EU dealer would have to be cleared (i.e. backloaded to a CCP if currently bilateral) when the mandate becomes effective?
From Risk: Frontloading of derivatives ... .... requires derivatives counterparties to retrospectively clear any transaction executed between the authorisation of a central counterparty (CCP) that clears the product and the start of a formal mandatory clearing determination for that instrument by European regulators.

Yes I agree - and I suppose by the time the mandate takes effect all the CCPs should be authorised, and will pick up the same mandated business they do now. What approach is your firm taking to pricing swaps in this period? Bill.

I work in the EM department so I'm not directly involved in this (yet) as EM swaps don't look like will be cleared for now. I know that a vast majority of client G10 swaps are already cleared, and for those that are not I really don't know as this is a very new phenomenon which hasn't been experienced during the US clearing mandate. My personal opinion is that mandatory break clauses could be the best way to overcome this issue.

Interesting - so price for the non-cleared market with a break in around a years time to enable early term around the point of the mandate?

Lots of non-EU CCPs want recognition: http://www.esma.europa.eu/system/files/list_of_applicants_tc-ccps_versio...

If so, I wonder if once recognised they must also clear according to the mandate, so EMIR becomes extra-territorial and begins to sweep up EM markets too?