Article: Considerations for EMIR Category 2 entities: to front-load or back-load?03 May 2016 | Jaki Walsh
After a long and arduous road to the final EMIR Interest Rate Swap (IRS) Regulatory Technical Standards (RTS), the dates are set and front-loading requirements remain.
Front-loading is a requirement that stipulates all trades executed on or after a pre-set date, that meet a defined criteria (instrument, currency and remaining maturity) on obligation date, must be cleared.
These trades can either be:
- front-loaded i.e. all trades executed on or after the effective date are immediately cleared or;
- back-loaded i.e. all trades executed on or after the effective date are bilateral until the clearing obligation date and then those trades are back-loaded into clearing – this could mean either termination or execution of a new trade with new economic terms or novation of the bilateral trade into clearing.
Frontloading was included at the outset of the regulatory process, in the level one EMIR text and therefore could not be completely removed from the final implementation of the regulation. However after significant deliberation