March 19, 2014

ESMA Mandatory Clearing | Parallel Streams and Arbitrage

ESMA have removed their lovely timeline chart and replaced it with a simplified table:

23.02.13 Publication of the delegated regulations in the Official Journal
15.03.13[A]Entry into force of the delegated regulations
CCPs and central clearing obligation
15.09.13 Previously existing EU CCPs authorisation application deadline [A+6 months]
18.03.14[B]First EU CCP authorised
18.03.14 First notification for the clearing obligation under Art. 5 [immediately after B]
18.09.14(*) ESMA to submit draft RTS on the clearing obligation [B + 6 months]
Trade Repositories (TRs)
07.11.13[C]Adoption of the registration decision of the first trade repositories
12.02.14 Reporting start date for all asset classes [C+5 working days + 90 calendar days]


The bit that's worth noting is the footnote on the approach to the mandatory clearing obligation:

(*) Draft RTS on the clearing obligation will be proposed 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, and the assessment by ESMA of the suitability of the classes for the clearing obligation will be performed only on the classes notified to ESMA. This means that if CCPs are authorised on different dates, several clearing obligation procedures may run in parallel.


It appears that the products mandated to clear may be driven in parallel streams, related to each CCP that is authorised. I wonder if an early authorised CCP such as OMX can cause mandatory clearing of a product such as IRS and drive business to themselves, as the only approved CCP, and win business over another CCP who may not yet be authorised? If IRS were mandated, does that mean only authorised CCPs can take on that business? Probably not but an interesting possibility.

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