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EMIR CDS Clearing clearer

The EC yesterday adopted a Delegated Regulation implementing mandatory clearing for certain CDS. Under the Regulation, the obligation will apply to the four clearing categories as follows:

  • Category 1- 9 months after the entry into force of the RTS
  • Category 2- 15 months after the entry into force of the RTS
  • Category 3- 21 months after the entry into force of the RTS
  • Category 4- 36 months (3 years) after the entry into force of the RTS

Article 4 of the delegated act lays down minimum remaining maturities for frontloading. For both Category 1 and 2, a frontloading minimum maturity of 5 years and three months will apply to those contracts entered into/novated before RTS entry + five months; a miminimum maturity of 6 months will apply to those contracts entered into/novated on or after the RTS entry + five months date. The specific CDS classes in scope are laid out in the regulation’s Annex:

  • Untranched iTraxx Index CDS (Europe Main, 5 year tenor, series 17 onwards, with EUR as the settlement currency)
  • Untranched iTraxx Index CDS (Europe Crossover, 5 year tenor, series 17 onwards, with EUR as the settlement currency)

Potential, but unlikely, objections from the Parliament and Council aside, the Regulation will enter into force on the twentieth day following its publication in the OJ.

Note- the Regulation was published on 19 April 2016. It will enter into force on the 9 May 2016.

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