The European Commission has adopted a new set of rules that requires certain over-the-counter (OTC) credit derivative contracts to be cleared through central counterparties (CCPs). This decision, in the form of a delegated regulation, implements the clearing obligation under the European Market Infrastructure Regulation (EMIR).
The adopted regulation refers in particular to certain credit default swaps (CDS) denominated in euro covering some European corporates. The clearing obligation will enter into force subject to scrutiny by the European Parliament and the Council of the EU. It will be phased in over three years to give extra time for smaller market participants to comply.
EU Financial Stability Commissioner Jonathan Hill said in a statement: “Today’s decision marks another step towards making good on our G20 commitments to bolster financial stability, reduce risks and boost market confidence.”
Mandatory central clearing is a vital part of the EC's response to the financial crisis; it follows commitments made by world leaders at the G-20 Pittsburgh Summit in 2009 to improve transparency and mitigate risks.
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