If you are engaged in OTC derivatives' trading it may be of interest for you whether you or your counterparty are under the legal obligation to clear the trades with the CCP or you are completely free when setting the settlements' rules for the contract.
As you presumably know, non-financial counterparties are required to clear their positions in OTC derivatives, if their exposition reaches the predetermined values.
This is a mandatory process and potential non-compliance may have severe consequences for all involved.
Your business partners may also ask you to make a representation whether you are above or below clearing threshold as this is a part of due dilligence process and entails legal consequences.
The requirements at issue have the legal basis in the Regulation of 29 March 2012 No 648/2012 of the European Parliament and Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (OJ L 201, 27.7.2012, p. 1, as amended), so-called EMIR - European Market Infrastructures Regulation, was adopted by the European Parliament on 29 March 2012 and entered into force on 16 August 2012 along with its secondary legislative pieces.
This is a compliance check containing the main steps to verify whether your assumptions in the process for establishing your position versus clearing thresholds are correct or you are exposed to the risk of some surprises with unpleasant consequences.
To start EMIR Clearing Thresholds Compliance Check click the green arrow and follow subsequent steps.