The European Securities and Markets Authority (ESMA) has updated on 6 June 2016 its EMIR Q&As.


The updated EMIR Q&As deal with the clearing obligation, in particular:


- the self-categorisation that is necessary in order to establish which counterparties belong to which categories,


- the issue how counterparties should handle the situation where some of their counterparties have not provided the information on the category they belong to.


The text of the update is available below.


OTC Question 24 [last update 2 June 2016]


Article 2 of Regulation (EU) 2015/2205 on the clearing obligation: Categories of counterparties


The clearing obligation (in relation to the first Regulation on the clearing obligation) takes effect on different dates depending on the classification of the counterparties to the OTC derivative transactions. When should counterparties have completed the process of (1) determining the category of counterparty to which they belong and (2) communicating this information to their OTC derivatives counterparties? What happens if a counterparty does not undergo the above process by that time?


OTC Answer 24


The first Delegated Regulation on the clearing obligation entered into force on 21 December 2015, therefore the obligations detailed in it apply to all concerned entities, in accordance with Article 4 of EMIR. The phase-in and the different frontloading start dates of this Regulation were introduced to provide sufficient time for counterparties to know to which category they and their own counterparties belong, and to prepare for the clearing of their relevant OTC derivative contracts.


Categories 1 and 4


CCPs have published the list of counterparties classified in Category 1 (see Section 1.3 of the Public Register on the Clearing Obligation). It is therefore assumed that counterparties in Category 1 have completed their self-classification and made this information available to their counterparties. In addition, for Category 1 counterparties, frontloading started to apply on 21 February 2016.

Category 4 is composed of some non-financial counterparties only. The counterparty classification between financial and non-financial counterparties should have been already completed as it is relevant for the compliance with other applicable requirements under EMIR (e.g. Article 11).


Categories 2 and 3


For counterparties which are neither in Category 1 nor in Category 4, the determination of the category of counterparty depends on the aggregate month-end average of outstanding gross notional amount of non-centrally cleared derivatives for January, February and March 2016 (at group level). In addition, the frontloading start date for counterparties in Category 2 is set at 21 May 2016.




Therefore, between March 2016 and 21 May 2016, counterparties should have completed the two following steps:


(1) determine whether they belong to Category 2 (in which case frontloading would be applicable to them as of 21 May 2016) or to Category 3 (in which case frontloading would not apply to them), and


(2) obtain from their counterparties in Categories 2 and 3 the outcome of their counterparty classification, and inform them that in the case this information is not provided by 21 May 2016, and where it is not possible for the counterparty to establish the category of the other counterparty, it will assume it is classified in category 2 for the purpose of compliance with the clearing obligation. In this situation, counterparties should immediately inform their counterparty of the assumption that has been made about them.