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23.2.2013 Official
Journal
of
the
European
Union L
52/11
COMMISSION DELEGATED REGULATION (EU) No 149/2013
of 19 December 2012
supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with
regard to regulatory technical standards on indirect clearing arrangements, the clearing obligation,
the public register, access to a trading venue, non-financial counterparties, and risk mitigation
techniques for OTC derivatives contracts not cleared by a CCP
(Text with EEA relevance)
THE EUROPEAN COMMISSION,
to specify technical terms necessary for developing this
technical standard, a number of terms should be defined.
Having regard to the Treaty on the Functioning of the European
Union,
(4) An
indirect
clearing
arrangement
should
not
expose
a
Having regard to the opinion of the European Central Bank (
CCP, clearing member, client or indirect client to

1 ),
additional counterparty risk and the assets and
positions of the indirect client should benefit from an
appropriate level of protection. It is therefore essential
Having regard to Regulation (EU) No 648/2012 of the European
that any type of indirect clearing arrangements comply
Parliament and of the Council of 4 July 2012 on OTC deriva
with minimum conditions for ensuring their safety. To
tives, central counterparties and trade repositories ( 2 ), and in
that end, the parties involved in indirect clearing
particular Articles 4(4), 5(1), 6(4), 8(5), 10(4) and 11(14)
arrangements shall be subject to specific obligations.
thereof,
Such arrangements extend beyond the contractual rela
tionship between indirect clients and the client of a
clearing member that provides indirect clearing services.
Whereas:
(1) A
framework
should
be
provided
to
encompass
rules
applicable to the clearing obligation, its application,
(5) Regulation
(EU)
No
648/2012
requires
a
CCP
to
be
a
possible exemptions and risk mitigation techniques to
designated system under Directive 98/26/EC of the
be established when clearing with a central counterparty
European Parliament and of the Council of 19 May
(CCP) cannot take place. To ensure coherence between
1998 on settlement finality in payment and securities
those provisions, which should enter into force at the
settlement systems
( 3 ). This implies that clearing
same time, and to facilitate a comprehensive view and
members of CCPs should qualify as participants within
efficient access for stakeholders and in particular those
the meaning of that Directive. Therefore to ensure an
subject to the obligations, it is desirable to include most
equivalent level of protection to indirect clients as
of the regulatory technical standards required under Title
granted to clients under Regulation (EU) No 648/2012,
II of Regulation (EU) No 648/2012 in a single Regu
it is necessary to ensure that clients providing indirect
lation.
clearing services are credit institutions, investment firms,
or equivalent third country credit institutions or
investment firms.
(2)
In view of the global nature of the over the counter
(OTC) derivatives market, this Regulation should take
into account the relevant internationally agreed
guidelines and recommendations on OTC derivatives
market reforms and mandatory clearing as well as the
(6) Indirect
clearing
arrangements
should
be
established
so
related rules developed in other jurisdictions. In particular
as to ensure that indirect clients can obtain an equivalent
the framework for the determination of a clearing
level of protection as direct clients in a default scenario.
obligation takes into account the Mandatory Clearing
Following the failure of a clearing member that facilitates
requirements published by the International Organization
an indirect clearing arrangement, indirect clients should
of Securities Commissions. This will support, as much as
be included in the transfer of client positions to an alter
possible, convergence with the approach in other juris
native clearing member under the portability
dictions.
requirements established by Articles 39 and 48 of Regu
lation (EU) No 648/2012. Appropriate safeguards against
client failure should also exist within indirect clearing
(3) In
order
to
clearly
identify
a
limited
number
of
concepts
arrangements and should support transferring indirect
stemming from Regulation (EU) No 648/2012, as well as
client positions to an alternative provider of clearing
services.
( 1 ) Not yet published in the Official Journal.
( 2 ) OJ L 201, 27.7.2012, p. 1.
( 3 ) OJ L 166, 11.6.1998, p. 45.

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L 52/12
EN
Official Journal of the European Union
23.2.2013
(7) As
indirect
clearing
arrangements
may
give
rise
to
that a contract is sufficiently liquid to be cleared by one
specific risks, all the parties included in an indirect
CCP does not necessarily imply that it should be subject
clearing arrangement, including clearing members and
to the clearing obligation. ESMA’s assessment should not
CCPs, should routinely identify, monitor and manage
replicate or duplicate the review already performed by
any material risks arising from the arrangement. Appro
the competent authority.
priate sharing of information between clients that
provide indirect clearing services and clearing members
that facilitate those services is especially important in this
context. Clearing members should use information
provided by clients for risk management purposes only
(11) The information to be provided by the competent
and should prevent the misuse of commercially sensitive
authority for the purpose of the clearing obligation
information, including through the use of effective
should enable ESMA to assess the availability of pricing
barriers between different divisions of a financial insti
information. In this respect, the access of a CCP to
tution to avoid conflicts of interest.
pricing information at one point in time does not
mean that market participants could access pricing
information in the future. As a result, the fact that a
CCP has access to the necessary price information to
manage the risks of clearing derivative contracts within
(8)
When it authorises a CCP to clear a class of OTC deriva
a certain class of OTC derivatives does not automatically
tives, the competent authority is required to notify the
imply that this class of OTC derivatives should be subject
European Securities and Markets Authority (ESMA). This
to the clearing obligation.
notification should include detailed information which is
necessary for ESMA to carry out its assessment process,
including information on liquidity and volume of the
relevant class of OTC derivatives. Although the
information flows from the competent authority to
(12) The level of details available in the register of classes of
ESMA, it is the CCP having requested the authorisation
OTC derivative contracts subject to the clearing
that should initially provide the required information to
obligation depends on the relevance of these details to
the competent authorities which may then complement
identify each class of OTC derivative contracts. As a
it.
result the level of details in the register may differ for
different classes of OTC derivative contracts.
(9) Although
all
information
to
be
included
in
the
notifi
cation from the competent authority to ESMA for the
purpose of the clearing obligation may not always be
(13) Allowing
access
by
multiple
CCPs
to
a
trading
venue
available, especially for new products, estimates that are
could broaden participant access to that venue and
available should be provided, including a clear indication
therefore enhance overall liquidity. It is nonetheless
of the assumptions made. The notification should also
necessary in such circumstances to specify the notion
contain information pertaining to the counterparties,
of liquidity fragmentation within a venue in the case
such as the type and number of counterparties, the
that it may threaten the smooth and orderly functioning
steps required to start clearing with a CCP, their legal
of markets for the class of financial instruments for
and operational capacity or their risk management
which the request is made.
framework in order to allow ESMA to assess the ability
of the active counterparties to comply with the clearing
obligation without disruption to the market.
(14) The assessment of the competent authority of the trading
venue to which a CCP has requested access and of the
competent authority of the CCP should be based on the
(10) The
notification
from
the
competent
authority
to
ESMA
mechanisms available to prevent liquidity fragmentation
should contain information on the degree of standard
within a trading venue.
isation, liquidity and price availability, in order for ESMA
to assess whether a class of OTC derivatives should be
subject to the clearing obligation. The criteria related to
the standardisation of the contractual terms and oper
ational processes of a relevant class of OTC are an
(15) To
prevent
liquidity
fragmentation
all
participants
in
a
indicator of the standardisation of the economic terms
trading venue should be able to clear all transactions
of a class of OTC derivatives as it is only when such
executed between them. However, it would not be
economic terms are standardised that the contractual
proportionate to require all clearing members of an
terms and operational processes can be standardised.
existing CCP to become also clearing members of any
The criteria related to liquidity and price availability are
new CCP serving such trading venue. Where there are
assessed by ESMA with different considerations than the
entities which are clearing members of both CCPs, they
assessment made by the competent authority while auth
may facilitate the transfer and clearing of transactions
orising the CCP. Liquidity in this context is assessed on a
executed by market participants separately served by
wider perspective and differs from the liquidity after the
the two CCPs, to limit the risk of liquidity fragmentation.
clearing obligation would apply. In particular, the fact
Nevertheless, it is important that a request to access a

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EN
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of
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European
Union L
52/13
trading venue by a CCP does not fragment liquidity in a
(19) A
risk
may
evolve
over
time
and
in
order
to
adapt
to
the
manner that would increase the risks to which the
evolution of the risk, OTC derivative contracts initially
existing CCP is exposed.
executed for reducing risk related to commercial or
treasury financing activity may have to be offset
through the use of additional OTC derivative contracts.
As a result, hedging of a risk may be achieved by a
combination of OTC derivative contracts including
offsetting OTC derivative contracts that close out those
OTC derivative contracts that have become unrelated to
the commercial or treasury financing risk.
(16) According to Article 8(4) of Regulation (EU)
No 648/2012, a request to access a trading venue by a
CCP should not require interoperability, and,
consequently, this Regulation should not prescribe inter
operability as the only way to resolve liquidity fragmen
tation. However, this Regulation should not preclude
CCPs from entering into such an arrangement on a
voluntary basis if the necessary conditions for its estab
lishment are fulfilled.
(20) The range of risks directly related to commercial and
treasury financing activities is very wide and varies
across different economic sectors. Risks related to
commercial activities are typically attached to inputs to
the production function of a company as well as
products and services that it sells or provides. Treasury
financing activities typically relate to the management of
the short- and long-term funding of an entity, including
its debt, and the ways it invests the financial resources it
(17) In
order
to
establish
which
OTC
derivative
contracts
are
generates or holds, including cash management. Treasury
objectively measurable as reducing risks directly relating
financing and commercial activities can be affected by
to commercial activity or treasury financing activity, non-
common sources of risks, such as foreign exchange,
financial counterparties should apply one of the criteria
commodity prices, inflation or credit risk. Given that
provided for in this Regulation including the accounting
OTC derivatives are concluded to hedge a particular
definition based on International Financial Reporting
risk, when analysing the risks directly related to
Standards (IFRS) rules. The accounting definition can be
commercial or treasury financing activities, those risks
used by counterparties even though they do not apply
should be defined in a consistent manner covering
IFRS rules. For those non-financial counterparties that
both activities. In addition, separating the two concepts
may use local accounting rules, it is expected that most
might have unintended consequences, given that
of the contracts classified as hedging under such local
depending on the sector in which non-financial counter
accounting rules would fall within the general definition
parties operate, a particular risk would be hedged under
of contracts reducing risks directly related to commercial
treasury financing or commercial activity.
activity or treasury financing activity provided for in this
Regulation.
(21) While
the
clearing
thresholds
should
be
set
taking
into
(18) In
some
circumstances,
it
may
not
be
possible
to
hedge
a
account the systemic relevance of the related risks, it is
risk by using a directly related derivative contract, a
important to consider that the OTC derivatives that
contract with exactly the same underlying and settlement
reduce risks are excluded from the computation of the
date as the risk being covered. In such case, the non-
clearing thresholds and that the clearing thresholds allow
financial counterparty may use proxy hedging through a
an exception to the principle of the clearing obligation
closely correlated instrument to cover its exposure such
for those OTC derivative contracts which may be
as an instrument with a different but very close
considered as not concluded for hedging purposes.
underlying in terms of economic behaviour. Additionally,
More specifically, the value of the clearing thresholds
certain groups of non-financial counterparties which
should be reviewed periodically and should be
enter into OTC derivative contracts, via a single entity,
determined by class of OTC derivative contracts. The
to hedge their risk in relation to the overall risks of the
classes of OTC derivatives determined for the purpose
group may use macro or portfolio hedging. Those macro,
of the clearing thresholds may be different from the
portfolio or proxy hedging OTC derivative contracts may
classes of OTC derivatives for the purpose of the
constitute hedging for the purpose of this Regulation and
clearing obligation. In setting the value of the clearing
should be considered against the criteria for establishing
thresholds, due consideration should be given to the need
which OTC derivative contracts are objectively reducing
to define a single indicator reflecting the systemic
risks.
relevance of the sum of net positions and exposures

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L 52/14
EN
Official Journal of the European Union
23.2.2013
per counterparty and per asset class of OTC derivatives.
(25) The excess of one of the values set for a class of OTC
Furthermore, the clearing thresholds being used by non-
derivatives should trigger the excess of the clearing
financial counterparties should be simple to implement.
threshold for all classes, given that OTC derivative
contracts reducing risks are excluded from the calculation
of the clearing threshold, the consequences of exceeding
the clearing threshold are not only related to the clearing
obligation but extend to risk mitigation techniques, and
the approach for the relevant obligations under Regu
lation (EU) No 648/2012 applicable to non-financial
counterparties should be simple in view of the non-soph
isticated nature of most of them.
(22) The determination of the value of the clearing thresholds
should take into account the systemic relevance of the
sum of net positions and exposures per counterparty and
per class of OTC derivatives in accordance with Regu
lation (EU) No
648/2012. However, it should be
considered that these net positions and exposures are
different from a net exposure across counterparties and
across asset class. Furthermore, in accordance with Regu
(26) For those OTC derivative contracts that are not cleared,
lation (EU) No 648/2012 these net positions should be
risk mitigation techniques such as timely confirmation
added up in order to determine the data to be considered
should apply. The confirmation of OTC derivative
for the setting of the clearing thresholds. It is the total
contracts may refer to one or more master agreements,
gross sum resulting from the addition of these net
master confirmation agreements, or other standard terms.
positions that should be considered when setting the
It may take the form of an electronically executed
clearing thresholds. The gross notional value resulting
contract or a document signed by both counterparties.
from that addition should be used as a reference for
setting the clearing thresholds.
(27) It is essential that counterparties confirm the terms of
their transactions as soon as possible following the
(23) In addition, the structure of the OTC derivatives activity
execution of the transaction, especially when the trans
of non-financial counterparties usually leads to a low
action is electronically executed or processed, in order to
level of netting as OTC derivative contracts are
ensure common understanding and legal certainty of the
concluded in the same direction. As a result, the
terms of the transaction. Counterparties entering into
difference between the sum of the net positions and
non-standard or complex OTC derivative contracts, in
exposures per counterparty and per class of OTC
particular, may need to implement tools in order to
derivatives would be very close to the gross value of
comply with the requirement to confirm their OTC
contracts. Therefore, and in order to reach the objective
derivative contracts in a timely manner. The timely
of simplicity, the gross value of OTC derivative contracts
confirmation would also anticipate that relevant market
should be used as a valid proxy of the measure to be
practices would evolve in this area.
taken into account in the determination of the clearing
threshold.
(28) To
further
mitigate
risks,
portfolio
reconciliation
enables
each counterparty to undertake a comprehensive review
of a portfolio of transactions as seen by its counterparty
(24) Given that non-financials that do not exceed the clearing
in order to promptly identify any misunderstandings of
threshold are not required to mark-to-market their OTC
key transaction terms. Such terms should include the
derivative contracts, it would not be reasonable to use
valuation of each transaction and may also include
this measure to determine the clearing thresholds as this
other relevant details such as the effective date, the
would impose a heavy burden on non-financial counter
scheduled maturity date, any payment or settlement
parties which would not be proportionate with the risk
dates, the notional value of the contract and currency
addressed. Instead, using the notional value of OTC
of the transaction, the underlying instrument, the
derivative contracts would allow a simple approach
position of the counterparties, the business day
which is not exposed to external events for non-finan
convention and any relevant fixed or floating rates of
cials.
the OTC derivative contract.

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(29) In
view
of
the
different
risk
profiles
and
in
order
for
the
(34) Although the design of the model used for the marking-
portfolio reconciliation to be a proportionate risk miti
to-model may be developed internally or externally, in
gation technique, the frequency of the reconciliation and
order to ensure appropriate accountability, the approval
size of the portfolio to consider should be different
of the model is the responsibility of the board of
depending on the nature of the counterparties. More
directors or the delegated committee of such board.
demanding requirements should apply to both financial
counterparties and non-financial counterparties that
exceed the clearing threshold while lower reconciliation
frequency should apply for non-financial counterparties
(35) When
counterparties
can
apply
the
intragroup
exemption
that would not exceed the clearing threshold irrespective
following their notification to the competent authorities
of the category of its counterparty who would also
but without waiting for the end of the non-objection
benefit from this less frequent reconciliation for that
period by such competent authorities, it is important
part of its portfolio.
to ensure that the competent authorities get timely,
appropriate and sufficient information in order to
assess whether it should object to the use of the
exemption.
(30) Portfolio
compression
may
also
be
an
efficient
tool
for
risk mitigation purposes depending on circumstances
such as the size of the portfolio with a counterparty,
the maturity, purpose and degree of standardisation of
(36) The anticipated size, volumes and frequency of
OTC derivative contracts. Financial counterparties and
intragroup OTC derivative contracts may be determined
non-financial counterparties that have a portfolio of
on the basis of the historical intragroup transactions of
OTC derivative contracts not cleared by a CCP above
the counterparties as well as the anticipated model and
the level determined in this Regulation should have
activity expected for the future.
procedures in place in order to analyse the possibility
to use portfolio compression that would allow them to
reduce their counterparty credit risk.
(37) When
counterparties
apply
an
intragroup
exemption,
they should publicly disclose information in order to
ensure transparency in respect of market participants
(31) Dispute
resolution
aims
at
mitigating
risks
stemming
and potential creditors. This is particularly important
from contracts that are not centrally cleared. When
for the potential creditors of the counterparties in
entering into OTC derivative transactions with one
terms of assessing risks. The disclosure aims at
another, counterparties should have an agreed
preventing misperception that OTC derivative contracts
framework for resolving any related dispute that may
are centrally cleared or subject to risk mitigation tech
arise. The framework should refer to resolution mech
niques when it is not the case.
anisms such as third party arbitration or market polling
mechanism. The framework intends to avoid unresolved
disputes escalating and exposing counterparties to
additional risks. Disputes should be identified, managed
(38) The
timeframe
to
achieve
timely
confirmation
requires
and appropriately disclosed.
adaptation efforts including changes of market practice
and enhancement of IT systems. Given that the pace of
adaptation to compliance may differ depending on the
category of counterparties and the asset class of OTC
derivatives, setting progressive dates of application
(32) For
the
purpose
of
specifying
market
conditions
that
which cater for these differences would allow
prevent marking-to-market, it is necessary to specify
enhancing the timeframe of the confirmation for those
inactive markets. A market may be inactive for several
counterparties and products that could be ready more
reasons including when there are no regularly occurring
rapidly.
market transactions on an arm’s length basis, where an
arm’s length basis should have the same meaning as for
accounting purposes.
(39) The
standards
set
for
portfolio
reconciliation,
portfolio
compression or dispute resolution would require
counterparties to set up procedures, policies, processes,
(33) This
Regulation
applies
to
financial
counterparties
and
and amend documentation which would require time.
non-financial counterparties above the clearing
The entry into force of the related requirements should
threshold and takes into consideration Directive
be delayed in order to grant time for the counterparties
2006/49/EC of the European Parliament and of the
to take the necessary steps for compliance purposes.
Council of 14 June 2006 on capital adequacy of
investment firms and credit institutions ( 1 ), which also
sets requirements to be complied with when marking-
to-model.
(40) This Regulation is based on the draft regulatory technical
standards submitted by the European Securities and
( 1 ) OJ L 177, 30.6.2006, p. 201.
Markets Authority to the Commission.

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Official Journal of the European Union
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(41) In accordance with Article 10 of Regulation (EU)
transactions arising as part of the indirect clearing arrangement,
No 1095/2010 of the European Parliament and of the
the scope of which shall be clearly documented in the agreed
Council ( 1 ), ESMA has conducted open public consul
contracts.
tations on the draft regulatory technical standards,
analysed the potential related costs and benefits and
requested the opinion of the Securities and Markets
Article 3
Stakeholder Group established in accordance with
Article 37 of Regulation (EU) No 1095/2010,
Obligations of CCPs
1. Indirect
clearing
arrangements
shall
not
be
subject
to
business practices of the CCP which act as a barrier to their
HAS ADOPTED THIS REGULATION:
establishment on reasonable commercial terms. At the request
of a clearing member, the CCP shall maintain separate records
and accounts enabling each client to distinguish in accounts
CHAPTER I
held with the CCP the assets and positions of the client from
those held for the accounts of the indirect clients of the client.
GENERAL
Article 1
2. A
CCP
shall
identify,
monitor
and
manage
any
material
Definitions
risks arising from indirect clearing arrangements that could
affect the resilience of the CCP.
For the purposes of this Regulation the following definitions
apply:
Article 4
(a) ‘indirect client’ means the client of a client of a clearing
Obligations of clearing members
member;
1. A
clearing
member
that
offers
to
facilitate
indirect
clearing
services shall do so on reasonable commercial terms. Without
prejudice to the confidentiality of contractual arrangements with
(b) ‘indirect clearing arrangement’ means the set of contractual
individual clients, the clearing member shall publicly disclose
relationships between the central counterparty (CCP), the
the general terms on which it is prepared to facilitate indirect
clearing member, the client of a clearing member and
clearing services. These terms may include minimum oper
indirect client that allows the client of a clearing member
ational requirements for clients that provide indirect clearing
to provide clearing services to an indirect client;
services.
(c) ‘confirmation’ means the documentation of the agreement
2. When
facilitating
indirect
clearing
arrangements,
a
clearing
of the counterparties to all the terms of an over the counter
member shall implement any of the following segregation
(OTC) derivative contract.
arrangements as indicated by the client:
(a) keep separate records and accounts enabling each client to
CHAPTER II
distinguish in accounts with the clearing member the assets
INDIRECT CLEARING ARRANGEMENTS
and positions of the client from those held for the accounts
of its indirect clients;
(Article 4(4) of Regulation (EU) No 648/2012)
Article 2
(b) keep separate records and accounts enabling each client to
Structure of indirect clearing arrangements
distinguish in accounts with the clearing member the assets
and positions held for the account of an indirect client from
1. Where
a
clearing
member
is
prepared
to
facilitate
indirect
those held for the account of other indirect clients.
clearing, any client of such clearing member shall be permitted
to provide indirect clearing services to one or more of its own
clients, provided that the client of the clearing member is an
3. The
requirement
to
distinguish
assets
and
positions
with
authorised credit institution, investment firm or an equivalent
the clearing member shall be considered to be met if the
third country credit institution or investment firm.
conditions specified in Article 39(9) of Regulation (EU)
No 648/2012 are satisfied.
2. The
contractual
terms
of
an
indirect
clearing
arrangement
shall be agreed between the client of a clearing member and the
4. A
clearing
member
shall
establish
robust
procedures
to
indirect client, after consultation with the clearing member on
manage the default of a client that provides indirect clearing
the aspects that can impact the operations of the clearing
services. These procedures shall include a credible mechanism
member. They shall include contractual requirements on the
for transferring the positions and assets to an alternative client
client to honour all obligations of the indirect client towards
or clearing member, subject to the agreement of the indirect
the clearing member. These requirements shall refer only to
clients affected. A client or clearing member shall not be
obliged to accept these positions unless it has entered into a
( 1 ) OJ L 331, 15.12.2010, p. 84.
prior contractual agreement to do so.

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5. The
clearing
member
shall
also
ensure
that
its
procedures (c) other information to be included in the public register in
allow for the prompt liquidation of the assets and positions of
accordance with Article 8;
indirect clients and the clearing member to pay all monies due
to the indirect clients following the default of the client.
(d) any further characteristics necessary to distinguish OTC
6. A
clearing
member
shall
identify,
monitor
and
manage
derivative contracts within the class of OTC derivative
any risks arising from facilitating indirect clearing arrangements,
contracts from OTC derivative contracts outside that class;
including using information provided by clients under
Article 4(3). The clearing member shall establish robust
internal procedures to ensure this information cannot be used
for commercial purposes.
(e) evidence of the degree of standardisation of the contractual
terms and operational processes for the relevant class of
OTC derivative contracts;
Article 5
Obligations of clients
(f) data on the volume of the class of OTC derivative contracts;
1. A
client
that
provides
indirect
clearing
services
shall
keep
separate records and accounts that enable it to distinguish
between its own assets and positions and those held for the
account of its indirect clients. It shall offer indirect clients a
(g) data on the liquidity of the class of OTC derivative
choice between the alternative account segregation options
contracts;
provided for in Article 4(2) and shall ensure that indirect
clients are fully informed of the risks associated with each
segregation option. The information provided by the client to
indirect clients shall include details of arrangements for trans
ferring positions and accounts to an alternative client.
(h) evidence of availability to market participants of fair, reliable
and generally accepted pricing information for contracts in
the class of OTC derivative contracts;
2. A
client
that
provides
indirect
clearing
services
shall
request the clearing member to open a segregated account at
the CCP. The account shall be for the exclusive purpose of
(i) evidence of the impact of the clearing obligation on avail
holding the assets and positions of its indirect clients.
ability to market participants of pricing information.
3. A
client
shall
provide
the
clearing
member
with
sufficient
information to identify, monitor and manage any risks arising
2. For the purpose of assessing the date or dates from which
from facilitating indirect clearing arrangements. In the event of
the clearing obligation takes effect, including any phasing-in and
default of the client, all information held by the client in respect
the categories of counterparties to which the clearing obligation
of its indirect clients shall be made immediately available to the
applies, the notification for the purpose of the clearing
clearing member.
obligation shall include:

CHAPTER III
(a) data relevant for assessing the expected volume of the class
of OTC derivative contracts if it becomes subject to the
NOTIFICATION TO ESMA FOR THE PURPOSE OF THE
clearing obligation;
CLEARING OBLIGATION
(Article 5(1) of Regulation (EU) No 648/2012)
Article 6
(b) evidence of the ability of the CCP to handle the expected
Details to be included in the notification
volume of the class of OTC derivative contracts if it
becomes subject to the clearing obligation and to manage
1. The notification for the purpose of the clearing obligation
the risk arising from the clearing of the relevant class of
shall include the following information:
OTC derivative contracts, including through client or
indirect client clearing arrangements;
(a) the identification of the class of OTC derivative contracts;
(c) the type and number of counterparties active and expected
to be active within the market for the class of OTC
(b) the identification of the OTC derivative contracts within the
derivative contracts if it becomes subject to the clearing
class of OTC derivative contracts;
obligation;

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(d) an outline of the different tasks to be completed in order to
class of OTC derivative contracts, the European Securities and
start clearing with the CCP, together with the determination
Markets Authority (ESMA) shall take into consideration:
of the time required to fulfil each task;
(a) whether the contractual terms of the relevant class of OTC
(e) information on the risk management, legal and operational
derivative contracts incorporate common legal documen
capacity of the range of counterparties active in the market
tation, including master netting agreements, definitions,
for the class of OTC derivative contracts if it becomes
standard terms and confirmations which set out contract
subject to the clearing obligation.
specifications commonly used by counterparties;
3. The data pertaining to the volume and the liquidity shall
(b) whether the operational processes of that relevant class of
contain for the class of OTC derivative contracts and for each
OTC derivative contracts are subject to automated post-
derivative contract within the class, the relevant market
trade processing and lifecycle events that are managed in
information, including historical data, current data as well as
a common manner according to a timetable which is widely
any change that is expected to arise if the class of OTC
agreed among counterparties.
derivative contracts becomes subject to the clearing obligation,
including:
2. In relation to the volume and liquidity of the relevant
(a) the number of transactions;
class of OTC derivative contracts, ESMA shall take into
consideration:
(b) the total volume;
(a) whether the margins or financial requirements of the CCP
would be proportionate to the risk that the clearing
(c) the total open interest;
obligation intends to mitigate;
(d) the depth of orders including the average number of orders
(b) the stability of the market size and depth in respect of the
and of requests for quotes;
product over time;
(e) the tightness of spreads;
(c) the likelihood that market dispersion would remain
sufficient in the event of the default of a clearing member;
(f) the measures of liquidity under stressed market conditions;
(d) the number and the value of the transactions.
(g) the measures of liquidity for the execution of default
procedures.
3. In
relation
to
the
availability
of
fair,
reliable
and
generally
accepted pricing information in the relevant class of OTC
derivative contracts, ESMA shall take into consideration
4. The
information
related
to
the
degree
of
standardisation
of whether the information needed to accurately price the
the contractual terms and operational processes for the relevant
contracts within the relevant class of OTC derivative contracts
class of OTC derivative contracts provided in point (e) of
is easily accessible to market participants on a reasonable
paragraph 1 shall include, for the class of OTC derivative
commercial basis and whether it would continue to be easily
contracts and for each derivative contract within the class,
accessible if the relevant class of OTC derivative contracts
data on the daily reference price as well as the number of
became subject to the clearing obligation.
days per year with a reference price it considers reliable over

at least the previous 12 months.
CHAPTER V
CHAPTER IV
PUBLIC REGISTER
CRITERIA FOR THE DETERMINATION OF THE CLASSES OF
(Article 6(4) of Regulation (EU) No 648/2012)
OTC DERIVATIVE CONTRACTS SUBJECT TO THE CLEARING
OBLIGATION
Article 8
(Article 5(4) of Regulation (EU) No 648/2012)
Details to be included in ESMA’s Register
Article 7
1. The
ESMA
public
register
shall
include
for
each
class
of
OTC derivative contracts subject to the clearing obligation:
Criteria to be assessed by ESMA
1. In relation to the degree of standardisation of the
contractual terms and operational processes of the relevant
(a) the asset class of OTC derivative contracts;

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(b) the type of OTC derivative contracts within the class;
(b) any other condition required pursuant to the regulatory
technical standards adopted under Article 5(2) of Regulation
(EU) No 648/2012, in order for the phase-in period to
(c) the underlyings of OTC derivative contracts within the class;
apply.
(d) for underlyings which are financial instruments, an indi
4.
The ESMA public register shall include the reference of the
cation of whether the underlying is a single financial
regulatory technical standards adopted under Article 5(2) of
instrument or issuer or an index or portfolio;
Regulation (EU) No
648/2012, according to which each
clearing obligation was established.
(e) for other underlyings an indication of the category of the
underlying;
5. In
relation
to
the
CCP
that
has
been
notified
to
ESMA
by
the competent authority, the ESMA public register shall include
at least:
(f) the notional and settlement currencies of OTC derivative
contracts within the class;
(a) the identification of the CCP;
(g) the range of maturities of OTC derivative contracts within
(b) the asset class of OTC derivative contracts that are notified;
the class;
(c) the type of OTC derivative contracts;
(h) the settlement conditions of OTC derivative contracts within
the class;
(d) the date of the notification;
(i) the range of payment frequency of OTC derivative contracts
(e) the identification of the notifying competent authority.
within the class;
CHAPTER VI
(j) the product identifier of the relevant class of OTC derivative
contracts;
LIQUIDITY FRAGMENTATION
(Article 8(5) of Regulation (EU) No 648/2012)
(k) any other characteristic required to distinguish one contract
Article 9
in the relevant class of OTC derivative contracts from
another.
Specification of the notion of liquidity fragmentation
1. Liquidity
fragmentation
shall
be
deemed
to
occur
when
the participants in a trading venue are unable to conclude a
2. In
relation
to
CCPs
that
are
authorised
or
recognised
for transaction with one or more other participants in that venue
the purpose of the clearing obligation, the ESMA public register
because of the absence of clearing arrangements to which all
shall include for each CCP:
participants have access.
(a) the identification code, in accordance with Article 3
2. Access by a CCP to a trading venue which is already
of Implementing Commission Regulation (EU) served by another CCP shall not be deemed to give rise to
No 1247/2012 ( 1 );
liquidity fragmentation within the trading venue if, without
the need to impose a requirement on clearing members of
the incumbent CCP to become clearing members of the
(b) the full name;
requesting CCP, all participants to the trading venue can clear,
directly or indirectly, through one of the following:
(c) the country of establishment;
(a) at least one CCP in common;
(d) the competent authority designated in accordance with
Article 22 of Regulation (EU) No 648/2012.
(b) clearing arrangements established by the CCPs.
3. The
arrangements
for
the
fulfilment
of
the
conditions
3. In
relation
to
the
dates
from
which
the
clearing
obligation under point (a) or (b) of paragraph 2 shall be established
takes effect, including any phased-in implementation, the ESMA
before the requesting CCP starts providing clearing services to
public register shall include:
the relevant trading venue.
(a) the identification of the categories of counterparties to
4. Access
to
a
common
CCP
as
referred
to
in
point
(a)
of
which each phase-in period applies;
paragraph 2 may be established through two or more clearing
members, or two or more clients or through indirect clearing
( 1 ) OJ L 352, 21.12.2012, p. 20.
arrangements.

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5. Clearing
arrangements
referred
to
in
point
(b)
of
(b) EUR 1 billion in gross notional value for OTC equity
paragraph 2 may foresee the transfer of transactions executed
derivative contracts;
by such market participants to clearing members of other CCPs.
Although access by a CCP to a trading venue should not require
interoperability, an interoperability arrangement which has been
agreed by the relevant CCPs and approved by the relevant
(c) EUR 3 billion in gross notional value for OTC interest rate
competent authorities may be used to fulfil the requirement
derivative contracts;
for access to common clearing arrangements.
CHAPTER VII
(d) EUR 3 billion in gross notional value for OTC foreign
exchange derivative contracts;
NON-FINANCIAL COUNTERPARTIES
Article 10
(Article 10(4)(a) of Regulation (EU) No 648/2012)
(e) EUR 3 billion in gross notional value for OTC commodity
Criteria for establishing which OTC derivative contracts
derivative contracts and other OTC derivative contracts not
are objectively reducing risks
provided for under points (a) to (d).
1. An OTC derivative contract shall be objectively
measurable as reducing risks directly relating to the commercial
activity or treasury financing activity of the non-financial
CHAPTER VIII
counterparty or of that group, when, by itself or in combination
with other derivative contracts, directly or through closely
RISK-MITIGATION TECHNIQUES FOR OTC DERIVATIVE
correlated instruments, it meets one of the following criteria:
CONTRACTS NOT CLEARED BY A CCP
Article 12
(Article 11(14)(a) of Regulation (EU) No 648/2012)
(a) it covers the risks arising from the potential change in the
value of assets, services, inputs, products, commodities or
Timely confirmation
liabilities that the non-financial counterparty or its group
owns, produces, manufactures, processes, provides,
1. An
OTC
derivative
contract
concluded
between
financial
purchases, merchandises, leases, sells or incurs or reasonably
counterparties or non-financial counterparties referred to in
anticipates owning, producing, manufacturing, processing,
Article 10 of Regulation (EU) No 648/2012 and which is not
providing, purchasing, merchandising, leasing, selling or
cleared by a CCP shall be confirmed, where available via elec
incurring in the normal course of its business;
tronic means, as soon as possible and at the latest:
(b) it covers the risks arising from the potential indirect impact
(a) for credit default swaps and interest rate swaps that are
on the value of assets, services, inputs, products,
concluded up to and including 28 February 2014, by the
commodities or liabilities referred to in point (a), resulting
end of the second business day following the date of
from fluctuation of interest rates, inflation rates, foreign
execution of the OTC derivative contract;
exchange rates or credit risk;
(c) it qualifies as a hedging contract pursuant to International
(b) for credit default swaps and interest rate swaps that are
Financial Reporting Standards (IFRS) adopted in accordance
concluded after 28 February 2014, by the end of the
with Article 3 of Regulation (EC) No 1606/2002 of the
business day following the date of execution of the OTC
European Parliament and of the Council ( 1 ).
derivative contract;
Article 11
(c) for equity swaps, foreign exchange swaps, commodity swaps
(Article 10(4)(b) of Regulation (EU) No 648/2012)
and all other derivatives not provided for in point (a) that
are concluded up to and including 31 August 2013, by the
Clearing thresholds
end of the third business day following the date of
The clearing thresholds values for the purpose of the clearing
execution of the derivative contract;
obligation shall be:
(d) for equity swaps, foreign exchange swaps, commodity swaps
(a) EUR 1 billion in gross notional value for OTC credit
and all other derivatives not provided for in point (a) that
derivative contracts;
are concluded after 31 August 2013 up to and including
31 August 2014, by the end of the second business day
( 1 ) OJ L 243, 11.9.2002, p. 1.
following the date of execution of the derivative contract;

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(e) for equity swaps, foreign exchange swaps, commodity swaps
possible and, at the latest, one business day following the
and all other derivatives not provided for in point (a) that
deadline set in paragraph 1 or 2 as relevant.
are concluded after 31 August 2014, by the end of the
business day following the date of execution of the
derivative contract.
4. Financial
counterparties
shall
have
the
necessary
procedure
to report on a monthly basis to the competent authority
designated in accordance with Article 48 of Directive
2. An OTC derivative contract concluded with a non-
2004/39/EC of the European Parliament and of the Council ( 1 )
financial counterparty not referred to in Article 10 of Regu
the number of unconfirmed OTC derivative transactions
lation (EU) No 648/2012, shall be confirmed as soon as
referred to in paragraphs 1 and 2 that have been outstanding
possible, where available via electronic means, and at the latest:
for more than five business days.
Article 13
(a) for credit default swaps and interest rate swaps that are
concluded up to and including 31 August 2013, by the
(Article 11(14)(a) of Regulation (EU) No 648/2012)
end of the fifth business day following the date of
Portfolio reconciliation
execution of the OTC derivative contract;
1. Financial and non-financial counterparties to an OTC
derivative contract shall agree in writing or other equivalent
electronic means with each of their counterparties on the
(b) for credit default swaps and interest rate swaps that are
arrangements under which portfolios shall be reconciled. Such
concluded after 31 August 2013 up to and including
agreement shall be reached before entering into the OTC
31 August 2014, by the end of the third business day
derivative contract.
following the date of execution of the OTC derivative
contract;
2. Portfolio
reconciliation
shall
be
performed
by
the
counter
parties to the OTC derivative contracts with each other or by a
qualified third party duly mandated to this effect by a counter
(c) for credit default swaps and interest rate swaps that are
party. The portfolio reconciliation shall cover key trade terms
concluded after 31 August 2014, by the end of the
that identify each particular OTC derivative contract and shall
second business day following the date of execution of
include at least the valuation attributed to each contract in
the OTC derivative contract;
accordance with Article 11(2) of Regulation (EU) No 648/2012.
(d) for equity swaps, foreign exchange swaps, commodity swaps
3. In
order
to
identify
at
an
early
stage
any
discrepancy
in
a
and all other derivatives not provided for in point (a) that
material term of the OTC derivative contract, including its valu
are concluded up to and including 31 August 2013, by the
ation, the portfolio reconciliation shall be performed:
end of the seventh business day following the date of
execution of the derivative contract;
(a) for a financial counterparty or a non-financial counterparty
referred to in Article 10 of Regulation (EU) No 648/2012:
(e) for equity swaps, foreign exchange swaps, commodity swaps
and all other derivatives not provided for in point (a) that
are concluded after 31 August 2013 up to and including
31 August 2014, by the end of the fourth business day
(i) each business day when the counterparties have 500 or
following the date of execution of the derivative contract;
more OTC derivative contracts outstanding with each
other;
(f) for equity swaps, foreign exchange swaps, commodity swaps
(ii) once per week when the counterparties have between
and all other derivatives not provided for in point (a) that
51 and 499 OTC derivative contracts outstanding with
are concluded after 31 August 2014, by the end of the
each other at any time during the week;
second business day following the date of execution.
(iii) once per quarter when the counterparties have 50 or
3. Where
a
transaction
referred
to
in
paragraph
1
or
2
is
less OTC derivative contracts outstanding with each
concluded after 16.00 local time, or with a counterparty located
other at any time during the quarter;
in a different time zone which does not allow confirmation by
the set deadline, the confirmation shall take place as soon as
( 1 ) OJ L 145, 30.4.2004, p. 1.

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(b) for a non-financial counterparty not referred to in Article 10
relating to an OTC derivative contract, its valuation or the
of Regulation (EU) No 648/2012:
exchange of collateral for an amount or a value higher than
EUR 15 million and outstanding for at least 15 business days.
(i) once per quarter when the counterparties have more
than 100 OTC derivative contracts outstanding with
Article 16
each other at any time during the quarter;
(Article 11(14)(b) of Regulation (EU) No 648/2012)
Market conditions that prevent marking-to-market
(ii) once per year when the counterparties have 100 or less
1. Market
conditions
that
prevent
marking-to
market
of
an
OTC derivative contracts outstanding with each other.
OTC derivative contract shall be considered to occur in either of
the following situations:
Article 14
(a) when the market is inactive;
(Article 11(14)(a) of Regulation (EU) No 648/2012)
Portfolio compression
(b) where the range of reasonable fair values estimates is
Financial counterparties and non-financial counterparties with
significant and the probabilities of the various estimates
500 or more OTC derivative contracts outstanding with a
cannot reasonably be assessed.
counterparty which are not centrally cleared shall have in
place procedures to regularly, and at least twice a year,
analyse the possibility to conduct a portfolio compression
2. A
market
for
an
OTC
derivative
contract
shall
be
exercise in order to reduce their counterparty credit risk and
considered inactive when quoted prices are not readily and
engage in such a portfolio compression exercise.
regularly available and those prices available do not represent
actual and regularly occurring market transactions on an arm’s
length basis.
Financial counterparties and non-financial counterparties shall
ensure that they are able to provide a reasonable and valid
explanation to the relevant competent authority for concluding
Article 17
that a portfolio compression exercise is not appropriate.
(Article 11(14)(b) of Regulation (EU) No 648/2012)
Criteria for using marking-to-model
Article 15
For using marking-to-model, financial and non-financial
counterparties shall have a model that:
(Article 11(14)(a) of Regulation (EU) No 648/2012)
Dispute resolution
1. When
concluding
OTC
derivative
contracts
with
each (a) incorporates all factors that counterparties would consider
other, financial counterparties and non-financial counterparties
in setting a price, including using as much as possible
shall have agreed detailed procedures and processes in relation
marking-to-market information;
to:
(b) is consistent with accepted economic methodologies for
pricing financial instruments;
(a) the identification, recording, and monitoring of disputes
relating to the recognition or valuation of the contract
and to the exchange of collateral between counterparties.
Those procedures shall at least record the length of time
(c) is calibrated and tested for validity using prices from any
for which the dispute remains outstanding, the counterparty
observable current market transactions in the same financial
and the amount which is disputed;
instrument or based on any available observable market
data;
(b) the resolution of disputes in a timely manner with a specific
(d) is validated and monitored independently, by another
process for those disputes that are not resolved within five
division than the division taking the risk;
business days.
(e) is duly documented and approved by the board of directors
2. Financial
counterparties
shall
report
to
the
competent
as frequently as necessary, following any material change
authority designated in accordance with Article 48 of
and at least annually. This approval may be delegated to a
Directive 2004/39/EC any disputes between counterparties
committee.

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Article 18
(a) within one month of the receipt of the notification with
respect to a notification under Article 11(7) or (9) of Regu
(Article 11(14)(c) of Regulation (EU) No 648/2012)
lation (EU) No 648/2012;
Details of the intragroup transaction notification to the
competent authority
(b) within one month from the decision being submitted to the
1. The
application
or
notification
to
the
competent
authority
counterparty with respect to a decision of the competent
of the details of the intragroup transaction shall be in writing
authority under Article 11(6), (8) or (10) of Regulation (EU)
and shall include:
No 648/2012.
(a) the legal counterparties to the transactions including their
2. The
notification
to
ESMA
shall
include:
identifiers in accordance with Article 3 of Implementing
Regulation (EU) No 1247/2012;
(a) the information listed in Article 18;
(b) the corporate relationship between the counterparties;
(b) whether there is a positive or a negative decision;
(c) details of the supporting contractual relationships between
the parties;
(c) in the case of a positive decision:
(d) the category of intragroup transaction as specified under
(i) a summary of the reason for considering that the
paragraph 1 and points (a) to (d) of paragraph 2 of
conditions set in Article 11(6), (7), (8), (9) or (10) of
Article 3 of Regulation (EU) No 648/2012;
Regulation (EU) No 648/2012 as applicable are fulfilled;
(e) details of the transactions for which the counterparty is
(ii) whether the exemption is a full exemption or a partial
seeking the exemption, including:
exemption with respect to of a notification related to
Article 11(6), (8) or (10) of Regulation (EU)
No 648/2012;
(i) the asset class of OTC derivative contracts;
(d) in the case of a negative decision:
(ii) the type of OTC derivative contracts;
(i) the identification of the conditions of Article 11(6), (7),
(iii) the type of underlyings;
(8), (9) or (10) of Regulation (EU) No 648/2012 as
applicable that are not fulfilled;
(iv) the notional and settlement currencies;
(ii) a summary of the reason for considering that such
(v) the range of contract tenors;
conditions are not fulfilled.
(vi) the settlement type;
Article 20
(Article 11(14)(d) of Regulation (EU) No 648/2012)
(vii) the anticipated size, volumes and frequency of OTC
Information on the intragroup exemption to be publicly
derivative contracts per annum.
disclosed
2. As
part
of
its
application
or
notification
to
the
relevant The information on an intragroup exemption to be disclosed
competent authority, a counterparty shall also submit
publicly shall include:
supporting information evidencing that the conditions of
Article 11(6) to (10) of Regulation (EU) No 648/2012 are
(a) the legal counterparties to the transactions including their
fulfilled. The supporting documents shall include copies of
identifiers in accordance with Article 3 of Implementing
documented risk management procedures, historical transaction
Regulation (EU) No 1247/2012;
information, copies of the relevant contracts between the parties
and may include a legal opinion upon request from the
competent authority.
(b) the relationship between the counterparties;
Article 19
(c) whether the exemption is a full exemption or a partial
(Article 11(14)(d) of Regulation (EU) No 648/2012)
exemption;
Details of the intragroup transaction notification to ESMA
1. The
notification
by
a
competent
authority
of
the
details
of
the intragroup transaction shall be submitted to ESMA in
(d) the notional aggregate amount of the OTC derivative
writing:
contracts for which the intragroup exemption applies.

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Article 21
Entry into force and application
This Regulation shall enter into force on the twentieth day following that of its publication in the Official
Journal of the European Union.
Articles 13, 14 and 15 shall apply six months after the date of entry into force of this Regulation.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 19 December 2012.
For the Commission
The President
José Manuel BARROSO

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Document Outline

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