Financial counterparties that are subject to the clearing obligation
- Notify FCA and clear OTC derivatives if positions exceed threshold
Retained EU Law
2012
United Kingdom
Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (Text with EEA relevance)
At a glance
What's here
43 compliance obligations
Who this Act binds
Plus 2 non-business duties on Crown ministers, regulators, local authorities or tribunals — shown collapsed under each section below.
What this Act requires
Sections that create concrete duties on businesses or carry penalties. Procedural and definitional sections are folded into the “Browse other sections” expander at the bottom of each group. Click any section title to read the source text on legislation.gov.uk.
Access to a trading venue
- Grant CCPs non-discriminatory access to your trading venue
Reporting obligation
- Report derivative contract details to a trade repository within one working day
Non-financial counterparties
- Monitor OTC derivative positions and notify FCA if clearing thresholds are exceeded
Risk-mitigation techniques for OTC derivative contracts not cleared by a CCP
- Put risk-mitigation procedures in place for non-cleared OTC derivatives
Authorisation of a CCP
- Apply for CCP authorisation before providing clearing services
Capital requirements
- Maintain minimum capital and risk-based capital reserves
General provisions
- Establish robust governance, risk management and compliance arrangements
Senior management and the board
- Appoint a board with independent members and ensure senior management is fit and proper
Risk committee
- Establish and operate a risk committee with required governance and reporting
Record keeping
- Keep records of all activities and contracts for 10 years
Information to competent authority
- Notify regulator of changes in CCP ownership or management
Conflicts of interest
- Maintain conflict-of-interest management and information safeguards
Business continuity
- Establish and maintain business continuity policy and disaster recovery plan
Outsourcing
- Oversee outsourced functions and keep full responsibility
General provisions
- Act fairly and professionally toward clearing members
Participation requirements
- Set fair and transparent rules for membership of a central counterparty
Transparency
- CCP and clearing members must publicly disclose prices and fees
Segregation and portability
- Segregate client assets and offer choice of segregation levels
Exposure management
- Measure and assess liquidity and credit exposures to clearing members near real-time
Margin requirements
- Impose, call and collect margins to limit credit exposures
Default fund
Other duties (1) — Crown / regulator
- Maintain a default fund to cover member defaults Statutory regulator
Other financial resources
- Maintain pre-funded financial resources to cover losses beyond margin and default fund
Liquidity risk controls
- Maintain adequate liquidity and manage liquidity risk
Default waterfall
- Use default waterfall order when a clearing member defaults
Collateral requirements
- Central counterparties must accept only highly liquid collateral and apply adequate haircuts
Investment policy
- Invest your CCP's financial resources in highly liquid, low-risk assets only
Default procedures
- CCP must implement and enforce default procedures
Review of models, stress testing and back testing
- Regularly test your risk models and parameters with stress tests and back tests
Settlement
- Settle transactions using central bank money and state delivery obligations
Calculation of K CCP
- Calculate K_CCP capital requirement and report quarterly
General rules for the calculation of K CCP
- CCPs must calculate KCCP exposure values using specified formulas
Reporting of information
- Report financial resources information to clearing members
Calculation of specific items to be reported by the CCP
- Include certain financial resources in default fund reporting
Interoperability arrangements
- Provide non-discriminatory access in CCP interoperability arrangements
Risk management
- Manage risks of interoperability arrangements with other CCPs
Provision of margins among CCPs
- CCPs must segregate interoperating CCP assets and restrict use of initial margins
Registration of a trade repository
- Register your trade repository with the FCA and comply with registration conditions
Recognition of trade repositories
Other duties (1) — Crown / regulator
- FCA must decide on trade repository recognition applications within set timeframes Statutory regulator
General requirements
- Maintain robust governance and operational arrangements as a trade repository
Operational reliability
- Manage operational risk, maintain business continuity plan, and plan for orderly substitution
Safeguarding and recording
- Safeguard, record and prevent misuse of derivative transaction data
Transparency and data availability
- Publish aggregate derivatives positions and grant regulators direct data access
Browse 87 other sections — procedural / definitional / commencement
Subject matter and scope
Definitions
Equivalence decisions for the purposes of the definition of OTC derivatives
Intragroup transactions
Clearing obligation
Clearing obligation procedure
Public register
Suspension of the clearing obligation
Risk reduction services
Access to a CCP
Penalties
Mechanism to avoid duplicative or conflicting rules
Conditions for making technical standards
Extension of activities and services
Procedure for granting and refusing authorisation
College
Opinion of the college
Withdrawal of authorisation
Review and evaluation
Competent authority
Cooperation between authorities
Supervisory cooperation between competent authorities and ESMA with regards to authorised CCPs
Emergency situations
CCP Supervisory Committee
Consultation of central banks of issue
Decision making within the CCP Supervisory Committee
Decision making within the Board of Supervisors
Accountability
Recognition of a third-country CCP
Comparable compliance
Ongoing compliance with the conditions for recognition
Third-country CCP college
Fees
Exercise of the powers referred to in Articles 25f to 25h
Request for information
General investigations
On-site inspections
Procedural rules for taking supervisory measures and imposing fines
Fines
Periodic penalty payments
Hearing of the persons concerned
Disclosure, nature, enforcement and allocation of fines and periodic penalty payments
Review by the Court of Justice
Amendments to Annex IV
Withdrawal of recognition
Supervisory measures by ESMA
Shareholders and members with qualifying holdings
Assessment
Approval of interoperability arrangements
Application for registration
Notification of and consultation with competent authorities prior to registration
Examination of the application
Notification of ESMA decisions relating to registration
Exercise of the powers referred to in Articles 61 to 63
Request for information
General investigations
On-site inspections
Procedural rules for taking supervisory measures and imposing fines
Fines
Periodic penalty payments
Hearing of the persons concerned
Disclosure, nature, enforcement and allocation of fines and periodic penalty payments
Review by the Court of Justice
Amendments to Annex II
Withdrawal of registration
Publication and notification of decisions about registration of trade repositories
Reference to the Tribunal
Supervisory fees
Supervisory measures by ESMA
Delegation of tasks by ESMA to competent authorities
Equivalence ...
Cooperation arrangements
Mutual direct access to data
Exercise of the delegation
Professional secrecy
Exchange of information
Regulations
FCA rules
Bank of England rules
Reports and review
Committee procedure
Amendment to Directive 98/26/EC
Websites
Transitional provisions
Further transitional provision
Staff and resources of ESMA
Entry into force
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