Flashnews: EMIR REFIT & the FRANDT criteria - The text is finally published


Delegated Regulation 2021/1456, published on 8 September 2021 in the EU OJ and coming into force the following day, puts an end to an ambiguous situation for the industry.

Indeed, if the ESMA issued its technical advices in June 2020, it was on 2 June 2021 that the Commission adopted the legislative text while the obligation, as enacted by EMIR Refit (2019/834), had to apply at the latest on 18 June 2021. The legislative process (a period of 3 months left to Parliament and the Council for a possible objection) led the ESMA to write a «public statement» on 11 June last.

One should recall that the FRANDT* criteria are linked to the clearing obligation introduced by EMIR for certain contracts. Its implementation showed the difficulties that could be faced by small counterparties in their search for a direct or indirect clearing solution and led legislators to soften this requirement (creation of FC+/FC-, reducing the scope of the obligation for NFC+). The FRANDT criteria are intended to give a framework to the relationship between a party subject to the obligation and a clearing service provider.

The official text confirms the scope of application (the provision of clearing services in the Union when they relate to OTC derivative contracts subject to the clearing obligation). Therefore, this does not include equity cash clearing, listed derivatives or contracts that are voluntarily cleared. The fact that the obligation applies when the service is provided in the Union answers the question of territoriality.

The annex to the delegated act details the obligations to be fulfilled in order to provide a "FRANDT" clearing service. The on-boarding process (transparency), the risk control assessment (fair and non-discriminatory) and billing (reasonable) are covered. On the other hand, it fixes at 6 months the notice (except in special cases) to suspend, stop the clearing service.

Finally, the text gives stakeholders time to comply and sets the entry into force on 9 March 2022.

(*) fair reasonable, non-discriminatory and transparent commercial terms