Flashnews: Uncleared derivatives: the end of a long wait


The last attempt by European regulators (ESMA, EBA and EIOPA: ESAs) will have been the right one. Delegated Regulation 2021/236, published on 17 February 2021 in the Union Official Journal and entered into force the following day, closes a long period of uncertainty and questioning for the industry.

Indeed, three years after the implementation of MiFID II, FX Forwards and FX Swaps contracts physically settled may finally officially not be subject to exchanges of variation margins if one of the parties is neither an investment firm nor a credit institution (the decision rests with the counterparties and must be included in their risk management procedure).

This new text also covers the issue of the transfer into the Union of contracts originally concluded between a party in the Union of 27 and a party in the UK. It includes a measure allowing new contracts (concluded between two parties in the Union) to benefit from the same exemptions as those applied to original contracts (for example, the exemption of initial margin swaps).

In addition, the delegated regulation extends certain temporary exemptions:

  • Exemption of initial and variation margins for equity options and index options valid until January 4, 2024
  • Until 30 June 2022, exemption from initial and variation margins for intra-group transactions involving a third-country entity where no equivalence has been recognised between the European Union and the European Union

Finally, it should be noted that the phase-in for the requirement to exchange initial margins has been modified to align with the international calendar (Basel Committee – IOSCO). The next steps are 1 September 2021 (for a threshold of 50 billion Euros) and 1 September 2022 (last phase and the threshold of 8 billion Euros).

Useful links:

27 January 2021: Article The settlement discipline regime (CSDR) SDR 2022
10 December 2020: Article On the way to CSDR 2
07 December 2020: Article Cleared derivatives: extension of exemption and Brexit
02 December 2020: Article CSDR & BREXIT
27 November 2020: Article Uncleared derivatives: Yet another new text proposal
02 November 2020: Article Consultation on AIFMD review is launched
26 October 2020: Article The settlement disciplines regime (CSDR): SDR 2022
29 September 2020: Article EMIR Third country CCPs … and the UK
28 September 2020: Article CMU 2 new action plan
25 September 2020: Article New measures on digital finance
23 September 2020: Article AIFMD Review: the process is ongoing
03 September 2020: Article The settlement disciplines regime (CSDR): A likely short-lived date