Date: 2019-04-10Category: Not ApplicableState: Union GovernmentCountry: Europe
Commission Delegated Regulation (EU) 2019/565 of 28 March 2019 amending Delegated Regulation (EU) 2015/2205, Delegated Regulation (EU) 2016/592 and Delegated Regulation (EU) 2016/1178 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council as regards the date at which the clearing obligation takes effect for certain types of contracts (Text with EEA relevance.)
Executive Summary:
This Commission Delegated Regulation (EU) 2019/565 amends previous regulations (EU 2015/2205, EU 2016/592, and EU 2016/1178) regarding the effective date of the clearing obligation for certain OTC derivative contracts. The amendments address the United Kingdom's withdrawal from the European Union. The regulation specifies conditions for a deferred clearing obligation and adjusts minimum remaining maturities for certain financial counterparties. It enters into force the day after its publication in the Official Journal of the European Union and shall apply from the date following that on which the Treaties cease to apply to and in the United Kingdom pursuant to Article 50(3) of the Treaty on European Union, but will not apply if a withdrawal agreement has been concluded, or the period has been extended beyond 31 December 2019.
Key Points / Main Content:
Clearing Obligation Amendments:
* A 12-month deferral of the clearing obligation is granted under specific conditions:
* The clearing obligation was not triggered by April 11, 2019.
* Contracts are novated solely to replace a UK-established counterparty with one in a Member State.
Minimum Remaining Maturity:
* For Category 3 financial counterparties and specific transactions, the minimum remaining maturity at the date the clearing obligation takes effect is specified as follows:
* Delegated Regulation EU 2015/2205:
* 50 years for contracts in Table 1 or Table 2 of the Annex.
* 3 years for contracts in Table 3 or Table 4 of the Annex.
* Delegated Regulation EU 2016/592:
* 5 years and 3 months for all relevant contracts.
* Delegated Regulation EU 2016/1178:
* 15 years for contracts in Table 1 of Annex I.
* 3 years for contracts in Table 2 of Annex I.
Entry into Force and Application:
* The Regulation enters into force the day following its publication in the Official Journal of the European Union.
* It applies from the date the Treaties cease to apply to the UK.
* The Regulation does not apply if:
* A withdrawal agreement with the UK is in force.
* The Article 50(3) period is extended beyond December 31, 2019.
Impact Analysis:
Financial Counterparties:
* Impact: Financial counterparties, particularly those in Category 3 and those novating contracts to replace UK counterparties, are affected by the adjusted clearing obligation dates and minimum remaining maturity requirements.
* Action Required: Assess existing OTC derivative contracts, determine if novation is required, and ensure compliance with the new clearing obligation timelines and maturity requirements.
Market Participants:
* Impact: Market participants are affected by the changes to the clearing obligation and need to adapt their strategies accordingly.
* Action Required: Monitor the situation regarding the UK's withdrawal and its impact on their OTC derivative contracts and clearing obligations.
European Securities and Markets Authority (ESMA):
* Impact: ESMA drafted the regulatory technical standards on which this regulation is based.
* Action Required: Continue to monitor the impact of Brexit on OTC derivative markets and provide guidance as needed.
Key Entities Referenced
European Union: A political and economic union of member states located primarily in Europe.
United Kingdom: A country in Europe that was formerly a member state of the European Union.
European Commission: An institution of the European Union, responsible for proposing legislation, implementing decisions, upholding the EU treaties and managing the day-to-day business of the EU.
Regulation EU No 648/2012: A regulation of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories.
Treaty on European Union: One of the primary treaties of the European Union, alongside the Treaty on the Functioning of the European Union.
Commission Delegated Regulation EU 2015/2205: A Commission Delegated Regulation supplementing Regulation EU No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on the clearing obligation.
Commission Delegated Regulation EU 2016/592: A Commission Delegated Regulation supplementing Regulation EU No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on the clearing obligation.
Commission Delegated Regulation EU 2016/1178: A Commission Delegated Regulation supplementing Regulation EU No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on the clearing obligation.
L 99/6 EN Official Journal of the European Union 10.4.2019
COMMISSION DELEGATED REGULATION (EU) 2019/565
of 28 March 2019
amending Delegated Regulation (EU) 2015/2205, Delegated Regulation (EU) 2016/592 and
Delegated Regulation (EU) 2016/1178 supplementing Regulation (EU) No 648/2012 of the
European Parliament and of the Council as regards the date at which the clearing obligation takes
effect for certain types of contracts
(Text with EEA relevance)
THE EUROPEAN COMMISSION,
Having regard to the Treaty on the Functioning of the European Union,
Having regard to 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 (1), and in particular Article 5(2) thereof,
Whereas:
(1) On 29 March 2017, the United Kingdom submitted the notification of its intention to withdraw from the Union
pursuant to Article 50 of the Treaty on European Union. The Treaties will cease to apply to the United Kingdom
from the date of entry into force of a withdrawal agreement, or failing that, two years after that notification,
unless the European Council, in agreement with the United Kingdom, unanimously decides to extend that period.
(2) Commission Delegated Regulation (EU) 2019/396 (2) provides for an amendment to Commission Delegated
Regulation (EU) 2015/2205 (3), Commission Delegated Regulation (EU) 2016/592 (4) and Commission Delegated
Regulation (EU) 2016/1178 (5) as regards the date at which the clearing obligation takes effect for certain types
of contracts. Pursuant to Article 4 of Delegated Regulation (EU) 2019/396, that Regulation is to apply from the
date following that on which the Treaties cease to apply to and in the United Kingdom pursuant to Article 50(3)
of the Treaty on European Union, unless a withdrawal has entered into force by that date or the two year period
referred to in Article 50(3) of the Treaty on European Union has been extended.
(3) By letter of 20 March 2019, the United Kingdom submitted a request for an extension of the period provided for
in Article 50(3) of the Treaty on European Union until 30 June 2019, with a view to finalising the ratification of
the Withdrawal Agreement (6). On 21 March 2019, the European Council agreed to an extension until 22 May
2019, provided the Withdrawal Agreement is approved by the House of Commons in the following week. If that
is not the case, the European Council agreed to an extension until 12 April 2019. Consequently, Delegated
Regulation (EU) 2019/396 will not apply.
(4) However, the reasons underlying Delegated Regulation (EU) 2019/396 will remain, regardless of any extension of
the period referred to in Article 50(3) of the Treaty on European Union. In particular, the risks to the smooth
functioning of the market and a level playing field between counterparties established in the Union will persist in
the case of the United Kingdom's withdrawal from the Union without an agreement after the extended period.
Those risks are expected to remain for the foreseeable future.
(1) OJ L 201, 27.7.2012, p. 1.
(2) Commission Delegated Regulation (EU) 2019/396 of 19 December 2018 amending Delegated Regulation (EU) 2015/2205, Delegated
Regulation (EU) 2016/592 and Delegated Regulation (EU) 2016/1178 supplementing Regulation (EU) No 648/2012 of the European
Parliament and of the Council as regards the date at which the clearing obligation takes effect for certain types of contracts (OJ L 71,
13.3.2019, p. 11).
(3) Commission Delegated Regulation (EU) 2015/2205 of 6 August 2015 supplementing Regulation (EU) No 648/2012 of the European
Parliament and of the Council with regard to regulatory technical standards on the clearing obligation (OJ L 314, 1.12.2015, p. 13).
(4) Commission Delegated Regulation (EU) 2016/592 of 1 March 2016 supplementing Regulation (EU) No 648/2012 of the European
Parliament and of the Council with regard to regulatory technical standards on the clearing obligation (OJ L 103, 19.4.2016, p. 5).
(5) Commission Delegated Regulation (EU) 2016/1178 of 10 June 2016 supplementing Regulation (EU) No 648/2012 of the European
Parliament and of the Council with regard to regulatory technical standards on the clearing obligation (OJ L 195, 20.7.2016, p. 3).
(6) Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European
Atomic Energy Community (OJ C 66 I, 19.2.2019, p. 1).10.4.2019 EN Official Journal of the European Union L 99/7
(5) Delegated Regulation (EU) 2015/2205, Delegated Regulation (EU) 2016/592 and Delegated Regulation (EU)
2016/1178 should therefore be amended accordingly.
(6) This Regulation is based on the draft regulatory technical standards submitted by the European Securities and
Markets Authority to the Commission.
(7) It is necessary to facilitate the implementation of efficient solutions by market participants as quickly as
possible. Therefore, the European Securities and Markets Authority have analysed the potential related costs and
benefits but have not conducted any open public consultation in accordance with the second subparagraph of
Article 10(1) of Regulation (EU) No 1095/2010 of the European Parliament and of the Council (7). For the same
reason, this Regulation should enter into force on the day following that of its publication,
HAS ADOPTED THIS REGULATION:
Article 1
Amendment to Delegated Regulation (EU) 2015/2205
Delegated Regulation (EU) 2015/2205 is amended as follows:
(1) in Article 3, the following paragraph is added:
‘3. By way of derogation from paragraphs 1 and 2, in respect of contracts pertaining to a class of OTC derivatives
set out in the Annex, the clearing obligation shall take effect 12 months from the date of application of this
Regulation where the following conditions are fulfilled:
(a) the clearing obligation has not been triggered by 11 April 2019;
(b) the contracts are novated for the sole purpose of replacing the counterparty established in the United Kingdom
with a counterparty established in a Member State.’;
(2) in Article 4, paragraph 3 is replaced by the following:
‘3. For financial counterparties in Category 3 and for transactions referred to in paragraphs 2 and 3 of Article 3
of this Regulation concluded between financial counterparties, the minimum remaining maturity referred to in
point (ii) of Article 4(1)(b) of Regulation (EU) No 648/2012, at the date the clearing obligation takes effect, shall be:
(a) 50 years for contracts that belong to the classes of Table 1 or Table 2 of the Annex;
(b) 3 years for contracts that belong to the classes of Table 3 or Table 4 of the Annex.’
Article 2
Amendment to Delegated Regulation (EU) 2016/592
Delegated Regulation (EU) 2016/592 is amended as follows:
(1) in Article 3, the following paragraph is added:
‘3. By way of derogation from paragraphs 1 and 2, in respect of contracts pertaining to a class of OTC derivatives
set out in the Annex, the clearing obligation shall take effect 12 months from the date of application of this
Regulation where the following conditions are fulfilled:
(a) the clearing obligation has not been triggered by 11 April 2019;
(b) the contracts are novated for the sole purpose of replacing the counterparty established in the United Kingdom
with a counterparty established in a Member State.’;
(2) in Article 4, paragraph 3 is replaced by the following:
‘3. For financial counterparties in Category 3 and for transactions referred to in paragraphs 2 and 3 of Article 3
of this Regulation concluded between financial counterparties, the minimum remaining maturity referred to in
point (ii) of Article 4(1)(b) of Regulation (EU) No 648/2012, at the date the clearing obligation takes effect, shall be
5 years and 3 months.’
(7) Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European
Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EC and repealing Commission
Decision 2009/77/EC (OJ L 331, 15.12.2010, p. 84).L 99/8 EN Official Journal of the European Union 10.4.2019
Article 3
Amendment to Delegated Regulation (EU) 2016/1178
Delegated Regulation (EU) 2016/1178 is amended as follows:
(1) in Article 3, the following paragraph is added:
‘3. By way of derogation from paragraphs 1 and 2, in respect of contracts pertaining to a class of OTC derivatives
set out in the Annex, the clearing obligation shall take effect 12 months from the date of application of this
Regulation where the following conditions are fulfilled:
(a) the clearing obligation has not been triggered by 11 April 2019;
(b) the contracts are novated for the sole purpose of replacing the counterparty established in the United Kingdom
with a counterparty established in a Member State.’;
(2) in Article 4, paragraph 3 is replaced by the following:
‘3. For financial counterparties in Category 3 and for transactions referred to in paragraphs 2 and 3 of Article 3
of this Regulation concluded between financial counterparties, the minimum remaining maturity referred to in
point (ii) of Article 4(1)(b) of Regulation (EU) No 648/2012, at the date the clearing obligation takes effect, shall be:
(a) 15 years for contracts that belong to the classes in Table 1 set out in Annex I;
(b) 3 years for contracts that belong to the classes in Table 2 set out in Annex I.’
Article 4
Entry into force and application
This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European
Union.
It shall apply from the date following that on which the Treaties cease to apply to and in the United Kingdom pursuant
to Article 50(3) of the Treaty on European Union.
However, this Regulation shall not apply in either of the following cases:
(a) a withdrawal agreement concluded with the United Kingdom in accordance with Article 50(2) of the Treaty on
European Union has entered into force by the date referred to in the second paragraph of this Article;
(b) a decision has been taken to extend the two year period referred to in Article 50(3) of the Treaty on European
Union beyond 31 December 2019.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 28 March 2019.
For the Commission
The President
Jean-Claude JUNCKER