Legal Aspects of OTC Derivatives Clearing

Anne-George Kuzuhara provides on overview of the clearing obligation under the European Market Infrastructure Regulation (EMIR), clearing models and key legal implications for client-clearing on the basis of day-to-day business examples.

Anne-George Kuzuhara

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Question 1 of 3

Question 1: Clearing is…

the process of establishing positions, including the calculation of net obligations, and ensuring that financial instruments and/or cash are available to secure exposures arising from those positions.

b) a settlement system in which each settling participant settles its own multilateral net settlement position by means of a single payment or receipt.

Question 2 of 3

Question 2: The clearing models are:

The continuous dynamic model and the peer-to-peer model.

The underlying clearing model and the excess clearing model.

The agency model and the principal-to-principal model.

Question 3 of 3

Question 3: Under EMIR the OTC derivatives are subject to the clearing obligation entered into between:

Financial counterparties (FCs), non-financial counterparties exceeding clearing threshold (NFC+s) and equivalent third country entities (TCE).

Contractual counterparties (CCs) and non-equivalent third country entities (neTCE).

Only non-financial counterparties exceeding clearing threshold (NFC+s).