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Preamble

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012, and in particular Article 32(1) thereof,

Whereas:

  1. (1)

    Regulation (EU) No 600/2014 provides for an obligation to trade on a regulated market, a multilateral trading facility, an organised trading facility or an equivalent third-country trading venue certain classes of derivatives, or relevant subsets thereof, which have been declared subject to the clearing obligation referred to in Article 4 of Regulation (EU) No 648/2012 of the European Parliament and of the Council. That trading obligation should only apply to derivatives that are sufficiently liquid and available for trading on at least one trading venue.

  2. (2)

    For interest rate derivatives subject to the clearing obligation, liquidity is concentrated in derivative contracts which have the most standardised characteristics. Those characteristics should therefore be taken into consideration when establishing the classes of derivatives subject to the trading obligation.

  3. (3)

    Similarly, liquidity in interest rate derivatives subject to the clearing obligation is concentrated in derivative contracts having certain benchmark tenors. It is therefore appropriate to limit the trading obligation to the derivatives with those benchmark tenors. In order to distinguish derivative contracts starting immediately after the execution of the trade from derivative contracts starting at a predetermined date in the future, the tenor of a contract should be calculated based on the effective date at which the obligations under the contract come into effect. However, to adequately take into account the derivatives' liquidity pattern and to avoid circumvention of the trading obligation, it is important not to make use of benchmark tenors as strict thresholds but rather as points of reference for targeted intervals.

  4. (4)

    For credit derivatives, with respect to the two index credit default swaps that are subject to the clearing obligation, liquidity is concentrated in the current on-the-run series and the latest off-the-run series. It is therefore appropriate to limit the application of the trading obligation to derivatives belonging to those series only.

  5. (5)

    Commission Delegated Regulation (EU) 2015/2205 (interest rate OTC derivatives) and Commission Delegated Regulation (EU) 2016/592 (credit OTC derivatives) identify four categories of counterparty to which the clearing obligation applies. In order to accommodate the specific needs of each category of counterparty, a phased-in application of that clearing obligation has also been laid down in those Delegated Regulations. Given the link between the clearing obligation and the trading obligation, the trading obligation for each category of counterparty should only take effect once the clearing obligation for that category has already taken effect.

  6. (6)

    This Regulation is based on the draft regulatory technical standards submitted by the European Securities and Markets Authority (ESMA) to the Commission.

  7. (7)

    This Regulation is adopted on the basis of the facts, and in particular the prevailing liquidity, at the time of its adoption and will be reviewed and amended as appropriate in accordance with market developments.

  8. (8)

    ESMA has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the opinion of the Securities and Markets Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council.

  9. (9)

    In order to ensure the smooth functioning of the financial markets, this Regulation should enter into force as a matter of urgency and apply from the same date as the date of application of Regulation (EU) No 600/2014,

HAS ADOPTED THIS REGULATION:

Article -2 Application

This Regulation applies to ‘financial counterparties’ and ‘non-financial counterparties’ subject to article 28 of Regulation 600/2014/EU.

Article -1 Interpretation

In this Regulation, where a term is defined in article 2 of Regulation 600/2014/EU, as amended by the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018, that definition shall apply for the purposes of this Regulation.

Article 1 Derivatives subject to the trading obligation

The derivatives set out in the Annex shall be subject to the trading obligation referred to in Article 28 of Regulation (EU) No 600/2014.

A derivative referred to in Table 1, Table 2 and Table 3 of the Annex shall be deemed to have a tenor of 2, 3, 4, 5, 6, 7, 8, 9, 10, 12, 15, 20 or 30 years where the period of time between the date at which the obligations under that contract come into effect and the termination date of that contract equals one of those periods of time, plus or minus 5 days.

Article 2 Dates from which the trading obligation takes effect

The trading obligation referred to in Article 28 of Regulation (EU) No 600/2014 shall, for each category of counterparties referred to in Article 3 of Delegated Regulation (EU) 2015/2205 and Article 3 of Delegated Regulation (EU) 2016/592, take effect from the later of the following dates:

  1. (a)

    3 January 2018;

  2. (b)

    the date referred to in Article 3 of Delegated Regulation (EU) 2015/2205 or Article 3 of Delegated Regulation (EU) 2016/592 for that category of counterparties.

Article 3 Entry into force

This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union.

Signature

Done at Brussels, 17 November 2017.

For the Commission

The President

Jean-Claude JUNCKER

ANNEX Derivatives subject to the trading obligation

Table 1 Fixed-to-float interest rate swaps denominated in EUR

Fixed-to-Float single currency interest rate swaps – EUR EURIBOR 3 and 6M

Fixed leg

Floating leg

Settlement currency

EUR

EUR

Trade start type

Spot (T+2)

Spot (T+2)

Optionality

No

No

Tenor

2,3,4,5,6,7,8,9,10,12,15,20,30Y

2,3,4,5,6,7,10,15,20,30Y

Notional type

Constant Notional

Constant Notional

Payment frequency

Annual or semi-annual

Annual or semi-annual

Day count convention

30/360 or Actual/360

30/360 or Actual/360

Reference index

EURIBOR 6M

EURIBOR 3M

Reset frequency

Semi-annual or quarterly

Quarterly

Day count convention

Actual/360

Actual/360

Table 2 Fixed-to-float interest rate swaps denominated in USD

Fixed-to-Float single currency interest rate swaps – USD LIBOR 3M

Fixed leg

Floating leg

Settlement currency

USD

USD

Trade start type

Spot (T+2)

IMM (next two IMM dates)

Optionality

No

No

Tenor

2,3,4,5, 6,7,10,12,15,20,30Y

2,3,4,5,6,7,10,12,15,20,30Y

Notional type

Constant Notional

Constant Notional

Payment frequency

Annual or semi-annual

Annual or semi-annual

Day count convention

30/360 or Actual/360

30/360 or Actual/360

Reference index

USD LIBOR 3M

USD LIBOR 3M

Reset frequency

Quarterly

Quarterly

Day count convention

Actual/360

Actual/360

Fixed-to-Float single currency interest rate swaps – USD LIBOR 6M

Fixed leg

Floating leg

Settlement currency

USD

USD

Trade start type

Spot (T+2)

IMM (next two IMM dates)

Optionality

No

No

Tenor

2,3,4,5, 6,7,10,12,15,20,30Y

2,3,4,5,6,7,10,12,15,20,30Y

Notional type

Constant Notional

Constant Notional

Payment frequency

Annual or semi-annual

Annual or semi-annual

Day count convention

30/360 or Actual/360

30/360 or Actual/360

Reference index

USD LIBOR 6M

USD LIBOR 6M

Reset frequency

Quarterly or semi-annual

Quarterly or semi-annual

Day count convention

Actual/360

Actual/360

Table 3 Fixed-to-float interest rate swaps denominated in GBP

Fixed-to-Float single currency interest rate swaps – GBP LIBOR 3 and 6M

Fixed leg

Floating leg

Settlement currency

GBP

GBP

Trade start type

Spot (T+0)

Spot (T+0)

Optionality

No

No

Tenor

2,3,4,5,6,7,10,15,20,30Y

2,3,4,5,6,7,10,15,20,30Y

Notional type

Constant Notional

Constant Notional

Payment frequency

Quarterly or semi-annual

Quarterly or semi-annual

Day count convention

Actual/365F

Actual/365F

Reference index

GBP LIBOR 6M

GBP LIBOR 3M

Reset frequency

Semi-annual or quarterly

Quarterly

Day count convention

Actual/365F

Actual/365F

Table 4 Index CDS

Type

Sub-type

Geographical zone

Reference index

Settlement Currency

Series

Tenor

Index CDS

Untranched index

Europe

iTraxx Europe Main

EUR

on-the-run series

first off-the-run series

5y

Index CDS

Untranched index

Europe

iTraxx Europe Crossover

EUR

on-the-run series

first off-the-run series

5y