On October 1, the European Securities and Markets Authority (ESMA) issued final draft regulatory technical standards (RTS) with respect to the central clearing of four classes of interest rate swaps (IRS). The RTS follows ESMA’s publication on July 11, 2014 of a consultation paper on the IRS clearing mandate, and takes into account feedback to the consultation paper that ESMA received from market participants. The RTS represents the first clearing mandate from ESMA developed pursuant to the European Market Infrastructure Regulation (EMIR), which according to ESMA Chair Steven Maijoor, “will lead to significant improvements in the risk management of EU derivatives markets.”

The following is an overview of the RTS, which specifies: (1) the type of IRS contracts required to be centrally cleared; (2) the type of counterparties4 obligated to clear such contracts, and (3) a phased-in compliance schedule based on the counterparty classification.