Skip to main content
Version date: 2 October 2019 - onwards
Version 3 of 3

OTC Question 4: Responsibility for the status of counterparties [last update 2 October 2019]

 Article 11 of EMIR

Article 11 of EMIR - Responsibility of the FC and NFC

Is counterparty responsible for assessing whether its counterparty is above or below the clearing thresholds?

OTC Answer 4

Counterparties which trade OTC derivatives are obliged to determine their own status. A counterparty should obtain representations from its NFC counterparties detailing their status. However, counterparties that are not subject to the clearing obligation an EMIR requirementfor which they would need to know the status of their counterparties, do not need to obtain representations from their counterparties. For instance, an FC-or an NFC-would not need representations from its counterparties to know whether they need to clear the derivative trades they enter into with them because that FC-or NFC-is not subject to the clearing obligation regardless of the status of its counterparties.

A counterparty is not expected to conduct verifications of the representations received from its counterpar-ties detailing their status and may rely on such representations unless they are in possession of information which clearly demonstrates that those representations are incorrect.

If a counterparty does not obtain representation from one of its counterparties detailing its status, it should assume that the counterparty is above the clearing thresholds and therefore subject to the relevant requirements applicable to FCs+ and NFCs+ respectively. The counterparty making this assumption will inform the other counterparty about the assumption that has been made.