OTC Question 20: Clearing obligation [last update 2 October 2019]
Article 4 of EMIR - Clearing obligation
(a) Article 4(1)(b) of EMIR requires to clear the OTC derivative contracts (pertaining to a class of OTC derivatives that has been declared subject to the clearing obligation) that are entered into or novated either on or after the date from which the clearing obligation takes effect. What types of novations are covered in this article?
(b) Does the clearing obligation apply to a swap which results from the exercise of a swaption?
OTC Answer 20
(a) All types of novations are covered, (e.g. the replacement of a party to a derivative contract with another party giving rise to a new derivative contract).
(b) A swap which results from the exercise of a swaption is subject to the clearing obligation when both the swap and the corresponding swaption are entered into on or after the date on which the clearing obligation takes effect.