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With mandatory central clearing of OTC derivative transactions through central counterparties (CCPs) now looking likely to begin in early 2016, according to implementing rules being prepared by the European Commission, derivatives counterparties who have clearing obligations under the European Market Infrastructure Regulation (EU 648/2012) (EMIR) should consider the steps which they will have to take to comply with those clearing obligations, in particular, whether it will be necessary for them to enter into client clearing arrangements with a clearing member (a CM) of a CCP in order to clear transactions subject to the clearing obligation.
As a follow on from our client briefing "EMIR - Gearing Up for Clearing - PART I", which considered the clearing obligations imposed by EMIR, this briefing is intended to provide an overview of the structure of client clearing, together with key points for clients to consider when choosing their CMs.
Annex 3 (updates to "EMIR - Gearing Up for Clearing - PART I") also contains some useful updates to our first briefing. This briefing will be followed by a separate briefing covering the client clearing documentation between a client and its CM and legal and practical issues which clients should consider in relation to client clearing.