Commission consults on draft Delegated Regulation supplementing EMIR specifying the conditions when commercial terms of central clearing are FRANDT

On 10 March 2021, the European Commission published for consultation a draft Delegated Regulation supplementing the European Market Infrastructure Regulation (EMIR) by specifying the conditions under which the commercial terms for clearing services for over-the-counter (OTC) derivatives are considered to be fair, reasonable, non-discriminatory and transparent (FRANDT).

The objective of the draft delegated act is to specify the conditions under which commercial terms for clearing services of clearing service providers are to be considered to be FRANDT.  The Annex to the draft delegated act sets out the requirements that contractual terms must meet in order to be considered as FRANDT: the transparency of the on-boarding process; the form for a request for proposal; disclosure of commercial terms; risk control assessment; the obligation to lay down in the contractual terms in writing; fees, and pass on costs; and the refusal of clearing orders, suspension of clearing services, liquidation or close-out of client positions, and the termination of contracts.

The deadline for comments on the draft Delegated Regulation is 7 April 2021.

When finalised the draft delegated act will enter into force on the day following that of its publication in the Official Journal of the EU (OJ). It shall apply from 3 months following its publication in the OJ.