Clearing

EMIR Clearing

Introduction to the EMIR Clearing requirements

Under the European Markets Infrastructure Regulation (EMIR), financial counterparties and certain non-financial counterparties with large derivatives exposures have to clear derivatives contracts subject to the clearing obligation when traded Over-the-Counter (OTC) with effect from the relevant clearing start date.

Important information for Non-Financial Counterparties (NFCs)

The EMIR Clearing obligation does not apply to 'Non-Financial Counterparties below the clearing thresholds' or 'NFC-'.

Whereas NFC+ were previously required to clear derivative transactions across all asset classes when they exceeded any of the clearing thresholds, EMIR REFIT requires NFC+ to only clear new and novated derivatives subject to the EMIR clearing obligation in the asset class where it exceeds the clearing threshold.

Small Financial Counterparties (FC-) are not subject to the EMIR clearing obligations. They remain however subject to all other EMIR obligations that apply to Financial Counterparties, such as margin requirements for uncleared derivatives, risk mitigation techniques and reporting.

Large Financial Counterparties (FC+) must clear new and novated derivative contracts subject to the clearing obligation across all asset classes.

For more information on counterparties and the classification thresholds as defined by EMIR go to the HSBC EMIR Overview page.

EMIR clearing requirements

In scope Products

To access the full list of products that are in scope of the EMIR Clearing rules, please download ESMA's Public Register for the Clearing Obligation under EMIR document.

Important notes:

  • Additional characteristics must be present in order for a trade to be subject to the clearing obligation. Please refer to Annex I of the relevant Regulatory Technical Standards (RTS) for full details.
  • All products listed as in-scope are dependent on each particular RTS and therefore subject to change.

When does the EMIR clearing obligation begin?

As detailed in the table below, the clearing obligation start date is different depending not only on when the relevant classes of OTC derivatives are declared subject to the clearing obligation, but also depending on the counterparty classification.

In any transaction between counterparties in different categories, the clearing obligation applies on the later date (e.g. a trade between Category 1 and Category 3 must be cleared within the deadline applicable to Category 3 counterparties).

Category                                   Clearing obligation start date for Interest Rates Swaps denominated in EUR, GBP, USD and JPY Clearing obligation start date for Interest Rates Swaps denominated in NOK, PLN and SEK and Credit Default Swaps

Category 1

In force since 21 June 2016

In force since 9 February 2017

Category 2

In force since 21 December 2016

In force since 9 August 2017

Category 3

18 October 2019

18 October 2019

Category 4

In force since 21 December 2018

18 October 2019

EMIR clearing categories

Category 1

You are a category 1 counterparty when you are a clearing member of at least one central counterparty (CCP) which is authorised or recognised under EMIR to clear one or more classes of derivatives which are subject to the clearing obligation, provided your clearing membership allows you to clear one or more of those classes of derivatives.

Category 2

You are a category 2 counterparty when you are:

  • a Financial Counterparty not included in Category 1 and belonging to a group whose aggregate month-end average notional amount of uncleared derivatives was above EUR 8 billion for the 3-month period comprised between 1 January 2016 and 31 March 2016; or
  • an Alternative Investment Fund (AIF) that is an NFC+, not included in Category 1 and belonging to a group whose aggregate month-end average notional amount of uncleared derivatives was above EUR 8 billion for the 3-month period comprised between 1 January 2016 and 31 March 2016.

Category 3

You are a category 3 counterparty when you are:

  • a Financial Counterparty not included in Category 1 or 2; or
  • an Alternative Investment Fund (AIF) that is an NFC+, not included in Category 1 or 2.

Category 4

You are a category 4 counterparty when you are a Non-Financial Counterparty above the EMIR Clearing Threshold or NFC+ not included in Category 1, 2 or 3.

Please note the following HSBC entities categories for the purpose of clearing in-scope interest rate derivatives under EMIR:

  • HSBC Bank plc (LEI: MP6I5ZYZBEU3UXPYFY54) is a category 1 counterparty.
  • HSBC UK Bank plc (LEI: 21380081EP12LC86CB82) is a category 1 counterparty.
  • HSBC Bank USA, National Association (LEI: 1IE8VN30JCEQV1H4R804) is a category 1 counterparty.
  • The Hongkong and Shanghai Banking Corporation Limited (LEI: 2HI3YI5320L3RW6NJ957) is a category 1 counterparty.
  • HSBC France S.A. (LEI: F0HUI1NY1AZMJMD8LP67) is a category 1 counterparty.
  • Trinkaus & Burkhardt AG (LEI: JUNT405OW8OY5GN4DX16) is a category 2 counterparty.

Clearing obligations in the EU and outside the EU

What is the EMIR Clearing obligation when at least one counterparty is established in the EU?

Trades in contracts which have been declared subject to the clearing obligation must be cleared when they involve Financial Counterparties or Non-Financial Counterparties above the threshold (NFC+) where at least one counterparty is established in the EU.

For more information on counterparties as defined by EMIR go to the HSBC EMIR Overview page.

What is the EMIR Clearing obligation when neither counterparty is established in the EU?

Trades in contracts which have been declared subject to the clearing obligation must be cleared, even if neither counterparty is in the EU, in the following cases:

  • Two non-EU (third country) entities that would be subject to the clearing obligation if they were established in the EU, where they are both trading through EU branches;
  • Two non-EU (third country) entities that would be subject to the clearing obligation if they were established in the EU, where one of them has a qualifying guarantee from an EU financial counterparty covering its OTC derivatives activities.

What if you are already subject to the clearing rules in the US?

The EMIR clearing requirements overlap significantly with clearing rules established by the United States Commodities and Futures Trading Commission under Title VII of the Dodd Frank Act. In the event that we already clear certain trades with you in accordance with those rules, we will continue to work closely with you in the coming months to agree how to accommodate the similarities and differences between the two sets of rules.

For more information on counterparties as defined by EMIR go to the HSBC EMIR Overview page

Clearing account segregation

Where HSBC Bank plc (HSBC) provides derivatives clearing services as a clearing member of a central counterparty (CCP) which is authorised or recognised under EMIR, we will:

  1. Disclose the levels of client protection CCPs offer in respect of each account type, the consequent degree of segregation associated with each account type and its associated costs. Please review the HSBC EMIR Disclosure.
  2. Offer you a choice between omnibus client segregation and individual client segregation, as described in the above HSBC Risk Disclosure Document.
    Please provide your choice of account by completing the Account Election Form and returning it to emir.clearing@hsbc.com. Absent and pending your election, we will continue to use your existing account structure or select an omnibus account for your business.
  3. Disclose the costs and fees HSBC charges for its derivatives clearing services, together with details of any discounts and rebates available in respect of those costs and fees and the circumstances in which such may apply.

Where The Hongkong and Shanghai Banking Corporation Limited (“HBAP”) provides derivatives clearing services as a clearing member of LCH Ltd. (‘LCH’) which is a CCP authorised or recognised under EMIR, we will:

Please see the HSBC Derivatives Clearing Services Fees Disclosure document.

  1. Disclose the levels of client protection LCH offers in respect of each account type, the consequent degree of segregation associated with each account type and its associated costs. Please review the HBAP EMIR Risk Disclosure for existing clients (if you have been on-boarded before 2021), or the HBAP EMIR Risk Disclosure for new clients (if you have been on-boarded from 1 January 2021 onwards).
  2. Offer you a choice between omnibus client segregation and individual client segregation, as described in the above HBAP EMIR Risk Disclosures. Please provide your choice of account by completing the Existing Client Acknowledgement Form (if you have been on-boarded before 2021) or the New Client Acknowledgement Form (if you have been on-boarded from 1 January 2021 onwards), and returning it to dcsasia.clientsolutions@hsbcib.com.
  3. Disclose the costs and fees HSBC charges for its derivatives clearing services, together with details of any discounts and rebates available in respect of those costs and fees and the circumstances in which such may apply. Please see the HBAP Derivatives Clearing Services Fees Disclosure document.

 

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Last updated: 19 December 2020