Several large European buyside derivatives users are set to move to central clearing ahead of the regulatory deadline at the end of the year, amid expectations that the likely additional costs will be more than offset by gains in operational and pricing certainty. Asset managers say they will start clearing from the commencement of the frontloading period on May 21. The date heralds an obligation to clear contracts entered into after clearinghouses have been authorised and before the clearing obligation comes into force. Clearing for classes of interest rate derivatives including vanilla swaps, basis swaps, forward rate agreements and overnight index swaps is set to start for Category 1 counterparties (mainly banks) on June 21, while Category 2 (investors with a gross notional of over-the-counter derivatives outstanding exceeding €3bn over a three-month period) must begin by December 21. Interest rate swaps make up around 80% of all derivatives.
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