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Indirect Clearing

An indirect clearing arrangement is a set of contractual relationships between a CCP, Clearing member, the client of the clearing member and the client of that client.

This set of arrangements allows these ‘indirect clients’ to access the clearing services of a clearing member via the direct client of the member. The requirements with regards to these arrangements were first implemented under EMIR Article 4(3) in order to allow these clients to meet the clearing obligation for OTC derivatives where they did not have access to clearing previously. This has now been transposed into MiFIR Article 30 in relation to exchange-traded derivatives. ESMA was tasked with establishing Regulatory Technical Standards (RTS) in order to ensure a harmonised approach to the indirect clearing provisions across both regulations. The EMIR RTS will come into force following a period of examination by the Council and Parliament (a final date has yet to be established for final implementation), and the MiFIR RTS will come into force in line with MiFIR on 3 January 2018.

These new RTS will: impose obligations on the DCs that facilitate indirect clearing; place new constraints on the length of the chain of such arrangements; provide for specific types of account structures to be available for the holding of assets and positions of the End Indirect Clients (e.g. GOSA and NOSA); and require default management procedures to be in place (e.g. portability and insolvency proceeds distribution).

It will also limit those direct clients of SGIL’s that will be allowed to offer their clients indirect clearing once the RTS are in force, as well as limiting the layers below a direct client that can be offered this facility. For instance, it will no longer be permissible for an IC that accesses clearing via an SGIL DC to offer any of its clients onward indirect clearing (except in limited circumstances). If you as a direct client of SGIL are based outside the EU then there is some clarity to be ascertained at this stage as to how the requirements will potentially impact you (it is likely that the requirements will only apply where you are offering indirect clearing to an EU entity), however we will provide updates as this becomes clear.

This summary information statement sets out the main issues related to the indirect clearing RTS in order that you, as a direct client of SGIL, and we as your clearing member, are able to comply with these obligations in due time.
Below are a number of important information and legal documents that we recommend you to read carefully.