On 16 February 2016, the European Securities and Markets Authority (ESMA) issued an update of its Question and Answers (Q&As) regarding the implementation of the European Market Infrastructure Regulation (EMIR).

The Q&A clarifies how the clearing obligation should apply to swaps resulting for the exercise of a swaption, including during the frontloading period and the approach on frontloading that was adopted in the ESMA’s first RTS on the clearing obligation, which entered into force on 21 December 2015.

ESMA’s EMIR Q&As aim at providing clarity to market participants ahead of the various compliance deadlines resulting from the first RTS on the clearing obligation, which establish that certain OTC interest rate derivatives denominated in the G4 currencies (i.e. EUR, GBP, JPY and USD) shall be cleared by central counterparties.