As outlined in a post on The OTC Space here, Yesterday NasdaqOMX announced that they had been approved as a CCP under EMIR, which kicks off the process towards mandatory clearing. The post reminds us of the the steps that will now lead to mandatory clearing, at some point over the next few months.

The energy and commodities sector cannot ignore this.

The majority in our sector are currently “NFC-“, below the clearing threshold,  which means that mandatory clearing does not apply. And even for those above who are “NFC+”, there is to be a phase in of the requirements, in comparison with Financial Counterparties (FC).

Never the less, once mandatory clearing starts, there is likely to be an inevitable push for most trades to be cleared, even in the cases where it is not mandatory. And with MiFID II coming, expect more in our sector to be required to have MiFID licences, turning entities into FCs. In fact many companies in our sector already have an FC entity.

Clearing could have a major impact on the amount of capital required to support a trading business. It is recommended that all become familiar with how it all works, and more importantly how to optimise capital consumption.

Expect many more posts on this subject in the coming months.