Utilities face pressure to clear OTC derivatives

Utilities are trying to avoid OTC derivatives clearing under Emir, but industry observers say bank capital requirements and rules on non-cleared derivatives may yet force them to clear their trades

Clearing: mandatory for certain trades

Despite the best efforts of utilities eager to avoid clearing their over-the-counter derivatives under the European Market Infrastructure Regulation (Emir), market participants and consultants believe that regulatory change will place them under huge pressure to clear their portfolios.

Emir rules on margining for non-cleared OTC derivatives, as well as increased bank capital requirements under the fourth Capital Requirements Directive, are both expected to contribute to the trend.

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