Small Financial Counterparty (SFC)
European Union Electricity Market Glossary

 


 

 

 

Small Financial Counterparty (SFC) is:

 

 

numbering blue   Financial counterparty as defined in Category 3 of the existing Commission Delegated Regulations on the clearing obligation:

 

- Commission Delegated Regulation (EU) 2015/2205 of 6 August 2015 supplementing Regulation (EU) No 648/2012, OJ L 314, 1.12.2015, p. 13;

 

- Commission Delegated Regulation (EU) 2016/592 of 1 March 2016 supplementing Regulation (EU) No 648/2012, OJ L 103, 19.4.2016, p. 5, and

 

- Commission Delegated Regulation (EU) 2016/1178 supplementing Regulation (EU) No. 648/2012, OJ L 195, 20.7.2016, p. 3;

 

 

numbering blue   These are financial counterparties (and certain funds which are classified as non-financial counterparties) belonging to a group whose aggregate positions in OTC derivatives are EUR 8bn or below.

 

  

   

 

 

info 

  

 

 

 

Aggregate positions in OTC derivatives at a group level 

 

 

EUR 8bn or below

 

 

 

 

 

 

Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 648/2012 as regards the clearing obligation, the suspension of the clearing obligation, the reporting requirements, the risk-mitigation techniques for OTC derivatives contracts not cleared by a central counterparty, the registration and supervision of trade repositories and the requirements for trade repositories (COM(2017)208) of May 2017 explains the reasons for introducing this new category of financial market counterparties as follows:

 

"The category of small financial counterparties (SFCs) should be defined in such a way that very small financial counterparties for which central clearing is not economically feasible because of their small volume of activity are not subject to the clearing obligation. This will lighten the burden on those SFCs that deal with a small volume of derivatives, while keeping the rest of the small financial counterparties (those belonging to the 'Category 3' defined in the relevant regulatory technical standards) obliged to clear once the phase-in period set in the regulatory technical standards ends, thus maintaining incentives for CCPs, clearing members and their clients to develop solutions to on-board this type of small financial counterparties."

 

Recital 6 of the said Proposal of May 2017 reads:

 

"Financial counterparties with a volume of activity in OTC derivatives markets that is too low to present an important systemic risk for the financial system and is too low for central clearing to be economically viable should be exempted from the clearing obligation while remaining subject to the requirement to exchange collateral to mitigate any systemic risk. The excess of the clearing threshold for at least one class of OTC derivative by a financial counterparty should however trigger the clearing obligation for all classes of OTC derivatives given the interconnectedness of financial counterparties and the possible systemic risk to the financial system that may arise if those derivative contracts are not centrally cleared."

 

 

 

 

 

IMG 0744

    Documentation    



 

 

 

Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 648/2012 as regards the clearing obligation, the suspension of the clearing obligation, the reporting requirements, the risk-mitigation techniques for OTC derivatives contracts not cleared by a central counterparty, the registration and supervision of trade repositories and the requirements for trade repositories, COM(2017)208, May 2017, Article 4a(1), Recital 6

 

Commission Staff Working Document Impact Assessment, Accompanying the document Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 648/2012 as regards the clearing obligation, the suspension of the clearing obligation, the reporting requirements, the risk-mitigation techniques for OTC derivatives contracts not cleared by a central counterparty, the registration and supervision of trade repositories and the requirements for trade repositories {COM(2017) 208 final} {SWD(2017) 149 final}, 4.5.2017 SWD(2017) 148 final, p. 5

 

 

 

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    Links    

 

 

 

EMIR Regulation

 

 

 

 

 

 

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Last Updated on Sunday, 02 July 2017 14:42
 

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