Front loading: Difference between revisions
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It is not known at the outset whether to price the transaction on the assumption that it will, or will not, be subject to central clearing during the life of the transaction. | It is not known at the outset whether to price the transaction on the assumption that it will, or will not, be subject to central clearing during the life of the transaction. | ||
==See also== | ==See also== | ||
[[Central clearing]] | *[[Central clearing]] | ||
*[[Central counterparty]] (CCP) | |||
*[[Derivative instrument]] | |||
*[[EMIR]] | |||
* [[European Securities and Markets Authority]] (ESMA) | |||
* [[Over the counter]] (OTC) | |||
[[Category:Financial_products_and_markets]] | |||
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Latest revision as of 10:58, 1 November 2023
Front loading as applied to derivatives is a term that describes the obligation to clear centrally an OTC derivative instrument or contract that is applied retrospectively.
It arises because there is a gap between the time that a CCP is authorised under EMIR and ESMA’s decision to mandate central clearing of certain derivatives. During the early implementation stages of EMIR and the clearing obligation it may not be known at the time of executing a derivative trade whether it ultimately will be subject to frontloading or not.
It is not known at the outset whether to price the transaction on the assumption that it will, or will not, be subject to central clearing during the life of the transaction.
