BoE consults on exempting post-trade risk reduction transactions from the clearing obligation

The Bank of England has published a consultation paper proposing to exempt transactions arising from post-trade risk reduction (PTRR) services from the derivatives clearing obligation under Article 4 of the UK European Market Infrastructure Regulation (UK EMIR). The proposal introduces a formal definition of PTRR services, including portfolio compression, portfolio rebalancing and basis-risk optimisation, and sets strict conditions for eligibility. To qualify for an exemption from the clearing obligation, transactions must be executed under an eligible agreement that identifies when the PTRR service becomes binding and includes supporting legal documentation.

It also needs to be part of a PTRR exercise that operates on non-discretionary, pre-set parameters, produces binding outcomes for all participants, and is not designed to circumvent the clearing obligation under UK EMIR Article 4(1). PTRR providers must establish participants' risk tolerances, provide transparency on how the exercise will operate, and ensure independence from market participants. Additional safeguards include notifying the BoE of their intention to offer PTRR services for the first time, confirming any changes or prior to ceasing providing any eligible PTRR service, and supplying details of each eligible service type to enable regulatory oversight and assess financial stability impacts. The deadline for comments is 11 March 2026. These changes are proposed to come into force three months after the publication of final rules.

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