Jurisdiction(s):
United Kingdom

Key definition

Derivative definition

What does Derivative mean? A derivative is a contract whose value or payoff is derived from an underlying asset, index or reference measure, for example a floating rate of interest, a currency exchange rate, an equity index or a commodity price. In practice, lawyers see derivatives as options, futures, forwards and swaps (including interest rate, currency and commodity derivatives), traded on exchanges or over the counter for hedging, risk management, speculation or arbitrage. The term is descriptive across legal contexts. For regulatory purposes, the UK perimeter classifies derivatives as specified investments under the Financial Services and Markets Act 2000 (Regulated Activities) Order...

EU and UK Central Counterparties: EMIR Authorisation and Rules on Clearing, Client Segregation and Portability, Prudential Standards, Default Management, and Resolution

Published by a LexisNexis Banking & Finance expert

Practice notes

What is a clearing house?

The clearing obligation set by the European Markets Infrastructure Regulation (EU) No 648/2012 (EU EMIR) and, from IP completion day (31 December 2020) in the UK, by assimilated Regulation (EU) 648/2012 (UK EMIR), requires that all eligible Derivatives are sent for clearing via a central counterparty (a clearing house, or CCP). For more on the obligation, see Practice Note: Clearing obligation.

EU EMIR was reviewed in 2019; the revised framework, EU EMIR REFIT (Regulation (EU) 2019/834), has applied since 17 June 2019.
In the UK, UK EMIR substantially carries across the EU EMIR Refit changes that were operative immediately before IP completion day.
EU EMIR is further amended by Regulation (EU) 2019/2099 (EU EMIR 2.2) concerning procedures and authorities for CCP authorisation and the requirements for recognising third-country CCPs, effective from 1 January 2020. These amendments form part of EU assimilated law and are mirrored in UK EMIR.

A CCP is a market infrastructure intended to reduce and manage counterparty risk through clearing and settlement...

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Assia Damianova

Cadwalader, Wickersham & Taft LLP

Assia’s practice focuses on complex financing transactions involving a wide variety of asset classes. She has extensive experience of derivative products (including credit default swaps, credit-linked notes, total return swaps, currency and interest rate swaps, equity derivatives, repos and other derivative instruments) and also advises on EMIR compliance and related regulatory issues....

Web page updated on 21/05/2026

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