The European Securities and Markets Authority has today provided eagerly-awaited clarity on the type of collateral that will be eligible for clearing under new derivatives trading laws.

The clarification, which comes at a time of a growing collateral crunch across the industry, has been published in new guidelines that provide much greater detail on how to implement over-the-counter derivatives trading rules outlined under the European Market Infrastructure Regulation. Emir will require banks and buyside firms to clear their OTC derivatives trades through central clearing counterparties which mitigate risk by guaranteeing a trade in the event either party defaults