The European Commission has adopted proposals that will make clearing of interest-rate derivatives mandatory by April next year at the earliest, in a long-awaited move towards fulfilling a 2009 G20 agreement to mitigate risk.

The nod from the EC, which was confirmed in a statement from the body on August 6, is the strongest step yet towards making central clearing an obligatory aspect of the European OTC market. It is designed to minimise risk in derivatives trading by placing a clearing house between both sides of a trade, guaranteeing the successful settlement of the transaction if either counterparty defaults.