(10)To address that situation, counterparties may want to novate their contract by replacing the counterparty established in the United Kingdom with a counterparty in a Member State. Before Regulation (EU) No 648/2012 and Delegated Regulation (EU) 2016/2251 applied, counterparties to non-centrally cleared OTC derivative contracts were not required to exchange collateral, and bilateral trades were therefore not collateralised or they were collateralised on a voluntary basis. If counterparties were to be required to exchange collateral as a result of novating their contracts to address the withdrawal of the United Kingdom from the Union, the other counterparty may not be able to agree to the novation. In order to ensure the smooth functioning of the market and a level playing field between counterparties established in the Union, counterparties should be able to replace counterparties established in the United Kingdom with counterparties in a Member State without being required to exchange collateral in respect of those novated contracts.