27 July 2017
visit www.finastra.com

FIA and Isda publish template for documenting cleared derivatives

30 August 2012  |  2139 views  |  0 Source: Isda

The Futures Industry Association (FIA) and the International Swaps and Derivatives Association, Inc. (ISDA) today announced the publication of the FIA-ISDA Cleared Derivatives Addendum, a template that can be used by U.S. futures commission merchants (FCMs) and their customers to document their relationship with respect to cleared over-the-counter (OTC) swaps.

The Addendum, which is designed to supplement a futures and options agreement between a U.S. FCM and its customer, includes representations for each party to make regarding certain clearing-related matters, such as the treatment of customer collateral. The Addendum also sets forth the close-out methodology for cleared OTC swaps, the triggers for liquidation, and provisions for valuing the terminated trades. In addition, the Addendum contains provisions governing tax issues regarding cleared OTC transactions.

The Addendum was developed with the assistance of both buy-side and sell-side participants in the cleared OTC swap markets, with expertise in both futures and OTC derivatives. Approximately 30 institutions participated in drafting the document.

"The Addendum is an important milestone that will enable customers in the U.S. to access central clearing of OTC derivatives transactions efficiently through the use of market standard documentation," said ISDA CEO Robert Pickel. "It represents the collaborative efforts of a broad cross-section of market participants and marks another step forward in the global derivatives industry working constructively to reduce counterparty credit risk through the use of central clearing facilities."

"As the financial industry moves toward central clearing for OTC derivatives transactions, there is a growing need for standard documentation such as this Addendum," said FIA President and CEO Walt Lukken. "FIA and ISDA express their appreciation to the buy-side and sell-side firms that helped draft this document, and we look forward to further collaboration on industry initiatives such as this."

The Addendum is designed to be customized by the parties that choose to use it. It includes a Schedule in which the parties can make additional representations or other modifications to the terms of the Addendum. Some customization of the Addendum is likely to be needed to ensure that the Addendum interacts with the parties' underlying futures agreement in the manner they desire. The FIA and ISDA recognize that certain provisions of the Addendum may need to be altered in light of future regulatory developments. As additional reforms are adopted and implemented, market participants should consider whether modifications to the Addendum are necessary or appropriate.

Comments: (0)

Comment on this story (membership required)

Related company news

 

Related blogs

Create a blog about this story (membership required)
visit vasco.com/news/PSD2-compliant-solutionsvisit www.worldpaymentsreport.comvisit www.www.fisglobal.com

Who is commenting?

A Finextra member Finextra Member Commented on: Personal Finance bot C...
A Finextra member Finextra Member Commented on: US firm to implant emp...
A Finextra member Finextra Member Commented on: US firm to implant emp...

Top topics

Most viewed Most shared
UK judge blocks £14bn class action suit against MastercardUK judge blocks £14bn class action su...
11016 views comments | 7 tweets | 6 linkedin
PayPal strikes deals with Chase and CitiPayPal strikes deals with Chase and Citi
10482 views comments | 10 tweets | 6 linkedin
Yet more deals announced in payments sectorYet more deals announced in payments secto...
9986 views comments | 7 tweets | 21 linkedin
Machines could take over 30% of bank jobs: McKinseyMachines could take over 30% of bank jobs:...
9931 views comments | 29 tweets | 29 linkedin
US firm to implant employees with RFID chipsUS firm to implant employees with RFID chi...
8638 views 16 comments | 31 tweets | 38 linkedin

Featured job

Competitive
New York, NY - USA (some flexibility on location)

Find your next job