Regulatory Developments: ISDA and FIA publish template cleared derivatives documentation

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Derivatives Insight -

ISDA and FIA have recently published two template agreements that address the clearing of bilaterally negotiated, over-the-counter derivatives transactions.

Addendum -

On August 29, 2012, ISDA and FIA published the FIA-ISDA Cleared Derivatives Addendum. The addendum is a template foruse by market participants that have entered into swaps which will be cleared where the clearing member is a registered futures commission merchant and is intended to supplement the customer agreement between the clearing member and its client as regards cleared swaps. The Addendum addresses issues such as (i) portability of positions, (ii) procedures for the clearing member to close out and liquidate cleared swaps upon the occurrence of certain close-out events or tax events, including the calculation of the termination amount (iii) the use of credit support to reduce any termination amounts payable,(iv) tax provisions, (v) representations by the parties and (vi) required disclosures.

Execution Agreement -

On September 20, 2012, ISDA and FIA published version 1.1 of the ISDA-FIA Cleared Derivatives Execution Agreement (which replaces version 1). The agreement is a template for market participants to use in negotiating execution-related agreements with counterparties to swaps that are intended to be cleared.

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