Isda 2017 Clearstream Security Agreement

(e) counterparties belonging to the same group must not exchange margins until their application for an exemption (“intragroup exemption”) of these contracts has been decided by the competent authorities. The exemption (both for IM and VM) for contracts that could be covered by the intragroup exemption was removed in the previous draft, but this was reinstated. As a result, the requirement to publish IM and VM now applies to these contracts, either according to the appropriate schedule for the phase at which it (or March 1, 2017, with respect to MVs) or July 4, 2017, with the latest date chosen; and as stated in the introduction, the effective date for “Phase 1” is February 4, 2017. The “VM for all counterparties” is March 1, 2017. The next phase-in then applies to the IM requirements of the margin rules: the Clearstream security agreement – is a standardized master pledge agreement, which sets security interests for warranties in Clearstream. Margin rules are the final set of the regulatory framework for derivatives after the crisis. Although a number of market participants had the existing collateral documentation, the binding requirements and minimum standards agreed at supranational level in 2011 indicated that this would be a huge departure from market practices at the time. The deadline of 1 March 2017, which is now less than three months, should allow market participants to carefully consider whether they fall within the scope of margin rules (both in Europe and other applicable jurisdictions) and to verify documents and/or modifications of existing documents necessary for compliance. Isda WGMR also created the 2016 ISDA Margin of Variation Protocol (the “Protocol”). The protocol provides for three different “methods” to create new documentation (or modify existing documentation) and allows different versions of each method to be used depending on the current system. The protocol is a “quiz-style” protocol that requires a party to send a loyalty letter to ISDA and exchange questionnaires in order to implement the essential conditions of the protocol between the two members. This is a binding agreement between the parties on the amendment of the agreements covered by the protocol. The protocol was designed for NY-law CSAs (security interests), English CSAs (transfer of titles) and Japanese law CSAs (all versions) with both versions of the ISDA Master Agreement and non-ISDA Master Agreement, which cover a CSA ISDA.

Regulatory rules are currently covered by the EU, the United States, Switzerland, Canada and Japan. It will also be useful for simple cash/non-cash collateral CSAs, where the Amend and Replicate method can be used without problems and there are limited product types that are added to a compensation package.