Cleared Derivatives Execution Agreement Explained
The recently published FIA-ISDA derivatives execution agreement is the industry`s first attempt to regulate relations between parties establishing trades for central clearing. Michael Beaton, Managing Director of Documentation Risk Solutions, explains the structure of this new legal agreement. The ISDA/FIA Cleared Cleared Derivatives Execution Agreement 2017 with non-US law is a model for market participants when negotiating execution agreements with counterparties on swaps that will be cleared. The document aims to facilitate access to derivatives transactions and clearing of such transactions with one or more CCPs outside the United States and can be used in conjunction with the ISDA/AIF client clearing addendum. This document has been updated to reflect the new timing under MIFID II for the transmission of information on cleared derivative transactions between counterparties on a bilateral basis. A blackline comparison with the 2016 version is published next to this document. The Cleared Derivatives Execution Agreement is a model intended to be used by participants in cleared swaps when negotiating execution agreements with counterparties for swaps that will be cleared. The memorandum contains, together with its annex, important information regarding the use of the Cleared Derivative Execution Agreement, a brief description of the intent of each of the sections of the Cleared Execution Agreement, which is unique for the performance of a sovereign credit swap agreement, and a comparison of the execution agreements. As soon as possible, but in any event within thirty minutes of execution, Party A shall transmit the details of the relevant derivative transaction(s) electronically to an agreed distribution system. As soon as possible after receipt of the deposit from Party A and, in any event, within two hours, Party B must either confirm, refuse or deny knowledge of the transaction in question (unless the submission took place within three hours from the last date for which trades may be subject to clearing on a given day, in this case, the period for confirmation, refusal or refusal is 9:00 local time on the next working day). .