The International Swaps and Derivatives Association (ISDA) and swaps trade body the Futures Industry Association (FIA) have published a new template for managing cleared OTC derivatives trades.
The FIA-ISDA Cleared Derivatives Addendum was designed for futures commission merchants and their buy-side customers to document details on cleared swaps, including the treatment of customer collateral, the close-out methodology for cleared OTC derivatives, the triggers for liquidation, the provisions for valuing terminated trades and tax issues.
The two trade bodies drafted the template with 30 buy- and sell-side firms with experience in futures and OTC derivatives trading and clearing. The Addendum can be tailored by its users and includes a schedule which can be used to make modifications or additions that may be required as swaps regulation evolves.
OTC derivatives reforms in the US have been enacted via the Dodd-Frank Act and require swaps to be standardised so they can be traded on exchange and centrally cleared, replacing largely informal processes between banks and buy-side firms.
“The Addendum is an important milestone that will enable customers in the US 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,” added FIA president and CEO Walt Lukken.
FIA hires to bolster Congress relations
Meantime, the FIA has appointed Dawn Stump, formerly of NYSE Euronext, to the newly-created position of senior vice president and head of government affairs.
Stump starts in her new role 10 September and will be responsible for coordinating the trade body’s relations with Capitol Hill and participate in the development and implementation of FIA’s legislative and regulatory strategy. Stump also held a government affairs role in her previous position at NYSE Euronext, primarily focused on issues relating to the exchange’s derivatives businesses.
She has also held positions at the Senate and House Agriculture Committees where she was involved in negotiations on the new derivatives rules in Dodd-Frank.
“With her deep industry and Capitol Hill experience, Dawn will be invaluable to FIA and its members as our industry works with policymakers to implement Dodd-Frank and strengthen customer protections,” said Lukken.