A template for agreeing principal-to-principal client clearing for European derivatives trades has been published by the International Swaps and Derivatives Association (ISDA) and the Futures Industry Association (FIA) Europe.
The ISDA/FIA Europe Cleared Derivatives Execution Agreement is a template document designed to assist market participants when negotiating execution agreements under English law for swaps intended to be cleared by central counterparties outside the US.
A working group of buy- and sell-side institutions developed the agreement alongside FIA Europe and ISDA.
Europe’s first clearing mandates, which will outline which OTC derivatives products need to be centrally cleared, are expected in late 2014 or early 2015 and ISDA’s CEO, Robert Pickel, said it was vital to standardise documentation across the market in advance to assist with the transition.
Simon Puleston Jones, CEO of FIA Europe, added: “This agreement represents the latest successful step forward by the industry in the risk management of its cleared swaps business. It stands as a testament to what can be achieved through the collaborative efforts of the members of FIA Europe and ISDA to further standardise documentation across the market, for the mutual benefit of both sell- and buy-side participants.”
The agreement sets out the rights and obligations of counterparties to a trade and describes the process of submitting the trade to a clearing house, as well as provisions should a trade not be accepted for clearing. It can be amended by the parties as necessary to meet their particular needs.