ISDA® and FIA Publish Cleared Derivatives Addendum | Practical Law

ISDA® and FIA Publish Cleared Derivatives Addendum | Practical Law

FIA and ISDA published the FIA-ISDA Cleared Derivatives Addendum, a template for futures commission merchants (FCMs) and their customers to use in connection with cleared over-the-counter (OTC) swaps.

ISDA® and FIA Publish Cleared Derivatives Addendum

Practical Law Legal Update 9-521-2380 (Approx. 3 pages)

ISDA® and FIA Publish Cleared Derivatives Addendum

by PLC Finance
Law stated as of 10 Sep 2012 • USA (National/Federal)
FIA and ISDA published the FIA-ISDA Cleared Derivatives Addendum, a template for futures commission merchants (FCMs) and their customers to use in connection with cleared over-the-counter (OTC) swaps.
On August 29, 2012, ISDA® and the Futures Industry Association (FIA) published the FIA-ISDA Cleared Derivatives Addendum. The addendum is an optional template which can be used by clearinghouse clearing member banks and their customers for documenting their relationship with respect to cleared OTC derivatives (swap) transactions. The addendum is designed to supplement clearing member futures account or futures and options account agreements, which are used by clearing member banks to govern cleared derivatives transactions.
The addendum:
  • Includes representations for each party on certain clearing-related matters.
  • Sets out the close-out methodology for cleared swaps, the triggers for liquidation and provisions for valuing terminated trades.
  • Contains provisions governing tax issues for cleared swap transactions.
The addendum may be customized by the parties and includes a schedule that parties can use to make additional representations or otherwise modify the terms of the addendum. FIA and ISDA also acknowledge that the addendum may need to be altered as a result of future regulations. Approximately 30 institutions on both the buy side (derivatives customers such as funds and end users) and sell side (derivatives dealers) contributed to the drafting of the addendum.
For more information on the addendum, see ISDA and FIA's joint press release.
For more information on ISDA documentation, see Practice Note, ISDA Documents: Overview (US).
To learn more about derivatives clearing, see Practice Note, Mechanics of Derivatives Clearing.
"ISDA" is a registered trademark of the International Swaps and Derivatives Association, Inc. (ISDA). ISDA is not a sponsor of Practical Law and had no part in the development of this resource.