Swiss Master Agreement Otc

FinfraG`s reporting obligations ensure that details of each derivative contract, any changes to those contracts and their termination are communicated to a trade repository registered or authorised by the Swiss Supervisory Authority. Contrary to EU requirements, FinfraG follows the US approach and allows unilateral reporting. Counterparties must agree on notification liability. Banks and large financial institutions will be able to facilitate the implementation of reporting operations in a simple way. Small institutions, like small non-financial counterparties, will rely either on their larger counterparties to make the report or, if they themselves are faced with a smaller institution without such a body, will update their internal systems to meet operational and technical requirements to ensure compliance with FinfraG`s reporting obligations. Reporting obligations do not necessarily require an amendment to existing agreements. FINMA has just approved and recognised the first two trade repositories under the Financial Market Infrastructures Act (FinfraG): SIX Trade Repository AG and Regis-TR S.A. This means that the obligation to report derivatives transactions to a trade repository is now gradually being introduced and that the regulation of derivatives transactions is a key concern of the Swiss legislator and that the infrastructure rules implemented have entered into force strict obligations, which are largely in line with European Union rules (EMIR). As a result, Swiss operators must implement certain obligations within a tight time frame. The impact on existing derivative contracts with Swiss and non-Swiss counterparties is expected, with some need to amend and supplement the executed framework agreements. Legislators and regulators around the world intend to settle as many OTC derivatives transactions as possible through a central counterparty (CCP), and FinfraG is no exception to this rule. As soon as operators know that they are subject to clearing obligations, either by their categorisation or according to the category of derivatives they are acting, they must strategically decide how they wish to organise the clearing institution in such a way that it complies with finfraG rules.

The first step is to select an appropriate CCP. In order to facilitate the clearing of certain derivative transactions, the parties must conclude a so-called customer clearing contract, which contains and amends certain standard customer clearing conditions. Accurate negotiation of the terms of such a customer credit agreement is essential, as the underlying framework agreements (e.g. ISDA Master Agreements or Swiss Master Agreements OTC-derivative Instruments) and trading confirmations are supplemented by the terms of the customer clearing agreement for cleared derivatives transactions. The parties should also pay attention to the guarantee conditions in customer clearing contracts and to the impact of prices in the event of a derogation from the conditions agreed in the bilateral guarantee agreement. The expected end of LIBOR, i.e. at the end of 2021, is approaching. Alternative interest rates, called risk-free interest rates, were established as new standard market rates for different currencies; z.B. SARON will replace the CHF LIBOR. Open derivatives transactions that relate to LIBOR and are due after the end of LIBOR (facility transactions) must be converted at risk-free interest rates.

Such a transition can take place, for example. B by renegotiating the transaction in question at an early stage or by granting robust case return clauses that facilitate the transition after the removal of LIBOR. Both approaches were recommended by FINMA in its guidance 08/2020 on the replacement of LIBOR for derivatives. .