SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
SWAPCLEAR CLIENT CLEARING
CLIENT CLEARING STANDARD TERMS
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
Background and Purpose
(A)
These provisions shall be known as the “Client Clearing Standard Terms”.
(B)
In order to facilitate the clearing of certain transactions with LCH.Clearnet, Party A and
Party B shall enter into the relevant Client Clearing Agreement and the relevant Swap
Agreement.
1
Interpretation and purpose
1.1
Definitions: Capitalised terms not otherwise defined in these Client Clearing Standard
Terms or in the Clearing ISDA Master Agreement shall have the meaning specified in the
relevant Client Clearing Agreement, the relevant Non-Clearing ISDA Master Agreement or
the LCH Rules. In addition the following expressions have the following meanings and
shall, to the extent used in the Clearing ISDA Master Agreement, be deemed to be inserted
into it:
“Accepted Transaction” has the meaning specified in Clause 4.1.2.
“Additional Transfer Conditions” means the additional transfer conditions (if any)
specified as such in the Client Clearing Agreement.
“Associated LCH Transaction” means, in respect of a Transaction, the related SwapClear
Contract (as defined in the LCH Rules) entered into between Party A and LCH.Clearnet
and credited to Party A’s Client Account at LCH.Clearnet.
“Backup Clearing Member” has the meaning specified in the LCH Rules.
“Clearing Default” has the meaning specified in Clause 6.4.1.
“Clearing ISDA Master Agreement” has the meaning specified in Clause 2.1.
“Client Account” has the meaning given to client account in the LCH Rules.
“Client Clearing Agreement” means the relevant client clearing agreement entered into
between Party A and Party B relating to the clearing of certain transactions with
LCH.Clearnet.
“Client Clearing Standard Terms” means, when used in the Clearing ISDA Master
Agreement, the Client Clearing Standard Terms specified in the relevant Client Clearing
Agreement and, otherwise, has the meaning given in the above Recitals.
“English Law CSA” has the meaning specified in Clause 2.2.
“ISDA 1992 Master Agreement” means the form of ISDA Master Agreement
(Multicurrency – Cross Border) published in 1992 by the International Swap Dealers
Association, Inc.
“ISDA 2002 Master Agreement” means the form of ISDA Master Agreement published in
2002 by the International Swaps and Derivatives Association, Inc.
“ISDA Master Agreements” has the meaning specified in Clause 2.1.
“LCH Business Day” means a day on which LCH.Clearnet is open for general business.
“LCH.Clearnet” means LCH.Clearnet Limited.
A18032743/4.0
1
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
“LCH Default” means the occurrence of a default, termination event or other similar event
in respect of LCH.Clearnet that, under the LCH Rules, entitles Party A to terminate, or
results in automatic termination of, one or more Associated LCH Transactions.
“LCH Default Rules” has the meaning given to “Default Rules” in the LCH Rules.
“LCH Disruption Event” means the occurrence on or after the date of the relevant Client
Clearing Agreement of one or more of (i) an LCH Insolvency Event, (ii) an LCH Default and
(iii) any event that occurs, or any action that is taken or not taken by or in relation to
LCH.Clearnet (including, without limitation, a default or deferment by it in making any
payment or in performing any of its obligations relating to any Associated LCH
Transactions and associated margin) the effect of which is (a) to create a material
mismatch between the respective rights, obligations or exposure of Party A and
LCH.Clearnet pursuant to an Associated LCH Transaction and the respective rights,
obligations or exposure of Party B and Party A pursuant to the related Transaction under
the Clearing ISDA Master Agreement or (b) to result in any loss, liability, cost, claim,
damages or expenses being incurred by Party A with respect thereto.
“LCH Insolvency Event” means the occurrence of an event described in Section 5(a)(vii)
of the ISDA 2002 Master Agreement with respect to LCH.Clearnet as if LCH.Clearnet were
the Defaulting Party (as defined therein) with respect to any such event.
“LCH Rules” means the rules, regulations, procedures or agreements (including the LCH
General Regulations and the LCH Default Rules), applicable to Party A and/or an
Associated LCH Transaction, in each case as published by LCH.Clearnet and as the same
may be amended from time to time.
“LCH Valuation” means, for the purposes of determining the value of each Terminated
Transaction or each group of Terminated Transactions, the valuation ascribed by
LCH.Clearnet to the related Associated LCH Transaction(s) (excluding the value of any
collateral posted by Party A in favour of LCH.Clearnet) as at the Local Business Day on
which such Associated LCH Transaction(s) is/are terminated in accordance with the LCH
Rules.
“Losses” means any losses, claims, injuries, damages, judgments, interest on judgments,
assessments, taxes, costs, fees, charges, amounts paid in settlement or other liabilities
(including, without limitation, reasonable attorneys’ fees, costs of collection and any
reasonable cost incurred in successfully defending against any claim), provided that a
person’s Losses will not include any injuries, costs, losses and expenses which are directly
caused by the relevant person’s fraud, wilful default or gross negligence.
“Net Clearing Default Adjustment” means an amount determined by Party B (being the
party which is not the Affected Party) equal to:
(i)
the sum of:
(a)
if LCH.Clearnet credits a Client Account of a Backup Clearing Member with
one or more SwapClear Contracts for the account of Party B pursuant to
the Default Rules, the Termination Currency Equivalent of the LCH
Valuation of such SwapClear Contracts at the time they are credited to
such Client Account. Such amount shall be negative where the Backup
Clearing Member is in-the-money and LCH.Clearnet is out-of-the-money in
respect of such SwapClear Contracts, and shall otherwise be positive; plus
A18032743/4.0
2
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
(b)
if LCH.Clearnet debits the Clearing Member Current Collateral Balance
and/or credits the Clearing House Current Collateral Balance, in either
case, in relation to a Backup Clearing Member and for the account of Party
B in relation to the SwapClear Contracts referred to in sub-paragraph (a)
above, the Termination Currency Equivalent of the Value of such debit
and/or credit determined at the time of such debit or credit (excluding any
element of any such debit or credit which represents assets transferred (or
required to be transferred) between LCH.Clearnet and the Backup Clearing
Member in order to reflect such element); minus
(c)
if LCH.Clearnet credits the Clearing Member Current Collateral Balance
and/or debits the Clearing House Current Collateral Balance, in either case,
in relation to a Backup Clearing Member and for the account of Party B in
relation to the SwapClear Contracts referred to in sub-paragraph (a) above,
the Termination Currency Equivalent of the Value of such debit and/or credit
determined at the time of such debit or credit (excluding any element of any
such debit or credit which represents assets transferred (or required to be
transferred) between LCH.Clearnet and the Backup Clearing Member in
order to reflect such element); or
(ii)
solely where Party A is an Exempt Client Clearing Member, if LCH.Clearnet
transfers a Client Clearing Entitlement to Party B (or to a party for the account of
Party B) pursuant to the Default Rules, the Termination Currency Equivalent of
such Client Clearing Entitlement at the time such amount is determined by
LCH.Clearnet. Such amount shall be negative; or
(iii)
otherwise, zero.
“Non-Clearing ISDA Master Agreement” has the meaning specified in the relevant Client
Clearing Agreement.
“Party A” shall have the meaning given to it in the Client Clearing Agreement.
“Party B” shall have the meaning given to it in the Client Clearing Agreement.
“Party B Default” has the meaning specified in Clause 3.3.
“Security Deed” means, for so long as Party A is not an Exempt Client Clearing Member,
the security deed executed by Party A creating a security interest in favour of Party B in the
form prescribed by LCH.Clearnet for the time being outstanding.
“Set-off Suspension End Date” means the date on which either (i) where Party A is an
Exempt Clearing Member, the date on which the acceleration of its obligations under its
Undertaking to Pay or Deliver has taken place such that such obligations become
immediately due and payable and such obligations have been satisfied by LCH.Clearnet
enforcing its security granted in its favour by Party A under the relevant Deed of Charge
and/or applying any other assets available to it and all assets in connection with such
acceleration, satisfaction and enforcement together with any such other assets, in each
case that are referable to Party B under the Client Account to which these Client Clearing
Standard Terms relate, have been transferred to Party B or (ii) otherwise, the date on
which enforcement by Party B of its rights under the Security Deed has been completed
and all amounts in connection with such enforcement have been paid.
A18032743/4.0
3
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
“Swap Agreement” means the Clearing ISDA Master Agreement (including the English
law CSA) together with the Client Clearing Agreement.
“SwapClear Clearing Member” has the meaning specified in the LCH Rules.
“Transfer Conditions” means, in relation to a requested transfer of all of the rights and
obligations of Party A with respect to one or more Transactions under the relevant Clearing
ISDA Master Agreement and the related Associated LCH Transaction (together with any
related assets comprised in the Associated Collateral Balance, if relevant) to one or more
other clearing members of LCH.Clearnet, (i) if required by Party A, Party B will have
transferred additional Eligible Credit Support as a Delivery Amount required to be made
pursuant to the terms of the Credit Support Annex to the Schedule to the relevant Clearing
ISDA Master Agreement in an amount specified by Party A (a) which Party A considers,
acting in a commercially reasonable manner, to be sufficient to protect it from the risk that
one or more of the Transactions to be transferred are not so transferred and/or (b) to
satisfy any additional Delivery Amounts arising in respect of Transactions under the
relevant Clearing ISDA Master Agreement that are not the subject of the requested transfer
which (A) are imposed by the LCH Rules as a condition to the relevant transfer or (B) will
result from the relevant transfer pursuant to the terms of the Credit Support Annex to the
Schedule to the relevant Clearing ISDA Master Agreement and (ii) any Additional Transfer
Conditions.
“Valuation Method” means, unless otherwise specified in the relevant Client Clearing
Agreement, where the Clearing ISDA Master Agreement is an ISDA 2002 Master
Agreement, “Close-out Amount” as defined therein, and where the Clearing ISDA Master
Agreement is an ISDA 1992 Master Agreement, whichever of “Market Quotation” or “Loss”
is specified as applying, and as each such term is defined, therein.
1.2
1.3
Interpretation and Construction: In these Client Clearing Standard Terms, except to the
extent that the context requires otherwise or to the extent specified to the contrary herein:
1.2.1
in the event of any inconsistency between the terms of (a) either the Non-Clearing
ISDA Master Agreement or the Clearing ISDA Master Agreement, including the
Schedules to them and any Credit Support Annex to the Non-Clearing ISDA Master
Agreement, and (b) these Client Clearing Standard Terms, these Client Clearing
Standard Terms shall prevail with respect to the subject matter of these Client
Clearing Standard Terms;
1.2.2
in the event of any inconsistency between any other agreement between the
parties and these Client Clearing Standard Terms, these Client Clearing Standard
Terms shall prevail with respect to the subject matter of these Client Clearing
Standard Terms;
1.2.3
the words “include” and “including” are to be construed without limitation;
1.2.4
references to these Client Clearing Standard Terms include its Appendices;
1.2.5
use of the singular shall include the plural and vice versa; and
1.2.6
headings are for ease of reference only and shall be ignored in interpreting these
Client Clearing Standard Terms.
Purpose: The purpose of the relevant Client Clearing Agreement generally and the
purpose of Clause 3 specifically is to permit Party B to access central counterparty clearing
for certain types of Transactions and to maximise Party B’s ability to move (by way of
A18032743/4.0
4
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
transfer or termination, close out and replication) positions represented by those
Transactions to a Backup Clearing Member upon a Clearing Default with respect to Party
A. By entering into the relevant Client Clearing Agreement, each party thereto agrees that
it is in its commercial interests to achieve the purpose of the relevant Client Clearing
Agreement and acknowledges that to do so requires both parties to forego certain
protections that might otherwise be afforded to it under netting and set-off arrangements
more typical than those included therein. These provisions have been specifically agreed
by the parties to the relevant Client Clearing Agreement and are a material and essential
feature thereof without which the parties would not have entered into the relevant Client
Clearing Agreement.
2
Execution of the Clearing ISDA Master Agreement and Credit Support Annex
2.1
Clearing ISDA Master Agreement: By entering into the relevant Client Clearing
Agreement, the parties thereto agree that with effect from the date thereof, they have
entered into an additional separate ISDA Master Agreement dated as of the date of the
relevant Client Clearing Agreement on terms which are, save as provided therein, identical
to those of the Non-Clearing ISDA Master Agreement, including the Schedule thereto, but
excluding any Credit Support Annex thereto and excluding any reference to any Credit
Support Document(s) contained therein (the “Clearing ISDA Master Agreement” and
together with the Non-Clearing ISDA Master Agreement, the “ISDA Master Agreements”
and each an “ISDA Master Agreement”).
2.2
Credit Support Annex: The parties to the relevant Client Clearing Agreement agree that,
by operation of the relevant Client Clearing Agreement and with effect from the date
thereof, they have entered into a Credit Support Annex (ISDA Agreements Subject to
English law) with a paragraph 11 in the form set out in Appendix 1 to these Client Clearing
Standard Terms with respect to the Clearing ISDA Master Agreement (“English Law
CSA”).
2.3
Security:
2.3.1
Solely where and for so long as Party A is not an Exempt Client Clearing Member,
the Security Deed shall constitute a Credit Support Document in respect of Party A
for the purposes of the Clearing ISDA Master Agreement only. In such case, Party
A agrees that it will comply with clause 10 of the Security Deed.
2.3.2
If, and to the extent that, the Security Deed (to the extent executed) is amended or
revoked by Party A pursuant to and in accordance with the LCH Rules, such
amendment or revocation shall not constitute an Event of Default or Termination
Event under the Clearing ISDA Master Agreement.
3
Set-off and Netting
3.1
Party B Default: Where (i) a Party B Default has occurred and (ii) an Early Termination
Date has occurred in respect of each of the relevant ISDA Master Agreements, the amount
payable under Section 6(d) of the relevant Clearing ISDA Master Agreement shall be
netted with and reduced by set-off against the amount payable under Section 6(d) of the
relevant Non-Clearing ISDA Master Agreement, and prior to netting or set-off of amounts
arising under any other agreements and notwithstanding any provision in any other
agreement to the contrary.
A18032743/4.0
5
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
3.2
Clearing Default: Upon the termination of all Transactions governed by the relevant
Clearing ISDA Master Agreement as a result of a Clearing Default Additional Termination
Event and in the absence of a Party B Default, the amount payable under Section 6(d) of
such Clearing ISDA Master Agreement shall not, until the Set-off Suspension End Date be
subject to set-off or netting against, or in respect of, any amount payable under Section
6(d) of the relevant Non-Clearing ISDA Master Agreement (if all Transactions governed by
such Non-Clearing ISDA Master Agreement are being terminated) or any amounts payable
under any other agreement, notwithstanding Clause 3.1 or any provision in any other
agreement to the contrary.
3.3
Definitions: For the purposes of this Clause 3, “Party B Default” means the occurrence of
circumstances that would constitute under the relevant ISDA Master Agreement a
Termination Event in respect of which Party B is the sole Affected Party or an Event of
Default in respect of which Party B is the Defaulting Party.
4
Creation of Transactions under Clearing ISDA Master Agreement
4.1
Submission and Acceptance of Proposed Transactions for Client Clearing and
Creation of Transactions under the Clearing ISDA Master Agreement:
4.2
4.1.1
Party A hereby authorises, upon the terms and subject to the conditions set out
below, Party B, or any party acting on its behalf authorised by it, to submit details of
proposed transactions to LCH.Clearnet via an Approved Trade Source System with
the purpose that such transactions will be submitted to LCH.Clearnet for
registration in the name of Party A with LCH.Clearnet for the account of Party B.
4.1.2
If LCH.Clearnet presents details of such a proposed transaction to Party A for
acceptance for clearing at LCH.Clearnet for the account of Party B, Party A may, in
its sole discretion, accept such transaction for clearing. Following any such
acceptance by Party A, LCH.Clearnet will, subject to the conditions set out in, and
pursuant to, the LCH Rules, register a SwapClear Contract in the name of Party A
and credit it to Party A’s Client Account at LCH.Clearnet (an “Accepted
Transaction”).
4.1.3
Immediately upon registration by LCH.Clearnet of an Accepted Transaction in Party
A’s Client Account at LCH.Clearnet there shall be constituted an equal and
offsetting transaction between Party A and Party B on economic terms identical to
those of such Accepted Transaction, except that Party A shall be the party in the
position of LCH.Clearnet under such Accepted Transaction and Party B shall be
the party in the position of Party A under such Accepted Transaction. Such
offsetting transaction shall constitute a Transaction under the Clearing ISDA Master
Agreement and the Accepted Transaction shall be the related Associated LCH
Transaction.
Registration of Accepted Transactions and Creation of Related Transactions under
the Clearing ISDA Master Agreement upon BAU Porting or Default Porting: If
transactions between LCH.Clearnet and another clearing member of LCH.Clearnet are
transferred to Party A and credited to Party A’s Client Account for the account of Party B (in
connection with a transfer of related client transactions between that other clearing
member of LCH.Clearnet and Party B) pursuant to the LCH Rules as a result of agreement
by Party A then:
A18032743/4.0
6
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
4.2.1
each such transaction will be deemed to be a transaction submitted to
LCH.Clearnet for registration in the name of Party A with LCH.Clearnet for the
account of Party B and accepted by Party A for clearing at LCH.Clearnet in
accordance with Clauses 4.1.1 and 4.1.2, so that there is an Accepted Transaction
between Party A and LCH.Clearnet; and
4.2.2
a Transaction under the relevant Clearing ISDA Master Agreement will arise
between Party A and Party B in accordance with Clause 4.1.3,
in each case, immediately upon the related SwapClear Contract (being an Associated LCH
Transaction) being registered in Party A’s Client Account at LCH.Clearnet pursuant to the
LCH Rules.
5
Transfer and Compression of Transactions under Clearing ISDA Master
Agreement
5.1
BAU Porting: Without prejudice to the operation of the LCH Rules, Party B may at any
time request by notice in writing to Party A that Party A transfers all of its rights and
obligations with respect to a Transaction under the relevant Clearing ISDA Master
Agreement and the related Associated LCH Transaction (together with any related assets
comprised in the Associated Collateral Balance, if relevant) to one or more other clearing
members of LCH.Clearnet. If Party B so requests, provided that (a) no LCH Default,
Clearing Default or Event of Default or Potential Event of Default in respect of Party B has
occurred under the Clearing ISDA Master Agreement and is continuing and no Termination
Event (or other event, howsoever described in the Clearing ISDA Master Agreement, that
permits Party A to terminate all Transactions under the Clearing ISDA Master Agreement or
any of such Transactions under the Clearing ISDA Master Agreement requested to be
transferred) has occurred and is continuing with respect to Party B or the relevant
Transactions under the relevant Clearing ISDA Master Agreement requested to be
transferred and (b) the Transfer Conditions have been satisfied, Party A will, subject to the
LCH Rules and applicable Law, promptly take such action(s) contemplated by the LCH
Rules and any applicable rules and procedures of any Approved Trade Source System
necessary for Party A to facilitate and effect the transfer of all of its rights and obligations
with respect to the relevant Transaction under the relevant Clearing ISDA Master
Agreement and the related Associated LCH Transaction (together with any related assets
comprised in the Associated Collateral Balance, if relevant) to the relevant Client Account
of such other clearing member(s) of LCH.Clearnet. Party A and Party B will be
automatically and immediately released and discharged from further obligations under the
Transactions under the relevant Clearing ISDA Master Agreement that arose in respect of
the related Associated LCH Transactions upon the related Associated LCH Transactions
being removed from Party A’s Client Account at LCH.Clearnet pursuant to the LCH Rules
as a result of any such transfer to one or more other clearing members of LCH.Clearnet.
5.2
Compression of SwapClear Contracts:
5.2.1
Party A agrees that, other than where a Party B Default has occurred or where
LCH.Clearnet compresses Associated LCH Transactions where no consent from
Party A is required, it shall only exercise its rights to compress Associated LCH
Transactions under the LCH Rules to the extent both it and Party B agree on the
terms of such exercise.
A18032743/4.0
7
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
5.2.2
If, in accordance with Clause 5.2.1, Party A exercises its rights to compress under
the LCH Rules resulting in one or more new SwapClear Contracts replacing two or
more Associated LCH Transactions relating to Transactions under the Clearing
ISDA Master Agreement, (i) the Transaction(s) under the Clearing ISDA Master
Agreement relating to such Associated LCH Transaction(s) shall be cancelled
without any further payment required between the parties and the parties shall be
deemed to enter into a number of new offsetting Transactions under the Clearing
ISDA Master Agreement equal to the number of, and on identical economic terms
to, such new SwapClear Contract(s) and such new SwapClear Contract(s) shall
constitute Associated LCH Transaction(s) for the purposes of the Client Clearing
Agreement.
5.3
Dispute: The books and records of LCH.Clearnet (absent manifest error) shall, in the
event of a dispute between the parties, provide conclusive evidence as to whether an
Associated LCH Transaction exists with respect to any Transaction under the Clearing
ISDA Master Agreement.
6
Amendments to Clearing ISDA Master Agreement
By entering into the relevant Client Clearing Agreement, the parties thereto agree that the
following amendments shall be made to the relevant Clearing ISDA Master Agreement.
6.1
ISDA 2002 Master Agreement: If the relevant Clearing ISDA Master Agreement (by virtue
of Clause 2.1) is an ISDA 2002 Master Agreement, it shall be amended by inserting the
following words immediately after the words ““Close-out Amount” means, with respect to
each Terminated Transaction or each group of Terminated Transactions and a Determining
Party,” in Section 14 thereof:
“(a) where an Early Termination Date occurs in respect of such Terminated
Transaction or group of Terminated Transactions as a result of a Clearing Default
Additional Termination Event, the sum of (i) the Termination Currency Equivalent of
the applicable LCH Valuation and (ii) the Termination Currency Equivalent of the
Net Clearing Default Adjustment and (b) in all other cases,”.
6.2
ISDA 1992 Master Agreement: If the relevant Clearing ISDA Master Agreement (by virtue
of Clause 2.1) is an ISDA 1992 Master Agreement, it shall be amended as follows:
6.2.1
where Market Quotation is specified as being applicable, the following words shall
be inserted immediately after the words ““Market Quotation” means, with respect to
one or more Terminated Transactions and a party making the determination,” in
Section 14 thereof:
“(a) where an Early Termination Date occurs in respect of such Terminated
Transactions as a result of a Clearing Default Additional Termination Event,
the sum of (i) the Termination Currency Equivalent of the applicable LCH
Valuation and (ii) the Termination Currency Equivalent of the Net Clearing
Default Adjustment, and (b) in all other cases,”; and
6.2.2
where Loss is specified as being applicable, the following words shall be inserted
immediately after the words ““Loss” means, with respect to this Agreement or one
or more Terminated Transaction, as the case may be, and a party,” in Section 14
thereof:
A18032743/4.0
8
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
“(a) where an Early Termination Date occurs in respect of such Terminated
Transactions as a result of a Clearing Default Additional Termination Event,
(i) the sum of the Termination Currency Equivalent of the applicable LCH
Valuation, the Termination Currency Equivalent of the Net Clearing Default
Adjustment and the Termination Currency Equivalent of the Unpaid
Amounts owing to the Non-defaulting Party, less (ii) the Termination
Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party,
and (b) in all other cases,”.
6.3
Close-out Amount protocols and agreements: If the relevant Clearing ISDA Master
Agreement (by virtue of Clause 2.1) is an ISDA 1992 Master Agreement in respect of
which, by operation of another agreement or protocol, the definition of Loss and/or Market
Quotation therein has been amended to reflect the definition of Close-out Amount from an
ISDA 2002 Master Agreement, then the amendments set out under Clause 6.1 shall be
made to the definition of Close-out Amount as set out in such other agreement or protocol.
6.4
Additional provisions:
6.4.1
The relevant Clearing ISDA Master Agreement shall be amended by the insertion
of the following Additional Termination Event (a “Clearing Default Additional
Termination Event”) into the Schedule thereto:
“Party A becoming a defaulter for the purposes of the LCH Default Rules (a
“Clearing Default”).
For such purposes, (i) Party A shall be the sole Affected Party and (ii) all
Transactions shall be Affected Transactions.”
6.4.2
The relevant Clearing ISDA Master Agreement shall be amended by the insertion
of the following Additional Termination Event (an “LCH Disruption Additional
Termination Event”) into the Schedule thereto:
“The determination by Party A that an LCH Disruption Event has occurred.
For such purposes: (i) Party B shall be the sole Affected Party; and (ii) all
Transactions that are determined by Party A to have been affected by the
relevant LCH Disruption Event shall be Affected Transactions.”
6.4.3
The relevant Clearing ISDA Master Agreement shall be amended by the insertion
of the following Additional Termination Event into the Schedule thereto:
“There ceasing to be an Associated LCH Transaction in respect of a
Transaction under this Agreement.
For such purposes: (i) Party B shall be the sole Affected Party; and (ii) the
Transaction in respect of which there has ceased to be an Associated LCH
Transaction shall be the Affected Transaction.”
6.4.4
The relevant Clearing ISDA Master Agreement shall be amended by the insertion
of the following provision immediately after the last sentence of Section 6(b):
“Notwithstanding anything to the contrary in this Agreement, an Early
Termination Date with respect to all outstanding Transactions will occur
immediately upon the occurrence of a Clearing Default or, where no Early
Termination Date may occur immediately by operation of law, as soon as
permissible under applicable law.”
A18032743/4.0
9
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
6.4.5
Solely where Automatic Early Termination is applicable to Party A in the relevant
Clearing ISDA Master Agreement, such Clearing ISDA Master Agreement shall be
amended by the insertion of the following Section 6(c)(iii) immediately after Section
6(c)(ii):
“(iii) Notwithstanding anything to the contrary in this Agreement, if an Event
of Default specified in Section 5(a)(vii)(1), (3), (4), (5), (6) or, to the extent
analogous thereto, (8), in respect of Party A and an Early Termination Date
has occurred pursuant to the terms of this Agreement, then if, subsequent
to the occurrence of such Early Termination Date but prior to any payment
being made by any party pursuant to Section 6(d) in respect thereof, a
Clearing Default in respect of Party A occurs then the Close-out Amount in
respect of each Terminated Transaction or group of Terminated
Transactions (where the Valuation Method is Close-out Amount), the
Market Quotation with respect to one or more Terminated Transactions
(where the Valuation Method is Market Quotation) or the Loss in respect of
this Agreement or one or more Terminated Transactions (where the
Valuation Method is Loss), in each case to be determined in respect of
such Early Termination Date shall be determined as if such Early
Termination Date had been designated as a result of a Clearing Default
Additional Termination Event.”
6.5
7
Disapplication of Certain Provisions: Except insofar as they relate to a Clearing Default
Additional Termination Event, the provisions of the Clearing ISDA Master Agreement:
6.5.1
that would entitle Party B to withhold any payment or delivery as a result of the
occurrence of a Potential Event of Default, Event of Default, or Termination Event
in respect of Party A will not apply to entitle Party B to withhold any payment or
delivery;
6.5.2
that would entitle Party B to terminate Transactions early upon the occurrence of
an Event of Default or Termination Event in respect of Party A or Party B, as
applicable, or would automatically terminate Transactions early upon the
occurrence of such event with respect to Party A, will not apply to entitle Party B to
terminate Transactions early upon the occurrence of an Event of Default or
Termination Event in respect of Party A or so as to automatically terminate
Transactions; and
6.5.3
which provide for the consequences of, and rights arising upon or pursuant to, the
occurrence of any such event (including, without limitation, the provisions relating
to the calculation of, and obligation to pay, any amount payable by either party
following such early termination), will not apply to entitle Party B to benefit from the
consequences of any such action taken by Party B under the Clearing ISDA Master
Agreement.
Amendments to Clearing ISDA Master Agreement and Non-Clearing ISDA
Master Agreement
By entering into the relevant Client Clearing Agreement, the parties thereto agree that the
following amendments shall be made to the relevant Non-Clearing ISDA Master Agreement
and, in the case of Clause 7.1 only, to the relevant Clearing ISDA Master Agreement.
A18032743/4.0
10
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
7.1
Additional Termination Event: Each of the relevant Clearing ISDA Master Agreement and
the relevant Non-Clearing ISDA Master Agreement shall be amended by the insertion of
the following Additional Termination Event into the Schedules of each such ISDA Master
Agreement:
“The designation of an Early Termination Date under the Connected ISDA Master
Agreement with respect to all outstanding Transactions under (and as defined in)
the Connected ISDA Master Agreement other than an Excluded Early Termination
Date.
For such purposes:
(i)
the Affected Party or Parties shall be the Affected Party or Parties or the
Defaulting Party with respect to the Connected Event;
(ii)
all Transactions shall be Affected Transactions;
(iii)
“Connected ISDA Master Agreement” means, in respect of the NonClearing ISDA Master Agreement, the Clearing ISDA Master Agreement
and, in respect of the Clearing ISDA Master Agreement, the Non-Clearing
ISDA Master Agreement;
(iv)
“Connected Event” means the occurrence of an Event of Default or
Termination Event in respect of which the Early Termination Date under the
Connected ISDA Master Agreement was designated;
(v)
unless the party designating an Early Termination Date under the
Connected ISDA Master Agreement specifies otherwise, the Early
Termination Date with respect to such Additional Termination Event shall be
the Early Termination Date under the Connected ISDA Master Agreement;
and
(vi)
“Excluded Early Termination Date” means the occurrence of an Early
Termination Date that is (a) designated by Party B under the Non-Clearing
ISDA Master Agreement or (b) designated pursuant to the Clearing ISDA
Master Agreement with respect to (1) a Clearing Default Additional
Termination Event where the event or circumstance constituting such
Clearing Default Additional Termination Event would not also constitute one
or more other Events of Default and/or Termination Events under either
ISDA Master Agreement or (2) an LCH Disruption Additional Termination
Event.
If the party designating an Early Termination Date under the Connected ISDA
Master Agreement determines (in its sole and absolute discretion) that this
Agreement shall not terminate immediately as a result of such designation, then it
shall so specify in the notice designating such Early Termination Date under the
Connected ISDA Master Agreement. Any such determination shall not prejudice the
right (if any) of either party to designate an Early Termination Date under this
Agreement as a result of this Additional Termination Event, in which case upon
such designation the immediately preceding paragraph shall apply thereto, save
that sub-paragraph (v) of the immediately preceding paragraph shall not apply and
the Early Termination Date shall instead be determined in accordance with Section
6(b).”
A18032743/4.0
11
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
7.2
Clearing Default not an Event of Default or Termination Event: The relevant NonClearing ISDA Master Agreement shall be amended by the insertion of the following at the
end of Section 5(a):
“The parties agree that the occurrence of a Clearing Default Additional Termination
Event (as such term is defined in the Clearing ISDA Master Agreement) where the
event or circumstance constituting such Clearing Default Additional Termination
Event would not also constitute one or more other Events of Default and/or
Termination Events hereunder shall not in itself constitute an Event of Default or
another Termination Event hereunder.”
8
Limited Recourse, LCH Disruption Event and Adjustments
8.1
Limited Recourse: Party B agrees that all performance and payment obligations of Party
A to Party B under or in respect of any Transaction under the Clearing ISDA Master
Agreement and, to the extent not a Transaction under the Clearing ISDA Master
Agreement, any collateral arrangements (including, in each case and without limitation, all
on-going payments, all termination payments and the transfer of any collateral) are limited
by and contingent on the actual performance or payment by LCH.Clearnet of its related
obligations (or obligations it would have had but for the application of any netting or set-off
in accordance with the LCH Rules or otherwise) in respect of any Associated LCH
Transactions and associated margin.
8.2
LCH Disruption Event: If at any time Party A determines that an LCH Disruption Event
has occurred, then it may, in good faith and a commercially reasonable manner, (i) make
such adjustment to (a) any of the terms of any Transaction; (b) the determination of the
value of any Transaction for the purposes of determining either party’s Exposure under a
Credit Support Annex; (c) either party’s Credit Support Balance under a Credit Support
Annex; or (d) any amount determined as being payable by either party under Section 6(d)
of a relevant ISDA Master Agreement, to reflect any loss, liability, cost, claim, damages or
expenses incurred by Party A as a result of the occurrence of such LCH Disruption Event,
(ii) defer any of its performance or payment obligations under any Transaction or make any
of its performance or payment obligations under any Transaction conditional on the
performance by LCH.Clearnet of its related obligations in respect of any Associated LCH
Transactions and associated margin, provided that if any such term is made conditional on
LCH.Clearnet’s performance and LCH.Clearnet subsequently renders such performance,
such term shall cease to be conditional and Party A shall perform its related obligation, (iii)
where LCH.Clearnet has, in accordance with the LCH Rules, allocated Losses to Party A
(including to Party A’s Proprietary Account) in circumstances other than pursuant to the
default of a clearing member of LCH.Clearnet (howsoever allocated, including without
limitation, by charging Party A in relation to such Losses or by way of a reduction of
LCH.Clearnet’s obligation to return margin to Party A), allocate such Losses pro rata to
Party A’s Client Account to the extent these have been calculated by reference to any
related Associated LCH Transactions (including transactions that are no longer in
existence) and/or any associated margin and/or (iv) terminate pursuant to an LCH
Disruption Additional Termination Event any Affected Transaction that formed part of the
relevant Clearing ISDA Master Agreement.
8.3
Adjustments:
8.3.1
Without prejudice to Clause 8.3.2, Party B will notify Party A as soon as reasonably
practicable after becoming aware that it has been, or will be, paid (or has otherwise
A18032743/4.0
12
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
received, or will otherwise receive credit for) any amount from LCH.Clearnet in
connection with one or more Transactions and the related Associated LCH
Transactions.
8.3.2
9
If any amount has been paid or asset delivered, or is payable or deliverable, to
Party B (or Party B has otherwise received or will otherwise receive credit for any
amount) from LCH.Clearnet and such amount or asset is attributable to amounts or
assets that would otherwise be determined and/or payable, or deliverable, under
the Clearing ISDA Master Agreement and is not otherwise already taken into
account in the determination of amounts payable or assets deliverable under the
Clearing ISDA Master Agreement, then Party A will make such adjustment to the
payment, delivery or other terms of the Clearing ISDA Master Agreement (which
may include, without limitation, an obligation on Party B to pay or deliver to Party A
any amount or asset received by Party B from LCH.Clearnet that exceeds the
amount due or assets deliverable to Party B from Party A under the Clearing ISDA
Master Agreement) as Party A determines appropriate to account for any Losses
that Party A may otherwise incur as a result of such amount being paid or asset
delivered, or being payable or deliverable, to Party B, or Party B otherwise
receiving credit for such amount or asset, from LCH.Clearnet.
Representations, Warranties and Agreements
Party B represents, warrants and agrees that:
(i)
it has read and understood the “Notice to End Users of SwapClear Client Clearing
Services” published on the website of LCH.Clearnet and the provisions set out in
Appendix 2, and agrees to be bound by the terms of both; and
(ii)
it understands that it will not receive client money protection or client asset
protection in relation to monies held in accounts opened by Party A with
LCH.Clearnet in respect of the SwapClear Client Clearing system or monies held
by Party A in connection with the SwapClear Client Clearing services.
Where the Clearing ISDA Master Agreement is an ISDA 2002 Master Agreement, the
representations, warranties and agreements above shall, in addition to any other Additional
Representations agreed between the parties, constitute Additional Representations for the
purposes thereof and Party B shall be deemed to repeat such representations, warranties
and agreements at all times until the termination of the Clearing ISDA Master Agreement.
Where the Clearing ISDA Master Agreement is an ISDA 1992 Master Agreement, such
representations, warranties and agreements shall be deemed to form part of Section 3(a)
and Party B shall be deemed to repeat such representations, warranties and agreements
at all times until the termination of the Clearing ISDA Master Agreement.
10
Miscellaneous
10.1
Entire agreement: The relevant Client Clearing Agreement constitutes the entire
agreement and understanding of the parties with respect to its subject matter. Each of the
parties acknowledges that in entering into the relevant Client Clearing Agreement it has not
relied on any oral or written representation, warranty or other assurance (except as
provided for or referred to in the relevant Client Clearing Agreement) and waives all rights
and remedies which might otherwise be available to it in respect thereof, except that
A18032743/4.0
13
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
nothing in the relevant Client Clearing Agreement will limit or exclude any liability of a party
for fraud.
10.2
Amendments: Any amendment, modification or waiver in respect of the relevant Client
Clearing Agreement will only be effective if in writing (including in writing evidenced by fax)
and executed by each of the parties or confirmed by an exchange of electronic messages
on an electronic messaging system. For the avoidance of doubt, any amendments to the
terms of the relevant Clearing ISDA Master Agreement by virtue of the relevant Client
Clearing Agreement or any amendment to the terms of any Transaction by Party A
pursuant to Clause 8.2(i)(a) hereof are evidenced by the relevant Client Clearing
Agreement and do not require the execution of any additional agreements for such
amendments to become effective. The parties agree that any amendment or modification
made in relation to one of the relevant ISDA Master Agreements will apply automatically to
the other relevant ISDA Master Agreement, unless the context requires otherwise or unless
the parties have otherwise expressly agreed in writing that any such amendment or
modification is to apply only to one of the relevant ISDA Master Agreements.
10.3
Remedies cumulative: Except as provided in the relevant Client Clearing Agreement, the
rights, powers, remedies and privileges provided in the relevant Client Clearing Agreement
are cumulative and not exclusive of any rights, powers, remedies and privileges provided
by law.
10.4
No waiver of rights: A failure or delay in exercising any right, power or privilege in respect
of the relevant Client Clearing Agreement will not be presumed to operate as a waiver, and
a single or partial exercise of any right, power or privilege will not be presumed to preclude
any subsequent or further exercise of that right, power or privilege or the exercise of any
other right, power or privilege.
10.5
Governing law, jurisdiction and service of process: The relevant Client Clearing
Agreement will be governed by and construed in accordance with the governing law
provisions, and will be subject to the jurisdiction and service of process provisions, in each
case as specified in the relevant Non-Clearing ISDA Master Agreement, as if such
provisions were set out in full in the relevant Client Clearing Agreement.
10.6
Waiver of immunities: Each party irrevocably waives, to the extent permitted by
applicable law, with respect to itself and its revenues and assets (irrespective of their use
or intended use), all immunity on the grounds of sovereignty or other similar grounds from
(i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction or order for specific
performance or recovery of property, (iv) attachment of its assets (whether before or after
judgement) and (v) execution or enforcement of any judgement to which it or its revenues
or assets might otherwise be entitled in any proceedings in the courts of any jurisdiction
and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any
such immunity in any such proceedings.
10.7
Use of Confidential Information: If “Confidentiality” is specified as being applicable in the
relevant Client Clearing Agreement, the parties to the relevant Client Clearing Agreement
acknowledge and agree that Party B may possess certain rights (the “Confidentiality
Rights”) against Party A to prevent the disclosure and/or use by Party A of certain
information (the “Confidential Information”) that is confidential to Party B. By entering into
the relevant Client Clearing Agreement, Party B thereby agrees that Party A may use such
Confidential Information in relation to the matters contemplated in the relevant Client
Clearing Agreement and may disclose such Confidential Information to such third parties
A18032743/4.0
14
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
as Party A may reasonably consider necessary in order to facilitate the arrangements
contemplated in the relevant Client Clearing Agreement and the relevant ISDA Master
Agreements or to the extent disclosure of such Confidential Information is required or
requested pursuant to any law, regulation or rule, or any court of competent jurisdiction, or
any competent judicial, governmental, supervisory or regulatory authority or body. By
entering into the relevant Client Clearing Agreement, Party B hereby waives its
Confidentiality Rights in respect of such Confidential Information to the extent described in
this Clause 10.7.
A18032743/4.0
15
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
Appendix 1
English Law Credit Support Annex
Where the effect of Clause 2.2 of the Client Clearing Standard Terms together with the governing
law provisions in the Client Clearing Agreement are that the Client Clearing Agreement is
governed by English law, by entering into the relevant Client Clearing Agreement, the parties will
have entered into a Credit Support Annex as supplemented by Paragraph 11 set out in this
Appendix 1 and as amended or modified by the relevant Client Clearing Agreement. There is no
requirement for the parties to execute a separate form of Credit Support Annex in relation to the
Clearing ISDA Master Agreement.
Paragraph 11. Elections and Variables
(a)
(b)
Base Currency and Eligible Currency.
(i)
“Base Currency” has the meaning specified in the relevant Client Clearing
Agreement.
(ii)
“Eligible Currency” has the meaning specified in the relevant Client Clearing
Agreement.
Credit Support Obligations.
(i)
Delivery Amount, Return Amount and Credit Support Amount.
(A)
“Delivery Amount” has the meaning specified in Paragraph 2(a).
(B)
“Return Amount” has the meaning specified in Paragraph 2(b).
(C)
“Credit Support Amount” means, for any Valuation Date (i) the
Transferee’s Exposure for that Valuation Date plus (ii) the aggregate of all
Independent Amounts applicable to the Transferor, if any, minus (iii) the
Transferor’s Threshold; provided, however, that (x) in the case where the
sum of the Independent Amounts applicable to the Transferor exceeds
zero, the Credit Support Amount will not be less than the sum of all
Independent Amounts applicable to the Transferor and (y) in all other
cases, the Credit Support Amount will be deemed to be zero whenever the
calculation of Credit Support Amount yields an amount less than zero.
(ii)
Eligible Credit Support. Subject to the other provisions of this Annex, the items
specified in the relevant Client Clearing Agreement will qualify as “Eligible Credit
Support” for the party specified therein.
(iii)
Thresholds.
(A)
“Independent Amount” means with respect to Party A: Not applicable.
“Independent Amount” means with respect to Party B: the sum of the
Base Currency Equivalent amounts of (i) the LCH Gross IM Amount and (ii)
the Additional Collateral Amount.
If specified as applicable in the relevant Client Clearing Agreement, the
“Additional Collateral Amount” shall be the amount specified in such
Client Clearing Agreement or, otherwise, shall be equal to zero.
A18032743/4.0
16
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
“LCH Gross IM Amount” means the initial margin portion of the Total
Required Margin Amount that Party A is required to post to LCH.Clearnet in
respect of the corresponding Associated LCH Transactions or, if Party B is
an Omnibus Segregated Clearing Client, the amount that Party A would be
required to post to LCH.Clearnet in respect of the corresponding
Associated LCH Transactions if the Total Required Margin Amount and
such initial margin portion of the Total Required Margin Amount were
calculated without taking into account any other transactions booked to
Party A’s Client Account.
(c)
(B)
“Threshold” means with respect to Party A: Not
“Threshold” means with respect to Party B: Not applicable.
(C)
“Minimum Transfer Amount” means with respect to Party A: Not
applicable.
“Minimum Transfer Amount” means with respect to Party B: Not
applicable.
(D)
Rounding. The Delivery Amount and the Return Amount will be rounded
using the same rounding convention applied by LCH.Clearnet in
accordance with the LCH Rules.
applicable.
Valuation and Timing.
(i)
“Valuation Agent” means (a) so long as no Clearing Default has occurred, Party A
and (b) if a Clearing Default has occurred, Party B. In all cases, the Valuation Agent
shall calculate Exposure in accordance with the LCH Valuation Methodology and
Value in accordance with the definition of “Value” (as amended in accordance with
Paragraph 11(h)(x)).
(ii)
“Valuation Date” means each LCH Business Day, unless otherwise specified in the
relevant Client Clearing Agreement, provided that if on any such LCH Business
Day LCH.Clearnet makes more than one demand on Party A to deliver margin in
respect of the Associated LCH Transactions, each such separate demand shall be
treated as a separate Valuation Date and the provisions of this Annex will be
construed accordingly (and each such demand whenever made, an “LCH Margin
Call”).
(iii)
“Valuation Time” means:
(A)
if “VM Matching Methodology” is specified as being applicable in the
relevant Client Clearing Agreement and in relation to each Delivery Amount
or Return Amount in respect of a Currency Portfolio, each time on a
Valuation Date at which LCH.Clearnet values the Associated LCH
Transactions relating to such Currency Portfolio for the purposes of
calculating variation margin deliverable in relation to such Associated LCH
Transactions pursuant to the LCH Rules. For the avoidance of doubt, there
may be more than one Valuation Time on or in respect of a Valuation Date;
and
(B)
in all other cases, the time specified as such in the relevant Client Clearing
Agreement on each Valuation Date unless the relevant determination has
been made in relation to an LCH Margin Call, in which case the Valuation
A18032743/4.0
17
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
Time shall be the time used by LCH.Clearnet for the purposes of such LCH
Margin Call.
(iv)
“Notification Time” means the time specified as such in the relevant Client
Clearing Agreement on each Valuation Date.
(d)
Exchange Date. “Exchange Date” has the meaning specified in Paragraph 3(c)(ii), unless
otherwise specified in the relevant Client Clearing Agreement.
(e)
Dispute Resolution.
(f)
(i)
“Resolution Time” means 1:00 p.m., London time, on the Local Business Day
following the date on which the notice is given that gives rise to a dispute under
Paragraph 4, unless otherwise specified in the relevant Client Clearing Agreement.
(ii)
Value. For the purpose of Paragraphs 4(a)(4)(i)(C) and 4(a)(4)(ii), the Value of the
outstanding Credit Support Balance or of any transfer of Eligible Credit Support or
Equivalent Credit Support, as the case may be, other than that comprising LCH
Eligible Collateral will be calculated as specified in the relevant Client Clearing
Agreement, as determined by reference to the most recent Valuation Time and
Value for Eligible Credit Support of the relevant type.
(iii)
Alternative. If “Alternative” is specified as being applicable in the relevant Client
Clearing Agreement, the provisions of Paragraph 4 will apply, provided that the
determination of Value by the Valuation Agent in respect of Eligible Credit Support
that is LCH Eligible Collateral shall be final and binding on both parties absent
Manifest Error. For the purposes of the immediately preceding sentence only,
“Manifest Error” means that the value determined by LCH.Clearnet (if any) and
referred to in sub-paragraph (x) of the definition of LCH Valuation Methodology
does not exactly match the value used by the Valuation Agent for the purposes of
determining Value (for such purposes, excluding the application of any Valuation
Percentage and any conversion into the Base Currency Equivalent) in respect of
the relevant Eligible Credit Support constituting LCH Eligible Collateral. In the case
of a Manifest Error, the relevant Value shall be recalculated so that the value
determined by LCH.Clearnet and referred to in sub-paragraph (x) of the definition
of LCH Valuation Methodology shall exactly match the value used by the Valuation
Agent for the purposes of determining Value (for such purposes, excluding the
application of any Valuation Percentage and any conversion into the Base
Currency Equivalent) in respect of the relevant Eligible Credit Support constituting
LCH Eligible Collateral.
Distributions and Interest Amount.
(i)
Interest Rate. “Interest Rate” has the meaning specified as such in the relevant
Client Clearing Agreement.
(ii)
Transfer of Interest Amount. The transfer of the Interest Amount will be made on
the last Local Business Day of each calendar month unless otherwise specified in
the relevant Client Clearing Agreement and on any Local Business Day that a
Return Amount consisting wholly or partly of cash is transferred to the Transferor
pursuant to Paragraph 2(b) unless otherwise specified in the relevant Client
Clearing Agreement (including pursuant to the application of any of sub-paragraphs
(f)(iii), (f)(iv) or (f)(v), below).
A18032743/4.0
18
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
(g)
(iii)
Alternative to Interest Amount. Unless otherwise specified in the relevant Client
Clearing Agreement, the provisions of Paragraph 5(c)(ii) will apply, provided that
where “VM Matching Methodology” is specified as being applicable in the relevant
Client Clearing Agreement, a separate Interest Amount will be determined in
respect of (a) each Currency Portfolio Credit Support Balance and (b) cash
comprised in the Initial Margin Credit Support Balance, in each case using the
Interest Rate(s) specified in the Client Clearing Agreement and with each Interest
Amount being transferred in the currency of calculation.
(iv)
Alternative to Distributions. If “Alternative to Distributions” is specified as being
applicable in the relevant Client Clearing Agreement, then the parties agree that (a)
Party A shall have no obligation to pay Equivalent Distributions on Eligible Credit
Support comprised in the Credit Support Balance that would otherwise be payable
to Party B as Transferor under Paragraph 5(c)(i) and (b) the definition of “Credit
Support Balance” hereunder shall be amended by the deletion of the words “any
Distributions”, “or Distributions and” and “Equivalent Distributions or” and by the
replacement of the words “of either” with the word “thereof”. As consideration
therefor, Party A agrees to pay Party B the amount or amounts specified in the
Client Clearing Agreement.
(v)
Modified Blended Alternative. If “Modified Blended Alternative” is specified as
being applicable in the relevant Client Clearing Agreement, then the parties agree
that (a) Party A shall have no obligation to pay Equivalent Distributions and Interest
Amounts on or with respect to Eligible Credit Support comprised in the Credit
Support Balance that would otherwise be payable to Party B as the Transferor
under Paragraph 5(c) and (b) the definition of “Credit Support Balance” hereunder
shall be amended by the deletion of the words “any Distributions”, “or Distributions
and” and “Equivalent Distributions or” and by the replacement of the words “of
either” with the word “thereof”. As consideration therefore, Party A agrees to pay
Party B the amount or amounts specified in the Client Clearing Agreement.
Addresses for Transfers.
Party A: as specified in the relevant Client Clearing Agreement.
Party B: as specified in the relevant Client Clearing Agreement.
(h)
Other Provisions.
(i)
All language preceding Paragraph 1 of this Annex is hereby deleted in its entirety
and replaced with the following:
“Credit Support Annex to the Schedule to the Clearing ISDA Master
Agreement created pursuant to the Client Clearing Agreement between
Party A and Party B. This Annex supplements, forms part of, and is subject
to, the Clearing ISDA Master Agreement and is part of its Schedule. For the
purposes of this Agreement, including, without limitation, Sections 1(c),
2(a), 5 and 6, the credit support arrangements set out in this Annex
constitute a Transaction (for which this Annex constitutes the
Confirmation).”
A18032743/4.0
19
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
(ii)
The following is hereby added to sub-paragraph (a) of Paragraph 1 of this Annex:
“Notwithstanding the foregoing, to the extent there is any inconsistency
between the provisions of the relevant Client Clearing Agreement and the
provisions of this Annex, the provisions of such Client Clearing Agreement
shall prevail. Terms used, but not otherwise defined, in this Agreement shall
have the meaning ascribed to such terms in the relevant Client Clearing
Agreement or the LCH Rules, as applicable, as at the date hereof. If there
is a conflict between a definition in the relevant Client Clearing Agreement
and the LCH Rules, the LCH Rules will prevail.”
(iii)
The following sub-paragraph (c) is hereby added to Paragraph 2 of this Annex:
“(c) No offset. Other than in the case of a Valuation Date occurring
pursuant to Paragraph 6, on any Valuation Date, if either (i) each party is
required to make one or more transfers under Paragraph 2(a) or (ii) each
party is required to make one or more transfers under Paragraph 2(b), then
each such transfer shall be made separately and the amounts of those
obligations will not be set-off against each other.”
(iv)
If “LCH Matching” is specified as being applicable in the relevant Client Clearing
Agreement, then the following sub-paragraph (d) shall be added to the end of
Paragraph 2 of this Annex:
“(d) LCH Matching. Notwithstanding the foregoing or anything to the
contrary in this Annex, whenever Party A makes a demand on Party B for
the transfer of a Delivery Amount or Return Amount, it may specify in that
demand the amounts and types of LCH Eligible Collateral corresponding to
those called by and transferable by Party A to LCH.Clearnet in respect of
the Associated LCH Transactions (assuming for such purpose that Party B
is an Individual Segregated Account Clearing Client) (an “LCH
Specification” and the specified amount and type of LCH Eligible
Collateral being “LCH Specification Assets”). Where any such demand by
Party A contains an LCH Specification, Party B will transfer to Party A
Eligible Credit Support or (to the extent that the Credit Support Balance
includes the LCH Specification Assets) Equivalent Credit Support, as the
case may be, matching the LCH Specification in amount and type. Where
Party A receives a demand for the transfer of Eligible Credit Support or
Equivalent Credit Support, as the case may be, to the extent that such
Eligible Credit Support or Equivalent Credit Support, as the case may be,
does not consist of an Additional Collateral Amount, it may transfer Eligible
Credit Support or (to the extent that the Credit Support Balance includes
the LCH Specification Assets) Equivalent Credit Support, as the case may
be, to Party B in the amounts and types of LCH Eligible Collateral
corresponding to those transferable by LCH.Clearnet to Party A in respect
of the Associated LCH Transactions (assuming for such purpose that Party
B is an Individual Segregated Account Clearing Client) and notwithstanding
any contrary specification by Party B in any such demand. For the
avoidance of doubt, specifying that “LCH Matching” is applicable shall not
preclude specifying that “Additional Collateral Amount” is applicable.”
A18032743/4.0
20
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
If “Flexible Calls” is specified as being applicable in the relevant Client Clearing
Agreement, then the following sub-paragraph (d) shall be added to the end of
Paragraph 2 of this Annex:
“(d) Flexible Calls. If Party A so elects, in its sole and absolute discretion, it
may specify in any demand made on Party B for the transfer of a Delivery
Amount or Return Amount by Party B the amounts, types and
denominations of Eligible Credit Support or Equivalent Credit Support, as
the case may be, required to be transferred by Party B in respect of such
Delivery Amount or Return Amount, including, for the avoidance of doubt,
cash denominated in one or more currencies. If Party B makes a demand
on Party A for the transfer of a Delivery Amount or a Return Amount,
regardless of the Eligible Credit Support or Equivalent Credit Support, as
the case may be, specified in such demand, Party A may elect, in its sole
and absolute discretion, to satisfy its obligation in respect of such Delivery
Amount or Return Amount by transferring to Party B, Eligible Credit Support
or Equivalent Credit Support, as the case may be, in the types,
denominations and amounts that it chooses, including for the avoidance of
doubt cash denominated in one or more currencies. However, if the
demand for such Delivery Amount or Return Amount specifies Eligible
Credit Support or Equivalent Credit Support, as the case may be,
denominated in one or more different currencies other than the Base
Currency, Party A may determine the Base Currency Equivalent amount of
the Eligible Credit Support or Equivalent Credit Support, as the case may
be, that it elects to deliver to or, as the case may be, receive from Party B.
Party A’s determinations in all respects under this sub-paragraph (d) shall
be final and binding on both parties.”
If “VM Matching Methodology” is specified as being applicable in the relevant Client
Clearing Agreement (and Party B is an Individual Segregated Account Clearing
Client or an Omnibus Gross Segregated Clearing Client the Client Account in
respect of which is not utilised by any other SwapClear Clearing Client), then the
following sub-paragraph (d) shall be added to the end of Paragraph 2 of this Annex:
“(d) VM Matching Methodology. Notwithstanding anything to the contrary
in this Annex, Paragraphs 2(a) and 2(b) shall be construed separately in
respect of each Initial Margin Determination and each Variation Margin
Determination, meaning multiple Delivery Amounts and Return Amounts will
be determined in respect of each Valuation Date as follows:
(i)
Initial Margin Determinations. Paragraphs 2(a) and 2(b) (together
with the other provisions of this Annex specified below) shall be
construed as follows (an “Initial Margin Determination”):
(A)
the Transferee shall be Party A and the Transferor shall be
Party B;
(B)
the Independent Amount
Paragraph 11(b)(iii)(A);
(C)
the Exposure shall be deemed to be zero;
(D)
the Threshold shall be as defined in Paragraph 11(b)(iii)(B);
A18032743/4.0
21
shall
be
as
defined
in
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
(ii)
(E)
the expression “Eligible Credit Support” as used in the
definition of Credit Support Balance shall be construed as
relating only to that Eligible Credit Support transferred by
the Transferor in respect of this Paragraph 2(d)(i) (the
“Initial Margin Credit Support Balance”) and not any other
Eligible Credit Support transferred in respect of Paragraph
2(d)(ii);
(F)
references in the definition of Credit Support Balance to
Paragraphs 5(c)(i) and 5(c)(ii) shall be construed in
accordance with Paragraph 11(h)(xxv); and
(G)
references in the definition of Equivalent Credit Support to
the Credit Support Balance shall be construed as the Initial
Margin Credit Support Balance.
Variation Margin Determinations. Paragraphs 2(a) and 2(b)
(together with the other provisions of this Annex specified below)
shall be construed separately in respect of each Currency Portfolio
as follows (each, a “Variation Margin Determination”):
(A)
notwithstanding anything to the contrary, the Eligible Credit
Support in respect of such Currency Portfolio shall be solely
cash in the currency of such Currency Portfolio;
(B)
the Independent Amount shall be deemed to be zero;
(C)
the Exposure shall be as defined in Paragraph 10 (as
amended by Paragraph 11(h)(viii)) except that references in
the definition of Exposure to the Base Currency shall, for
the purposes of a Variation Margin Determination in respect
of such Currency Portfolio, be construed as the currency of
such Currency Portfolio;
(D)
the Threshold shall be as defined in Paragraph 11(b)(iii)(B);
(E)
the expression “Eligible Credit Support” as used in the
definition of Credit Support Balance shall be construed as
relating only to that Eligible Credit Support transferred by
the Transferor to the Transferee in respect of such Currency
Portfolio (a “Currency Portfolio Credit Support Balance”)
and not any other Eligible Credit Support transferred in
respect of Paragraph 2(d)(i) or any other Currency Portfolio;
(F)
the Value of Eligible Credit Support will be determined in the
currency of such Currency Portfolio;
(G)
references in the definition of Credit Support Balance to
Paragraphs 5(c)(i) and 5(c)(ii) shall be construed in
accordance with Paragraph 11(h)(xxv);
(H)
references in the definition of Equivalent Credit Support to
the Credit Support Balance shall be construed as the
Currency Portfolio Credit Support Balance in respect of
such Currency Portfolio; and
A18032743/4.0
22
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
(I)
the Credit Support Balance and Credit Support Amount in
respect of such Currency Portfolio shall be determined in
the currency of such Currency Portfolio.
For these purposes:
“Currency Portfolio” means, in relation to a currency, all
Transactions for which, in respect of the related Associated LCH
Transactions, LCH.Clearnet calls variation margin in such currency.”
(v)
The final sub-paragraph of Paragraph 3(a) is hereby deleted in its entirety and
replaced with:
“Subject to Paragraph 4 and unless otherwise specified,
(A)
(B)
if a demand for the transfer of Eligible Credit Support or Equivalent
Credit Support is received by the Notification Time, then:
(I)
where such demand is made by Party B, the relevant transfer
will be made not later than the close of business on the
Settlement Day relating to the date such demand is received;
and
(II)
where such demand is made by Party A (x) if such demand is
received on an LCH Business Day, the relevant transfer will
be made not later than the close of business on such LCH
Business Day or (y) if such demand is received on a day
other than an LCH Business Day, the relevant transfer will be
made not later than close of business on the earlier of (i) the
next LCH Business Day and (ii) the next Local Business Day;
and
if a demand is received after the Notification Time, then:
(I)
where such demand is made by Party B, the relevant transfer
will be made not later than the close of business on the
Settlement Day relating to the day after the date such
demand is received; and
(II)
where such demand is made by Party A, the relevant transfer
will be made not later than the close of business on the
earlier of (i) the next LCH Business Day and (ii) the next
Local Business Day,
provided that, where such demand is made by Party A, Party A may in the
relevant demand specify a later date (which shall be a Local Business Day)
falling no later than the close of business on the “Nth Local Business Day”
specified in the relevant Client Clearing Agreement after the day on which
the relevant LCH Margin Call is made by which Party B will be required to
make the relevant transfer, and in such circumstances the relevant transfer
shall be made by Party B no later than the close of business on such date.
For the purposes of this Annex, the definition of Settlement Day shall
include each day on which a demand is required to be satisfied pursuant to
sub-paragraphs (A)(II) and (B)(II) above.”
A18032743/4.0
23
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
(vi)
Paragraph 3(b) is hereby amended by the deletion of the words “the Local
Business Day following” from the second sentence.
(vii)
Paragraph 6 is hereby amended by the insertion of the words “or Clearing Default”
immediately after the words “Event of Default”.
(viii)
The definition of “Exposure” in Paragraph 10 is hereby deleted in its entirety and
replaced with:
““Exposure” means with respect to a party on a Valuation Date: (1) if this
Agreement is a 1992 ISDA Master Agreement, the amount, if any, that
would be payable to that party by the other party (expressed as a positive
number) or by that party to the other party (expressed as a negative
number) pursuant to Section 6(e)(ii)(1) of this Agreement as if all
Transactions (other than the Transaction constituted by this Annex) were
being terminated as of the relevant Valuation Time and the Base Currency
is the Termination Currency, provided that Market Quotation or Loss, as the
case may be, for such purposes will mean the Base Currency Equivalent of
the value determined applying the LCH Valuation Methodology; and (2) if
this Agreement is a 2002 ISDA Master Agreement or a 1992 ISDA Master
Agreement subject to another agreement or protocol which amends the
definition of Loss and/or Market Quotation therein to reflect the definition of
Close-out Amount from an ISDA 2002 Master Agreement, the amount, if
any, that would be payable to that party by the other party (expressed as a
positive number) or by that party to the other party (expressed as a
negative number) pursuant to Section 6(e)(ii)(1) of this Agreement as if all
Transactions (other than the Transaction constituted by this Annex) were
being terminated as of the relevant Valuation Time and the Base Currency
is the Termination Currency, provided that Close-out Amount for such
purposes will mean the Base Currency Equivalent of the value determined
applying the LCH Valuation Methodology.”
(ix)
The definition of “Transferee” in Paragraph 10 is hereby deleted in its entirety and
replaced with the following:
““Transferee” means (A) in relation to each Valuation Date, any party
entitled to make a demand for or that is entitled to receive Eligible Credit
Support under Paragraph 2(a) and (B) in relation to a Credit Support
Balance, any party which, subject to this Annex, owes such Credit Support
Balance or, as the case may be, the Value of such Credit Support Balance
to the other party and, where “VM Matching Methodology” is specified as
being applicable in the relevant Client Clearing Agreement (and Party B is
an Individual Segregated Account Clearing Client or an Omnibus Gross
Segregated Clearing Client the Client Account in respect of which is not
utilised by any other SwapClear Clearing Client), references to “Credit
Support Balance” for such purposes shall be construed as references to
each of (i) the Initial Margin Credit Support Balance and (ii) each Currency
Portfolio Credit Support Balance, in accordance with Paragraphs 2(d)(i) and
2(d)(ii).”
A18032743/4.0
24
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
(x)
The definition of “Value” in Paragraph 10 shall not apply, and is hereby replaced
with the following:
““Value” means:
(i)
unless sub-paragraph (ii) of this definition applies:
(a)
for any Valuation Date or other date for which Value is
calculated in respect of any Eligible Credit Support that is
LCH Eligible Collateral, (I) the Base Currency Equivalent of
the value ascertained by the Valuation Agent applying the
LCH Valuation Methodology that would be applicable
thereto pursuant to the LCH Rules if it were provided as
margin to LCH.Clearnet in respect of one or more
Associated LCH Transactions, assuming for such purposes
that Party B is an Individual Segregated Account Clearing
Client, multiplied by (II) the applicable Valuation Percentage,
if any; and
(b)
in all other cases, for any Valuation Date or other date for
which Value is calculated, and subject to Paragraph 4 in the
case of a dispute, with respect to:
(I)
(II)
(ii)
Eligible Credit Support comprised in a Credit
Support Balance that is:
(A)
an amount of cash, the Base Currency
Equivalent of such amount multiplied by the
applicable Valuation Percentage, if any; and
(B)
a non-cash asset, the Base Currency
Equivalent of the bid price obtained by the
Valuation Agent multiplied by the applicable
Valuation Percentage, if any; and
items that are comprised in a Credit Support
Balance and are not Eligible Credit Support, zero;
and
where an Early Termination Date is designated as a result of the
occurrence of a Clearing Default or an LCH Default, or where
Automatic Early Termination applies, where Section 6(c)(iii) of the
Agreement has been triggered such that the Early Termination Date
is deemed to have been designated as a result of a Clearing
Default Additional Termination Event:
(a)
in respect of each non-cash asset comprising collateral:
(I)
where such non-cash asset is held by LCH.Clearnet
and is attributable to the Client Account of Party A:
(A)
A18032743/4.0
25
if LCH.Clearnet liquidates such non-cash
asset at any time between the occurrence of
the related Clearing Default and the time at
which LCH.Clearnet determines the final net
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
amount due as between it and Party A with
respect to the Client Account (such time the
“Final Valuation Time”), the liquidation
proceeds of such non-cash asset (less any
costs
incurred
by
LCH.Clearnet
in
connection with such liquidation); and
(B)
(II)
(b)
if LCH.Clearnet does not liquidate such noncash asset between the occurrence of the
related Clearing Default and the Final
Valuation Time, the Base Currency
Equivalent of the bid price obtained by the
Valuation Agent as at the Final Valuation
Time; and
where such non-cash asset is not held by
LCH.Clearnet, the value of such non-cash asset as
at the Final Valuation Time, determined in
accordance with sub-paragraph (i) above;
in respect of any cash in any currency comprising collateral,
the value of such cash in such currency at the Final
Valuation Time.
The determination of each value for the purposes of sub-paragraph
(ii)(a)(I)(A) of this definition shall be made by reference to the books and
records of LCH.Clearnet, provided that where such information is not
available within a reasonable period after the Final Valuation Time (the
Valuation Agent having used all reasonable efforts to obtain such
information), the Valuation Agent shall determine such value acting in good
faith and using commercially reasonable procedures in order to produce a
commercially reasonable result.
The following definition of “LCH Valuation Methodology” shall be inserted in
alphabetical order into Paragraph 10:
“LCH Valuation Methodology” means, as applicable, (x) a value provided
by LCH.Clearnet in respect of LCH Eligible Collateral and the Associated
LCH Transactions calculated by LCH.Clearnet in accordance with the LCH
Rules and notified to the Valuation Agent by LCH.Clearnet, or (y) a value
calculated using technology provided by LCH.Clearnet to the Valuation
Agent for the application of its valuation methodology to LCH Eligible
Collateral and the Associated LCH Transactions pursuant to the LCH
Rules. If LCH.Clearnet fails to maintain any such technology and also fails
to provide any such valuation in respect of any LCH Eligible Collateral
and/or any Associated LCH Transaction then: (i) in the case of LCH Eligible
Collateral, it shall be valued by the Valuation Agent applying the standard
Paragraph 10 definition of Value to such LCH Eligible Collateral as if it did
not comprise LCH Eligible Collateral and applying the relevant Valuation
Percentages as set forth herein, and/or (ii) in the case of an Associated
LCH Transaction, for the purposes of determining Exposure, the
Transaction under the Agreement related to such Associated LCH
A18032743/4.0
26
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
Transaction shall be valued by the Valuation Agent in accordance with the
applicable Valuation Method as if such Valuation Method had not been
amended by the Client Clearing Agreement.”
(xi)
The definition of “Valuation Percentage” in Paragraph 10 is amended by the
insertion of the words “, except that, for the purposes of Paragraph 6, Valuation
Percentage for each item of Eligible Credit Support is 100%” immediately after the
words “Paragraph 11(b)(ii)”.
(xii)
Subject to the provisions of the Client Clearing Agreement and as otherwise
modified therein, the following definition is added to Paragraph 10 where this
Agreement is not a 1992 ISDA Master Agreement:
““Set-off” means set-off, offset, combination of accounts, right of retention
or withholding or similar right or requirement to which the payer of an
amount under Section 6 is entitled or subject (whether arising under this
Agreement, another contract, applicable law or otherwise) that is exercised
by, or imposed on, such payer.”
(xiii)
If either “LCH Matching” or “Flexible Calls” is specified as being applicable in the
relevant Client Clearing Agreement, then the following sub-paragraph (iii) shall be
added to the end of Paragraph 3(c) of this Annex:
“Notwithstanding anything to the contrary in this Agreement, if Party A as
the Transferee so elects in its sole and absolute discretion, it may notify
Party B that it has elected to require collateral substitution. In such
circumstance, the parties agree that the relevant original Eligible Credit
Support comprised in the Credit Support Balance shall be deemed for all
purposes to comprise such amount and type of the alternative Eligible
Credit Support as determined by Party A as having an equivalent Value to
such original Eligible Credit Support then comprised in the Credit Support
Balance with respect to Party B.”
If “LCH Matching” is specified as being applicable in the relevant Client Clearing
Agreement, then the following sub-paragraph shall be added to the end of
Paragraph 3 of this Annex:
“To facilitate the operation of Paragraph 2(d), and notwithstanding anything
to the contrary in this Agreement, Party A as the Transferor may direct
Party B as the Transferee to accept Eligible Credit Support in the amounts,
types and denominations specified by Party A as the Transferor as an
alternative for, so far as is practicable, Eligible Credit Support previously
delivered by Party A. Upon such direction, the parties agree that the
relevant original Eligible Credit Support comprised in the Credit Support
Balance shall be deemed for all purposes to comprise such amount and
type of the alternative Eligible Credit Support as determined by Party A as
having an equivalent Value to such original Eligible Credit Support then
comprised in the Credit Support Balance with respect to Party A as
Transferor.”
(xiv)
To the maximum extent legally permissible in accordance with applicable law and
notwithstanding anything to the contrary in this Annex or this Agreement, following
a Clearing Default, any notices required to be provided to Party A from or on behalf
A18032743/4.0
27
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
of Party B shall be made in the manner and only to the extent set forth in the
relevant Client Clearing Agreement and the LCH Rules, provided, however, that
Party B shall deliver or cause to be delivered copies of any such notices to Party A,
but the failure by Party B to provide any such notices shall not affect the validity or
effectiveness of any such notices.
(xv)
By entering into the relevant Client Clearing Agreement, Party B agrees to
indemnify Party A and LCH.Clearnet for any reasonable costs or expenses incurred
as a result of any claims brought by any other SwapClear Clearing Member or on
such other SwapClear Clearing Member’s behalf, or by any trustee, administrator,
conservator or receiver appointed in respect of such other SwapClear Clearing
Member or its affairs or its business, including reasonable attorney’s fees in
connection with defending against any such claims, in each case with respect to
Party A acting as the Backup Clearing Member in respect of SwapClear Contracts
relating to Party B.
(xvi)
For the purposes of the Contracts (Rights of Third Parties) Act 1999, as amended,
LCH.Clearnet may enforce the rights conferred on it pursuant to sub-paragraph
(xv). The consent of any third party shall not be required in order for the parties to
this Agreement to make any amendment to, or exercise any provision of, this
Agreement.
(xvii)
Sub-paragraphs (xv) to this sub-paragraph (xvii) (inclusive) shall survive
termination of this Agreement (including, for the avoidance of doubt, any
Transactions under this Agreement).
(xviii)
This paragraph is intentionally left blank.
(xix)
This paragraph is intentionally left blank.
(xx)
This paragraph is intentionally left blank.
(xxi)
On the date on which one or more Transactions are entered into under the relevant
Clearing ISDA Master Agreement pursuant to the operation of Clause 4.2 of the
Client Clearing Standard Terms and:
(I)
any assets comprised in the Associated Collateral Balance are transferred
by LCH.Clearnet from the Client Account of the other clearing member of
LCH.Clearnet transferring such Transactions to the Client Account of Party
A pursuant to the LCH Rules, such assets comprised in the Associated
Collateral Balance shall thereupon constitute Eligible Credit Support that
has been Transferred by Party B to Party A to increase the Credit Support
Balance of Party B hereunder; and
(II)
any credit or debit for variation margin that is not included as part of the
assets comprised in the Associated Collateral Balance is transferred by
LCH.Clearnet to Party A in respect of such Transactions, (A) any such
credit shall thereupon constitute Eligible Credit Support forming part of
Party B’s Credit Support Balance hereunder and (B) and any such debit
shall thereupon constitute Eligible Credit Support forming part of Party A’s
Credit Support Balance hereunder.
A18032743/4.0
28
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
(xxii)
On the date on which Party A and Party B are automatically and immediately
released and discharged from further obligations under one or more Transactions
under the relevant Clearing ISDA Master Agreement pursuant to the operation of
Clause 5.1 of the Client Clearing Standard Terms:
(I)
any assets comprised in the Associated Collateral Balance are transferred
by LCH.Clearnet from the Client Account of Party A to the Client Account of
the other clearing member of LCH.Clearnet to whom such Transactions and
such assets comprised in the Associated Collateral Balance are to be
transferred pursuant to the LCH Rules, such assets comprised in the
Associated Collateral Balance shall thereupon constitute Equivalent Credit
Support to Eligible Credit Support comprised in the Credit Support Balance
of Party B that has been Transferred by Party A to Party B in reduction of
the Credit Support Balance of Party B hereunder; and
(II)
any credit or debit for variation margin that is not included as part of the
assets comprised in the Associated Collateral Balance is transferred by
LCH.Clearnet from Party A to such other clearing member of LCH.Clearnet
in respect of such Transactions, (A) any such credit shall thereupon
constitute Equivalent Credit Support to Eligible Credit Support comprised in
the Credit Support Balance of Party B that has been Transferred by Party A
to Party B in reduction of the Credit Support Balance of Party B hereunder
and (B) any such debit shall thereupon constitute Equivalent Credit Support
to Eligible Credit Support comprised in the Credit Support Balance of Party
A that has been Transferred by Party B to Party A in reduction of the Credit
Support Balance of Party A hereunder.
(xxiii)
Notwithstanding anything to the contrary in this Agreement, Party A may make such
adjustments to the Credit Support Balance of either party as it considers
necessary, in its sole and absolute discretion, to facilitate the operation of and/or
give effect to sub-paragraphs (xxi) and (xxii) and, for such purposes, Party A may
take into account (without limitation) any margining arrangements that have been
agreed between the parties to this Agreement. Any adjustments made by Party A
pursuant to this sub-paragraph (xxiii) shall be final and binding on both parties.
(xxiv)
If “VM Matching Methodology” is specified as being applicable in the relevant Client
Clearing Agreement (and Party B is an Individual Segregated Account Clearing
Client or an Omnibus Gross Segregated Clearing Client the Client Account in
respect of which is not utilised by any other SwapClear Clearing Client), the Credit
Support Balance for the purposes of Paragraph 6 shall be determined as: (I) the
sum of the Value of the Initial Margin Credit Support Balance and the Value of all
Party A’s Currency Portfolio Credit Support Balances less (II) the Value of all Party
B’s Currency Portfolio Credit Support Balances. Where the result is a positive
amount, such amount shall constitute the Credit Support Balance of Party A, and
where the result is a negative amount, the absolute value of such amount shall
constitute the Credit Support Balance of Party B.
(xxv)
If “VM Matching Methodology” is specified as being applicable in the relevant Client
Clearing Agreement (and Party B is an Individual Segregated Account Clearing
Client or an Omnibus Gross Segregated Clearing Client the Client Account in
respect of which is not utilised by any other SwapClear Clearing Clients), subject to
Paragraphs 2(d)(i) and 2(d)(ii), references to a Credit Support Balance shall be
A18032743/4.0
29
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
construed separately as being references to the relevant Initial Margin Credit
Support Balance or Currency Portfolio Credit Support Balance, as the case may
be. Accordingly:
(I)
Distributions will be determined separately in respect of each of the Initial
Margin Credit Support Balance and each Currency Portfolio Credit Support
Balance and shall be paid pursuant to Paragraph 5(c)(i); and
(II)
Interest Amounts will be determined separately in respect of each Initial
Margin Credit Support Balance and each Currency Portfolio Credit Support
Balance and shall be paid pursuant to Paragraph 5(c)(ii).
A18032743/4.0
30
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
Appendix 2
LCH.Clearnet
Capitalised terms used in this Appendix 2 and not defined in the relevant Client Clearing
Agreement shall have the meaning specified in the LCH Rules.
Party B hereby acknowledges and agrees that:
(i)
the services provided by the Clearing House with regard to the Clearing Services will be
subject to and governed by the rules in the Clearing House's Rulebook, and Party B will
not act so as to cause – whether directly or indirectly – any breach of such rules or
agreement by any person. The provisions of the amended text of Regulation 52 (Exclusion
of Liability) of the Clearing House's Rulebook set out below shall apply mutatis mutandis
as though entered into by Party B directly with the Clearing House;
(ii)
in the event that Party B has failed to appoint a Backup Clearing Member or the Clearing
House does not receive the necessary confirmation from Party B of its wish to have its
positions transferred (including by way of termination, close-out and establishment of new
replacement transactions to replicate such positions) or the Backup Clearing Member
declines to act as such, on the default of the relevant Clearing Member, the Clearing
House will close out and terminate the Contracts entered into by that Clearing Member in
respect of Party B and will not transfer or otherwise re-establish such positions. For the
avoidance of doubt, a Backup Clearing Member can be appointed prior to or after the
default of the relevant Clearing Member, but if Party B has not appointed a Backup
Clearing Member prior to the default of its Clearing Member, it may find that porting may
be less likely to occur in those circumstances;
(iii)
Party B will not be entitled to instruct the Clearing House to act or to omit to act in any
manner at any time prior to the default of the relevant Clearing Member but the Clearing
House shall accept instructions from Party B following a default of the relevant Clearing
Member, provided that such instructions are in accordance with the rules of the Clearing
House's Rulebook and/or the DMP Amendment Agreement;
(iv)
Party B will not be entitled to any information from the Clearing House as to any balance
held by the Clearing House for any person at any time prior to the default of the relevant
Clearing Member but the Clearing House shall provide such information to Party B
following a default of the relevant Clearing Member;
(v)
the Clearing House will not hold any assets transferred to it on trust for any person; and
(vi)
where the Clearing Member provides securities to the Clearing House as Collateral (the
“Securities”), Party B will not be entitled to assert any equitable or other claim to any such
Securities in circumstances where the assertion of such a claim would delay or inhibit the
disposal by the Clearing House of such Securities and/or the application of the proceeds
of sale of such Securities in accordance with the rules of the Clearing House's Rulebook.
Regulation 52: Exclusion of Liability
(This has been extracted from the LCH Rules)
(a)
Without prejudice to the provisions of Regulations 2 and 32 and 52(e) neither the Clearing
House, nor any other member of the LCH.Clearnet Group shall have any liability
whatsoever to any Member or to any other person (including, without limitation, any
Clearing Client of a Member) in contract, tort (including, without limitation, negligence),
A18032743/4.0
31
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
trust, as a fiduciary or under any other cause of action in respect of any damage, loss, cost
or expense of whatsoever nature suffered or incurred by a Member or any other person,
as the case may be, as a result of: any suspension, restriction or closure of the market
administered by an Exchange, an ATP or a Co-operating Clearing House, whether for a
temporary period or otherwise or as a result of a decision taken on the occurrence of a
market emergency; any failure by the Clearing House or an Exchange or a Co-operating
Clearing House or an ATP or its operator or the relevant approved agent or the Approved
EquityClear Settlement Provider to supply each other with data or information in
accordance with arrangements from time to time established between any or all of such
persons; the failure of any systems, communication facilities or technology supplied,
operated or used by the Clearing House, an Exchange, or a Co-operating Clearing House;
any event which is outside the control of the Clearing House; any act or omission of an
Exchange, or a Co-operating Clearing House in connection with a Co-operating Clearing
House Contract or any contracts made on such terms, including, without limitation, any
error in the establishment of a settlement price made by an Exchange; any act or omission
of the Clearing House, an Exchange, or a Co-operating Clearing House (as the case may
be) in connection with the operation of a Link or the arrangement for the transfer of
Contracts under a Link.
(b)
Neither the Clearing House nor any other member of the LCH.Clearnet Group shall have
any liability to a Member or any other person (including without limitation a SwapClear
Dealer, or a RepoClear Dealer or a ForexClear Dealer) in respect of any dispute arising
from or in relation to any OTC Transaction, Eligible OTC Trade, or an ATP Match including,
but not limited to, any dispute as to the validity or otherwise of such OTC Transaction,
Eligible OTC Trade, the terms of such OTC Transaction, Eligible OTC Trade, trade or ATP
Match, or whether any alleged agreement or arrangement constitutes an OTC Transaction
or Eligible OTC Trade.
(c)
Without prejudice to the provisions of Regulation 2 and Regulation 52(e), neither the
Clearing House nor any other member of the LCH.Clearnet Group shall have any liability
whatsoever to any SwapClear Clearing Member, RepoClear Clearing Member,
EquityClear Clearing Member, LCH EnClear OTC Clearing Member, ForexClear
Participant or to any other person (including, without limitation, a SwapClear Dealer or a
RepoClear Dealer) in contract, tort (including without limitation, negligence), trust, as a
fiduciary or under any other cause of action in respect of any damage, loss, cost or
expense of whatsoever nature suffered or incurred as a result of: any suspension of an
OTC Service or the EquityClear Service or the LCH EnClear OTC Services (or any part
thereof), whether for a temporary period or otherwise, a step taken by the Clearing House
under Regulation 16(i), Regulation 37, Regulation 38, Regulation 55(g), or Regulation 72
or any failure or malfunction of any systems, communication lines or facilities, software or
technology supplied, operated or used by the Clearing House or the relevant approved
agent; the occurrence of any event which is outside the control of the Clearing House; or
any exercise by the Clearing House of its discretion under the Regulations, or any decision
by the Clearing House not to exercise any such discretion.
(d)
Without prejudice to Regulation 52(c) and Regulation 52(e), unless otherwise expressly
provided in the Regulations or in any other agreement to which the Clearing House is
party, neither the Clearing House nor any other member of the LCH.Clearnet Group shall
have any liability under any circumstances (including, without limitation, as a result of any
negligence by the Clearing House, or any other member of the LCH.Clearnet Group
Limited, or their respective officers, employees, agents or representatives), to any
A18032743/4.0
32
SwapClear Client Clearing
Client Clearing Standard Terms/Version 3.0 dated 20 June 2014
Member, or a SwapClear Dealer, a RepoClear Dealer, or a ForexClear Dealer for any
indirect or consequential loss or damage, or loss of anticipated profit (whether direct or
indirect) or loss of bargain, suffered or incurred by any such Member, SwapClear Dealer,
RepoClear Dealer, or a ForexClear Dealer, and shall not in any circumstances be liable for
any loss, cost, damage or expense suffered or incurred by any person as a result of any
negligence on the part of the Clearing House, or any other member of the LCH.Clearnet
Group Limited, or their respective officers, employees, agents or representatives.
(e)
Nothing in this Regulation 52 shall be construed as an attempt by the Clearing House to
exclude any liability for any fraud, fraudulent misrepresentation or wilful default on the part
of the Clearing House. The Clearing House accepts liability for any personal injury or
death caused by the negligence of the Clearing House and for any fraud or wilful default
on the part of the Clearing House and for any actions that it may take on the basis of
advice given to it by the SwapClear DMG, and for the accuracy of the information that it
distributes to the SwapClear Clearing Members in connection with the SwapClear DMP
pursuant to the SwapClear DMP Annex in the Default Rules, and for any actions that it
may take on the basis of advice given to it by the ForexClear DMG, and for the accuracy of
the information that it distributes to the ForexClear Clearing Members in connection with
the ForexClear DMP pursuant to the ForexClear DMP Annex in the Default Rules.
(f)
Without prejudice to the provisions of Regulation 2 and Regulation 32 and Regulation
52(e) neither the Clearing House, nor any other member of the LCH.Clearnet Group shall
have any liability whatsoever to any Member or to any other person (including, without
limitation, any Clearing Client of a Member or a member of a Co-operating Clearing House
or any Clearing Client of such member) in contract, tort (including, without limitation,
negligence), trust, as a fiduciary or under any other cause of action in respect of any
damage, loss, cost or expense of whatsoever nature suffered or incurred by a Member or
any other person, as the case may be, as a result of the failure of any systems,
communication facilities or technology supplied, operated or used by TGHL or as a result
of any negligence, wrongdoing, or other act, error, failure or omission on the part of TGHL,
in supplying any services to the Clearing House with regard to the Turquoise Derivatives
Services or as a result of or in connection with any inconsistency or conflict between any
provision contained in the Turquoise Derivatives Rules on the one hand and any provision
of these Regulations, Default Rules and Procedures and any other Clearing House
documentation on the other hand.
(g)
For the purposes of the Contracts (Rights of Third Parties) Act 1999, save as is expressly
set out herein, these Regulations, Default Rules and Procedures do not create any rights
in any persons who is/are not a Member/s.
(h)
Without prejudice to Regulation 2 and Regulation 52(e), neither the Clearing House, nor
any other member of the LCH.Clearnet Group, shall have any liability whatsoever to any
Member or to any other person (including, without limitation, any client of a Member) in
contract, tort (including, without limitation, negligence), trust, as a fiduciary or under any
other cause of action in respect of any damage, loss, cost or expense of whatsoever
nature suffered or incurred by a Member or any other person as the case may be, as a
result of any service failure, whether complete or partial, of any payment or securities
services provider, including (without limitation) any Securities System Operator, custodian,
settlement agent, securities depository, securities settlement system, settlement facility or
central bank.
A18032743/4.0
33