Russian derivatives regulations – developments and
remaining challenges
Andrei Murygin
Partner
10 September 2013
Repositories – reporting and close-out netting
― NSD and NP RTS announced availability of reporting facilities for
repos and FX swaps – reportable from 5 November 2013
― Impact: close out netting will become available for repos and swaps
― Announcement of reporting facility for DFIs and “other agreements
involving securities and foreign currency” expected before
November 2013
― Works as extension of transition period for reporting of derivatives
and spot trades until July 2014
― Close out netting for derivatives will effectively be postponed too,
unless both parties agree to report before statutory obligation arises
― Foreign banks’ reporting obligation – applicable?
1
Collateral
― “Contracts for payment of floating margin amounts” are included in
the basic DFI list in the 2011 Russian Master Derivatives
Documentation;
― 2011 Form of Margin Agreement - collateral is treated as a separate
derivatives transaction
― FSFM proposes adding Credit Support Agreements into the list of
DFIs
― Improves chances of inclusion of collateral in Close out Amount;
― Does it improve enforceability of collateral in the absence of
statutory recognition of margin payments in the SML?
― Civil Code or SML changes necessary: timing unclear
2
Curing discrimination of foreign players - Civil code
changes needed
― Article 1062 (2) : change is needed to ensure equal protection of
derivatives with non-Russian professional counterparties
― November 2012 – Duma indefinitely postponed the proposed
changes to the Civil Code
― Timing of such changes is uncertain
3
Court practice – adverse cases
― Unicredit case – 2013 repeat case of 2012 loss
― Easy fix: specific termination clauses can be dealt with in the
documentation
― Larger impact: unpredictable interpretation of international-style
provisions of Russian and ISDA derivatives documentation
― VAS discussions of possible clarifications on derivatives
― Possibility of adding termination if a professional party acted in bad
faith
― Possibility of professional party’s disclosure obligation and suitability
tests
4
Questions
?
5