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August 13, 2013

What Customers Should Look Out For in FCM Clearing Agreements | Sherri Venokur

For Clients in the US market, putting in place an FCM agreement is not to be taken lightly. Lawyer Sherri Venokur (http://svderivatives.com) explains how to handle IM amounts, affiliate issues, limitations of liability and indemnification, notice provisions and termination.

Because of the Dodd-Frank clearing mandate, many end-users have received Clearing Agreements from banks that are willing to act as their FCMs. This piece is designed to identify those provisions in a Clearing Agreement that may be negotiable or, alternatively, that pose risks that a customer should consider before signing up with the FCM. Unlike the ISDA Master Agreement, which is intended to be a bilateral agreement between two counterparties, Clearing Agreements are intended to govern the service provider relationship between FCMs and their customers, so there is rarely anything bilateral about them. Also, unlike the ISDA Master Agreement, there is no standard industry form of Clearing Agreement, so that each FCM has its own form of agreement. Nonetheless, most Clearing Agreements address the same basic issues.7 FCM Clearing Agreements are difficult to negotiate and contain provisions that may not be negotiable, especially for customers that need the services of an FCM more than the FCM needs their business. This piece is designed to identify those provisions in a Clearing Agreement that may be negotiable or, alternatively, that pose risks that a customer should consider before signing up with the FCM.

Read the full article at http://svderivatives.com/wp-content/uploads/2013/07/How-to-Negotiate-a-Clearing-Agreement-4.9.13.pdf For more than 20 years, Sherri Venokur has practiced law in the area of derivatives products and derivatives documentation representing both U.S. and non-U.S. investment and commercial banks, hedge funds, mutual funds, energy companies, ERISA counterparties and corporate end-users.   Her work has included the range of derivatives documentation — from ISDA Master Agreements to Clearing Agreements and Cross-Product Netting Arrangements – and derivatives products, including interest rate, equity, commodity and foreign exchange swaps and options, credit default swaps and bespoke transactions.  

 


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