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Russian derivatives regulations – developments and outstanding challenges

Russian derivatives regulations – developments and outstanding challenges. Andrei Murygin 11 September 2012. Model Provisions ( M.P .) 2011 – Principal changes.

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Russian derivatives regulations – developments and outstanding challenges

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  1. Russian derivatives regulations – developments and outstanding challenges Andrei Murygin 11 September 2012

  2. Model Provisions (M.P.) 2011 – Principal changes • Mandatory Terms which cannot be changed – this is necessary to fix compliance of the M.P. 2011 Master Agreement with the netting law requirements; • Russian Cross-currency definitions added; • Commodity definitions finalised: to be published soon; • Registration with repository and nomination of the Notifying Party;

  3. Principal changes (contd) • Range of transactions extended to cover additional DFI asset classes: • inflation rates; • more commodity derivatives; • credit default products and CDS; • margin payments; • contracts which are not DFIsand “the subject-matter of which is cash and/or securities” and which are settled on T+3 plus – money market?

  4. Migration to M.P. 2011 • New agreements – use M.P. 2011 for netting purposes; • Old arrangements – re-execute on M.P. 2011 terms but watch elections made in 2009 M.P. if they do not affect the “Mandatory Terms”; • Existing Master FX and MM Agreements – NFEA developed a standard Transition Agreement referencing M.P. 2011 and replacing those clauses which may contradict “Mandatory Terms”? • All forms: add registration and alteration language to cater for the anticipated FSFM repository registration regulations.

  5. Collateral • “Contracts for payment of floating margin amounts” are included in the basic DFI list in the Master; • Form of Margin Agreement - collateral is not treated as alternative security arrangements anymore; • Improves chances of inclusion in Close out Amount; • M.P. 2011 registered by the FSFM; • Does it improve enforceability of collateral in the absence of statutory recognition of margin payments in the SML? • Proposed Civil Code and SML changes

  6. More Civil code changes • Pledge of bank accounts; • Recognition of physically settled options; • Proposed extension of exemption in Article 1062 (2) to cover foreign banks, IFOs;

  7. Court practice – adverse cases • Unicredit case – corporate client challenged M.P. 2011 termination clause and walked away • Sony Ericsson case - HAC prohibited unilateral submission to courts: arbitration only for cross-border trades?

  8. Questions • ?

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