Margin Agreement Template for England and Wales

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Key Requirements PROMPT example:

Margin Agreement

"Need a Margin Agreement between our hedge fund and Deutsche Bank for OTC derivatives trading, with rehypothecation rights and a minimum transfer amount of €500,000, to be effective from March 2025."

Document background

A Margin Agreement is essential for managing counterparty risk in financial transactions under English and Welsh law. This document is typically used when parties engage in trading activities requiring collateral posting, such as derivatives trading or securities lending. The agreement defines the operational framework for margin calculations, transfers, and dispute resolution, ensuring compliance with UK regulatory requirements and market standards. It incorporates specific provisions required by legislation including FSMA 2000 and retained EU regulations, while providing flexibility to accommodate various types of financial instruments and collateral arrangements.

Suggested Sections

1. Parties: Identification of contracting parties and their registered details

2. Background: Context and purpose of the margin arrangement, including regulatory framework

3. Definitions: Key terms used throughout the agreement, including regulatory and technical terms

4. Margin Requirements: Core obligations regarding posting and maintaining margin, including minimum transfer amounts

5. Calculation and Valuation: Methods for calculating margin requirements, valuation timing, and procedures

6. Transfer and Settlement: Procedures for transferring margin, including timing and payment instructions

7. Events of Default: Circumstances constituting default and consequences of default

8. Representations and Warranties: Standard legal assurances from both parties regarding capacity and authority

9. Governing Law and Jurisdiction: Specification of English and Welsh law as governing law and jurisdiction

Optional Sections

1. Rehypothecation Rights: Optional provisions regarding rights to reuse posted collateral

2. Cross-Currency Provisions: Provisions for handling margin posted in multiple currencies

3. Dispute Resolution: Specific procedures for resolving disagreements about margin calculations or transfers

4. Interest Provisions: Terms regarding payment of interest on cash margin

Suggested Schedules

1. Schedule 1 - Eligible Collateral: Detailed list of acceptable forms of margin collateral and associated conditions

2. Schedule 2 - Valuation Percentages: Haircuts applied to different types of collateral for margin calculation purposes

3. Schedule 3 - Notice Details: Contact information and procedures for margin calls and other notices

4. Schedule 4 - Form of Transfer Documents: Standard forms and procedures for margin transfers

5. Schedule 5 - Approved Banks: List of approved banks for cash margin transfers and accounts

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co

Relevant legal definitions

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FSMA 2000: Financial Services and Markets Act 2000 - Primary UK legislation governing financial services regulation and oversight

Financial Collateral Arrangements Regulations: The Financial Collateral Arrangements (No.2) Regulations 2003 - Specific regulations governing financial collateral arrangements in the UK

Companies Act 2006: Primary legislation governing company law in the UK, relevant for corporate entities entering into margin agreements

Consumer Credit Act 1974: Legislation protecting consumers in credit arrangements, applicable if margin agreement involves retail clients

UK EMIR: European Market Infrastructure Regulation as retained in UK law - Regulates derivatives trading and clearing obligations

UK MiFID II: Markets in Financial Instruments Directive II as retained in UK law - Regulates financial markets and improves protections for investors

Financial Collateral Directive: EU directive as retained in UK law governing financial collateral arrangements and enforcement rights

FCA Handbook: Financial Conduct Authority's comprehensive rulebook including COBS, CASS, and MAR regulations for financial services firms

PRA Rulebook: Prudential Regulation Authority's rules applicable to regulated financial institutions

ISDA Framework: International Swaps and Derivatives Association's standardized documentation for derivatives transactions

Basel III: International regulatory framework for banks, including specific requirements for margin and capital adequacy

IOSCO Principles: International Organization of Securities Commissions' principles for margin requirements for non-centrally cleared derivatives

English Contract Law: Common law principles governing formation and enforcement of contracts in England and Wales

Equity and Trusts: Legal principles governing fiduciary relationships and trust arrangements in English law

Insolvency Law: Legal framework governing corporate insolvency and creditor rights in England and Wales

Security Interest Rules: Legal principles governing creation and enforcement of security interests under English law

AML Regulations: Anti-money laundering regulations requiring customer due diligence and monitoring

Market Abuse Regulation: Regulations preventing market manipulation and insider trading

UK GDPR: Data protection regulations governing the processing of personal data in the UK

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Authors

Alex Denne

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