Credit Default Swap Agreement Template for South Africa

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Key Requirements PROMPT example:

Credit Default Swap Agreement

"I need a Credit Default Swap Agreement under South African law for a major commercial bank acting as protection seller, with physical settlement options and specific provisions for sovereign debt restructuring events, targeting implementation by March 2025."

Document background
This Credit Default Swap Agreement is designed for use in credit derivative transactions within the South African financial markets regulatory framework. It enables parties to transfer credit risk of reference entities through a structured derivative instrument, with one party providing credit protection in exchange for regular premium payments. The document incorporates requirements from South African financial regulations, including the Financial Markets Act and Financial Sector Regulation Act, while maintaining alignment with international derivative trading practices. It is particularly relevant for financial institutions, investment firms, and corporate entities seeking to manage credit risk exposure or engage in trading credit derivatives. The agreement includes comprehensive provisions for credit event determination, settlement procedures, regulatory compliance, and risk management, making it suitable for both domestic South African transactions and cross-border deals subject to South African law.
Suggested Sections

1. Parties: Identification of the protection buyer and protection seller, including their registration details and regulatory status

2. Background: Context of the agreement and brief description of the transaction structure

3. Definitions and Interpretation: Comprehensive definitions of terms used in the agreement, including specific credit events and financial terms

4. Transaction Terms: Core economic terms including reference entity, obligations, credit events, and settlement terms

5. Premium Payments: Details of premium calculations, payment dates, and payment mechanics

6. Credit Events: Detailed description of credit events that trigger settlement, notification requirements, and verification procedures

7. Settlement: Settlement mechanics, including choice between physical and cash settlement, valuation methods, and timing

8. Representations and Warranties: Standard and transaction-specific representations and warranties from both parties

9. Covenants: Ongoing obligations of the parties during the term of the agreement

10. Events of Default: Circumstances constituting default and corresponding remedies

11. Early Termination: Provisions for early termination, including triggers and consequences

12. Calculations and Determinations: Roles and responsibilities for calculations, including dispute resolution mechanisms

13. Notices: Communication procedures and contact details

14. Governing Law and Jurisdiction: South African law as governing law and jurisdiction provisions

15. General Provisions: Standard boilerplate clauses including amendments, assignments, and severability

Optional Sections

1. Credit Support Arrangements: Collateral requirements and credit support mechanisms, used when parties require additional security

2. Multiple Reference Entities: Additional provisions for CDS agreements covering multiple reference entities

3. Third Party Rights: Provisions regarding rights of third parties, particularly relevant if there are guarantors or other involved parties

4. Special Settlement Provisions: Custom settlement arrangements deviating from standard physical or cash settlement

5. Tax Provisions: Detailed tax provisions when parties are in different jurisdictions or have specific tax requirements

6. Market Disruption Events: Provisions dealing with market disruption events affecting settlement or valuation

7. Additional Termination Events: Transaction-specific termination triggers beyond standard events of default

Suggested Schedules

1. Schedule 1: Transaction Details: Detailed economic terms including reference entity information, credit events, obligations, and settlement terms

2. Schedule 2: Notice Details: Comprehensive contact information and notice requirements for all parties

3. Schedule 3: Credit Support Terms: Detailed collateral requirements and credit support calculations if applicable

4. Schedule 4: Settlement Matrix: Standard settlement terms and modifications based on ISDA Credit Derivatives Physical Settlement Matrix

5. Appendix A: Form of Credit Event Notice: Template for credit event notifications

6. Appendix B: Form of Notice of Physical Settlement: Template for physical settlement notifications

7. Appendix C: Calculation Methods: Detailed calculation methodologies for premiums, settlement amounts, and other payments

8. Appendix D: Reference Entity Details: Comprehensive information about the reference entity and reference obligations

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

Relevant legal definitions
Clauses
Relevant Industries

Banking

Financial Services

Insurance

Investment Management

Securities Trading

Risk Management

Corporate Finance

Asset Management

Hedge Funds

Pension Funds

Relevant Teams

Legal

Risk Management

Trading

Compliance

Treasury

Operations

Finance

Documentation

Credit Analysis

Regulatory Affairs

Portfolio Management

Settlements

Product Development

Relevant Roles

Chief Risk Officer

Trading Director

Derivatives Trader

Financial Director

Legal Counsel

Compliance Officer

Portfolio Manager

Credit Risk Manager

Treasury Manager

Investment Manager

Structured Products Manager

Operations Director

Chief Financial Officer

Risk Analyst

Documentation Specialist

Regulatory Affairs Manager

Industries
Financial Markets Act 19 of 2012: Primary legislation governing the regulation of financial markets and over-the-counter derivatives trading in South Africa. Provides framework for registration, licensing and conduct of market participants.
Financial Sector Regulation Act 9 of 2017: Establishes the Twin Peaks model of financial regulation in South Africa, creating the Financial Sector Conduct Authority (FSCA) and Prudential Authority (PA) as key regulators.
Banks Act 94 of 1990: Regulates banking institutions that may be parties to the CDS agreement and their permitted activities in derivatives markets.
Financial Intelligence Centre Act 38 of 2001: Provides anti-money laundering and counter-terrorist financing requirements that must be considered in financial transactions including derivatives.
Financial Advisory and Intermediary Services Act 37 of 2002: Regulates the provision of financial advisory and intermediary services to clients, including in relation to derivative instruments.
Consumer Protection Act 68 of 2008: Provides general consumer protection provisions that may apply to retail clients in financial services.
Protection of Personal Information Act 4 of 2013: Governs the processing of personal information, which is relevant for client data handling in financial agreements.
Companies Act 71 of 2008: Relevant for corporate governance requirements and company powers to enter into derivative transactions.
Exchange Control Regulations: Regulates cross-border financial transactions and must be considered for international CDS agreements.
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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