FIA has been working with a consortium of clearing members, external counsel and CCPs to build a new client clearing model in Europe - the European Agent Trustee Model (EATM). It has been designed broadly to replicate the US FCM Model and is intended to be complementary to, and not a substitute for, other clearing models available for use in Europe.

It has historically been difficult to design a clearing model outside the U.S. that replicates substantially the US FCM Model on account of some uncertainty as to the legal basis of that model. Recent memoranda prepared for FIA and ISDA have provided more clarity and enabled the articulation of the legal relationships underlying the US FCM Model. This has made it easier to reverse engineer that model, which is a statutory construct unique to the U.S. legal system, elsewhere.

The capacity of clearing members (CMs) has become of particular importance in recent years as the number of CMs in the market has declined. Capacity is a crucial consideration, in particular as demand for clearing services is expected to increase. Against this backdrop, the key driver behind the EATM is to increase capacity in the client clearing market. It is hoped that capacity will be increased by the cost savings and efficiencies that will be realised by clearing members providing client clearing services under the EATM, rather than pursuant to the Principal Model. Specifically, the EATM is expected to be classified as an Agency Model and as such subject to different regulatory capital requirements in the US compared to the Principal Model.

Under English law, the EATM involves the creation of a structure in respect of client transactions held by the CM at the CCP for clients pursuant to which the CM will hold such client transactions as a trustee for the account of clients. The EATM has been developed under English law and an equivalent structure is currently being developed under German law. The EATM has been designed for initial implementation for OTC contracts, but with a view to its extension to exchange/venue traded contracts subject to demand.

If you have questions about the EATM or require more information, please contact Mitja Siraj (msiraj@fia.org).

                                         EATM - English Law Version