FIA continuously monitors legal and regulatory developments in the UK and in the EU with a view to assessing their impact on the FIA Terms of Business 2018. Following the latest review, we recently published an updated version of the User Guide to the FIA Terms of Business 2018 (Version 2.0), as well as updated versions of certain FIA Indirect Clearing Terms.

The updated User Guide features the following changes and new sections:

• optional language for the Clause 9.4 (Retained Margin);
• amendments to the two-way default provisions in respect of indirect clearing arrangements;
• a new BRRD section;
• a new Indirect Clearing section; and
• a new EU CCPRRR section; and
• consequential amendments. 

Following detailed analysis and review by external counsel, FIA published updated version of the following three Indirect Clearing Terms:

• 2011 Longer Chain CM-DC Terms;
• 2011 Longer Chain Middle Link Terms; and
• 2018 Longer Chain Middle Link Terms.

The updated versions now contain:

• the multiple capacity updates;
• the corrigenda and clarifications in relation to certain netting scenarios (corrigenda amendments were only made to the 2011 and 2018 Middle Link Terms); and
• consequential amendments and drafting improvements.

In case of any questions or if you are unable to access the documents, please reach out Mitja Siraj (msiraj@fia.org).

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For background:

In November 2021, FIA published several updates to its comprehensive suite of industry standard contractual terms for derivatives execution and clearing. Following a review of the FIA Terms of Business and associated documents, FIA released the following templates and materials:

• FIA Terms of Business 2018 – Version 2.0;
• Update Patch 2021;
• Updated User Guide to the FIA Terms of Business 2018;
• New Indirect Clearing Terms (suitable for longer chains indirect clearing); and
• Updated versions of the Indirect Clearing Terms published in 2018.

The review focused on recent UK and EU regulatory developments and reforms, as well as on member feedback. External counsel and the FIA Terms of Business Working Group considered the following points when determining whether amendments to the FIA Terms of Business are required:

• The end of the Brexit transition period;
• Changes to UK insolvency legislation;
• Article 4(3a) EMIR, which requires clearing members and clients providing clearing services to provide those services under fair, reasonable, non-discriminatory and transparent commercial terms (FRANDT);
• IBOR transition;
• The potential for a firm to retain profits that a client has accumulated rather than paying them out as variation margin;
• Changes to the netting sets aggregation provision and the mechanics of it under the Indirect Clearing Terms;
• Recent court cases relevant in the context of the FIA Terms of Business;
• Supplementing the Indirect Clearing Terms modules to cater for the provision of indirect clearing services by indirect clients; and
• The impact of the LME's proposal to dematerialise warrants.

By way of background, FIA has maintained a suite of English law governed Terms of Business for the provision of client clearing services for over 15 years, in partnership with the law firm Clifford Chance LLP. In mid-2018, we released a fully updated and comprehensive state-of-the-art set of industry standard contractual terms for derivatives execution (ETD only) and clearing (ETD and OTC)—the FIA Terms of Business 2018. More information is available here.