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FIA Professional Client Agreement 2011
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FIA Terms of Business 2018 |
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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*NEW* 2024 Developments
1. FIA Terms of Business – DORA ICT Services Memo
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FIA has instructed external counsel to analyse whether the execution and clearing services (together, the "In-Scope Services"), set out in the FIA's Terms of Business, may qualify as "ICT Services" for the purposes of DORA, with the consequence that Firms providing one or more In-Scope Service may qualify as an "ICT third-party services provider" under DORA.
In order to undertake the above assessment, the memorandum below sets out assessment criteria, based on principles of financial services regulatory law, to be applied to determine whether the In-Scope Services would qualify as ICT Services.
The conclusions set out in this memorandum remain subject to the formal Q&As that will be published by the European Supervisory Authorities (ESAs) in due course.
For the reasons set out in the memorandum, counsel consider that the execution and clearing services, set out in the FIA ToBs, are unlikely to qualify as "ICT Services" for the purposes of DORA. This is primarily because these In-Scope Services constitute Regulated Services, and should therefore be out of scope of DORA.
FIA Terms of Business – DORA ICT Services Memo FIA - Dora Memo Final |
2. Operational Continuity in Resolution (OCIR)
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FIA has worked with members and external counsel to analyse the application of the Operational Continuity in Resolution ("OCIR") requirements and related requirements in the EU and the UK to firms providing clearing services.
To that end, we commissioned a memorandum that analyses the application of the main requirements in respect of the following four related topics:
- EU and UK OCIR requirements;
- EU and UK outsourcing requirements;
- EU and UK operational resilience requirements; and
requirements under the proposed UK critical third-party regime (the "UK CTP Regime") and the EU equivalent (the "EU CTP Regime").
In response to the memorandum, we have asked counsel certain follow-up questions. Their answers to these follow-up questions are included in Schedules 3 and 4. In particular, Schedule 3 to this memorandum contains a discussion of sample wording which FIA Member Firms have been requested to include in their agreements by Clients and which are purportedly mandated by EU and/or UK OCIR requirements, together with suggested alternative wording. Schedule 4 addresses other follow-up questions raised by FIA Member Firms. This memorandum and Schedules 3 and 4 were originally issued as separate memoranda. Each of these memoranda reflects the state of the law on the date it was originally issued (i.e. 4 October 2023 for this main memorandum, 30 August 2023 for Schedule 3 and 31 January 2024 for Schedule 4).
FIA - Application of OCIR Requirements to Clearing
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3. FIA Terms of Business 2018 Review for operational resilience scenarios
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Following certain market disruptions in the last couple of years, FIA, on request of its clearing members, asked external counsel to carry out a review (the "Review") of the FIA Terms of Business 2021 (the "TOBs") with respect to cyber/operational resilience in line with the agreed methodology.
As set out in more detail in the memorandum, the Review took into account new laws and evolving market practice in light of increasing cyber risk, but did not take into account the EU Digital Operational Resilience Act, which was not finalised at the time of the Review.
In the memorandum, counsel set out the following deliverables in respect of the Review:
- in Schedule 1, they set out an amended version of the TOBs incorporating the suggested cyber/ operational resilience related amendments in tracked changes;
- in Schedule 2, they set out the agreed methodology for their Review; and
- in Schedule 3, they set out a table collating comments from member firms and counsel responses.
FIA TOBs - Operational Resilience Amendments - Consolidated Memorandum
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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.
