Swapclear Client Clearing

SwapClear Client Clearing

Client Clearing Standard Terms/Version 3.0 dated 20 June 2014

SwapClear Client Clearing

Client Clearing Standard Terms/Version 3.0 dated 20 June 2014

Background and Purpose

(A)  These provisions shall be known as the “Client Clearing Standard Terms”.

(B)  In order to facilitate the clearing of certain transactions with LCH.Clearnet, Party A and Party B shall enter into the relevant Client Clearing Agreement and the relevant Swap Agreement.

1  Interpretation and purpose

1.1  Definitions: Capitalised terms not otherwise defined in these Client Clearing Standard Terms or in the Clearing ISDA Master Agreement shall have the meaning specified in the relevant Client Clearing Agreement, the relevant Non-Clearing ISDA Master Agreement or the LCH Rules. In addition the following expressions have the following meanings and shall, to the extent used in the Clearing ISDA Master Agreement, be deemed to be inserted into it:

“Accepted Transaction” has the meaning specified in Clause 4.1.2.

“Additional Transfer Conditions” means the additional transfer conditions (if any) specified as such in the Client Clearing Agreement.

“Associated LCH Transaction” means, in respect of a Transaction, the related SwapClear Contract (as defined in the LCH Rules) entered into between Party A and LCH.Clearnet and credited to Party A’s Client Account at LCH.Clearnet.

“Backup Clearing Member” has the meaning specified in the LCH Rules.

“Clearing Default” has the meaning specified in Clause 6.4.1.

“Clearing ISDA Master Agreement” has the meaning specified in Clause 2.1.

“Client Account” has the meaning given to client account in the LCH Rules.

“Client Clearing Agreement” means the relevant client clearing agreement entered into between Party A and Party B relating to the clearing of certain transactions with LCH.Clearnet.

“Client Clearing Standard Terms” means, when used in the Clearing ISDA Master Agreement, the Client Clearing Standard Terms specified in the relevant Client Clearing Agreement and, otherwise, has the meaning given in the above Recitals.

“English Law CSA” has the meaning specified in Clause 2.2.

“ISDA 1992 Master Agreement” means the form of ISDA Master Agreement (Multicurrency – Cross Border) published in 1992 by the International Swap Dealers Association, Inc.

“ISDA 2002 Master Agreement” means the form of ISDA Master Agreement published in 2002 by the International Swaps and Derivatives Association, Inc.

“ISDA Master Agreements” has the meaning specified in Clause 2.1.

“LCH Business Day” means a day on which LCH.Clearnet is open for general business.

“LCH.Clearnet” means LCH.Clearnet Limited.

“LCH Default” means the occurrence of a default, termination event or other similar event in respect of LCH.Clearnet that, under the LCH Rules, entitles Party A to terminate, or results in automatic termination of, one or more Associated LCH Transactions.

“LCH Default Rules” has the meaning given to “Default Rules” in the LCH Rules.

“LCH Disruption Event” means the occurrence on or after the date of the relevant Client Clearing Agreement of one or more of (i) an LCH Insolvency Event, (ii) an LCH Default and (iii) any event that occurs, or any action that is taken or not taken by or in relation to LCH.Clearnet (including, without limitation, a default or deferment by it in making any payment or in performing any of its obligations relating to any Associated LCH Transactions and associated margin) the effect of which is (a) to create a material mismatch between the respective rights, obligations or exposure of Party A and LCH.Clearnet pursuant to an Associated LCH Transaction and the respective rights, obligations or exposure of Party B and Party A pursuant to the related Transaction under the Clearing ISDA Master Agreement or (b) to result in any loss, liability, cost, claim, damages or expenses being incurred by Party A with respect thereto.

“LCH Insolvency Event” means the occurrence of an event described in Section 5(a)(vii) of the ISDA 2002 Master Agreement with respect to LCH.Clearnet as if LCH.Clearnet were the Defaulting Party (as defined therein) with respect to any such event.

“LCH Rules” means the rules, regulations, procedures or agreements (including the LCH General Regulations and the LCH Default Rules), applicable to Party A and/or an Associated LCH Transaction, in each case as published by LCH.Clearnet and as the same may be amended from time to time.

“LCH Valuation” means, for the purposes of determining the value of each Terminated Transaction or each group of Terminated Transactions, the valuation ascribed by LCH.Clearnet to the related Associated LCH Transaction(s) (excluding the value of any collateral posted by Party A in favour of LCH.Clearnet) as at the Local Business Day on which such Associated LCH Transaction(s) is/are terminated in accordance with the LCH Rules.

“Losses” means any losses, claims, injuries, damages, judgments, interest on judgments, assessments, taxes, costs, fees, charges, amounts paid in settlement or other liabilities (including, without limitation, reasonable attorneys’ fees, costs of collection and any reasonable cost incurred in successfully defending against any claim), provided that a person’s Losses will not include any injuries, costs, losses and expenses which are directly caused by the relevant person’s fraud, wilful default or gross negligence.

“Net Clearing Default Adjustment” means an amount determined by Party B (being the party which is not the Affected Party) equal to:

(i) the sum of:

(a) if LCH.Clearnet credits a Client Account of a Backup Clearing Member with one or more SwapClear Contracts for the account of Party B pursuant to the Default Rules, the Termination Currency Equivalent of the LCH Valuation of such SwapClear Contracts at the time they are credited to such Client Account. Such amount shall be negative where the Backup Clearing Member is in-the-money and LCH.Clearnet is out-of-the-money in respect of such SwapClear Contracts, and shall otherwise be positive; plus

(b) if LCH.Clearnet debits the Clearing Member Current Collateral Balance and/or credits the Clearing House Current Collateral Balance, in either case, in relation to a Backup Clearing Member and for the account of Party B in relation to the SwapClear Contracts referred to in sub-paragraph (a) above, the Termination Currency Equivalent of the Value of such debit and/or credit determined at the time of such debit or credit (excluding any element of any such debit or credit which represents assets transferred (or required to be transferred) between LCH.Clearnet and the Backup Clearing Member in order to reflect such element); minus

(c) if LCH.Clearnet credits the Clearing Member Current Collateral Balance and/or debits the Clearing House Current Collateral Balance, in either case, in relation to a Backup Clearing Member and for the account of Party B in relation to the SwapClear Contracts referred to in sub-paragraph (a) above, the Termination Currency Equivalent of the Value of such debit and/or credit determined at the time of such debit or credit (excluding any element of any such debit or credit which represents assets transferred (or required to be transferred) between LCH.Clearnet and the Backup Clearing Member in order to reflect such element); or

(ii) solely where Party A is an Exempt Client Clearing Member, if LCH.Clearnet transfers a Client Clearing Entitlement to Party B (or to a party for the account of Party B) pursuant to the Default Rules, the Termination Currency Equivalent of such Client Clearing Entitlement at the time such amount is determined by LCH.Clearnet. Such amount shall be negative; or

(iii) otherwise, zero.

“Non-Clearing ISDA Master Agreement” has the meaning specified in the relevant Client Clearing Agreement.

“Party A” shall have the meaning given to it in the Client Clearing Agreement.

“Party B” shall have the meaning given to it in the Client Clearing Agreement.

“Party B Default” has the meaning specified in Clause 3.3.

“Security Deed” means, for so long as Party A is not an Exempt Client Clearing Member, the security deed executed by Party A creating a security interest in favour of Party B in the form prescribed by LCH.Clearnet for the time being outstanding.

“Set-off Suspension End Date” means the date on which either (i) where Party A is an Exempt Clearing Member, the date on which the acceleration of its obligations under its Undertaking to Pay or Deliver has taken place such that such obligations become immediately due and payable and such obligations have been satisfied by LCH.Clearnet enforcing its security granted in its favour by Party A under the relevant Deed of Charge and/or applying any other assets available to it and all assets in connection with such acceleration, satisfaction and enforcement together with any such other assets, in each case that are referable to Party B under the Client Account to which these Client Clearing Standard Terms relate, have been transferred to Party B or (ii) otherwise, the date on which enforcement by Party B of its rights under the Security Deed has been completed and all amounts in connection with such enforcement have been paid.

“Swap Agreement” means the Clearing ISDA Master Agreement (including the English law CSA) together with the Client Clearing Agreement.

“SwapClear Clearing Member” has the meaning specified in the LCH Rules.

“Transfer Conditions” means, in relation to a requested transfer of all of the rights and obligations of Party A with respect to one or more Transactions under the relevant Clearing ISDA Master Agreement and the related Associated LCH Transaction (together with any related assets comprised in the Associated Collateral Balance, if relevant) to one or more other clearing members of LCH.Clearnet, (i) if required by Party A, Party B will have transferred additional Eligible Credit Support as a Delivery Amount required to be made pursuant to the terms of the Credit Support Annex to the Schedule to the relevant Clearing ISDA Master Agreement in an amount specified by Party A (a) which Party A considers, acting in a commercially reasonable manner, to be sufficient to protect it from the risk that one or more of the Transactions to be transferred are not so transferred and/or (b) to satisfy any additional Delivery Amounts arising in respect of Transactions under the relevant Clearing ISDA Master Agreement that are not the subject of the requested transfer which (A) are imposed by the LCH Rules as a condition to the relevant transfer or (B) will result from the relevant transfer pursuant to the terms of the Credit Support Annex to the Schedule to the relevant Clearing ISDA Master Agreement and (ii) any Additional Transfer Conditions.

“Valuation Method” means, unless otherwise specified in the relevant Client Clearing Agreement, where the Clearing ISDA Master Agreement is an ISDA 2002 Master Agreement, “Close-out Amount” as defined therein, and where the Clearing ISDA Master Agreement is an ISDA 1992 Master Agreement, whichever of “Market Quotation” or “Loss” is specified as applying, and as each such term is defined, therein.

1.2  Interpretation and Construction: In these Client Clearing Standard Terms, except to the extent that the context requires otherwise or to the extent specified to the contrary herein:

1.2.1  in the event of any inconsistency between the terms of (a) either the Non-Clearing ISDA Master Agreement or the Clearing ISDA Master Agreement, including the Schedules to them and any Credit Support Annex to the Non-Clearing ISDA Master Agreement, and (b) these Client Clearing Standard Terms, these Client Clearing Standard Terms shall prevail with respect to the subject matter of these Client Clearing Standard Terms;

1.2.2  in the event of any inconsistency between any other agreement between the parties and these Client Clearing Standard Terms, these Client Clearing Standard Terms shall prevail with respect to the subject matter of these Client Clearing Standard Terms;

1.2.3  the words “include” and “including” are to be construed without limitation;

1.2.4  references to these Client Clearing Standard Terms include its Appendices;

1.2.5  use of the singular shall include the plural and vice versa; and

1.2.6  headings are for ease of reference only and shall be ignored in interpreting these Client Clearing Standard Terms.

1.3  Purpose: The purpose of the relevant Client Clearing Agreement generally and the purpose of Clause 3 specifically is to permit Party B to access central counterparty clearing for certain types of Transactions and to maximise Party B’s ability to move (by way of transfer or termination, close out and replication) positions represented by those Transactions to a Backup Clearing Member upon a Clearing Default with respect to Party A. By entering into the relevant Client Clearing Agreement, each party thereto agrees that it is in its commercial interests to achieve the purpose of the relevant Client Clearing Agreement and acknowledges that to do so requires both parties to forego certain protections that might otherwise be afforded to it under netting and set-off arrangements more typical than those included therein. These provisions have been specifically agreed by the parties to the relevant Client Clearing Agreement and are a material and essential feature thereof without which the parties would not have entered into the relevant Client Clearing Agreement.

2  Execution of the Clearing ISDA Master Agreement and Credit Support Annex

2.1  Clearing ISDA Master Agreement: By entering into the relevant Client Clearing Agreement, the parties thereto agree that with effect from the date thereof, they have entered into an additional separate ISDA Master Agreement dated as of the date of the relevant Client Clearing Agreement on terms which are, save as provided therein, identical to those of the Non-Clearing ISDA Master Agreement, including the Schedule thereto, but excluding any Credit Support Annex thereto and excluding any reference to any Credit Support Document(s) contained therein (the “Clearing ISDA Master Agreement” and together with the Non-Clearing ISDA Master Agreement, the “ISDA Master Agreements” and each an “ISDA Master Agreement”).

2.2  Credit Support Annex: The parties to the relevant Client Clearing Agreement agree that, by operation of the relevant Client Clearing Agreement and with effect from the date thereof, they have entered into a Credit Support Annex (ISDA Agreements Subject to English law) with a paragraph 11 in the form set out in Appendix 1 to these Client Clearing Standard Terms with respect to the Clearing ISDA Master Agreement (“English Law CSA”).

2.3  Security: