practices and provisions in order to facilitate and document the activity between
both parties.
Whenever a Master Agreement exists between two parties, the confirmation should
conform to the standards, provisions and content of the market or product. If there
is no standard, the confirmation should make reference to the Master Agreement.
The use of a Master Agreement allows the trading parties to establish legal comfort
and certainty for any executed trades, minimising the legal risk of those
transactions. It will govern all the trades that explicitly refer to the Master
Agreement. Bilateral trading should be executed in a legal framework known to
both sides.
All terms and exceptional provisions will be according to the Master Agreement and
ensures both counterparties acknowledge the trade and any and all exceptional
situations that may occur during the life of the trade.
Any new or changed standard form “template” documents used to document
contractual commitments and all bespoke contracts should be reviewed and
approved by the Legal department.
j) Market Conventions
The content of a confirmation is the economic and non-economic details, which
identify both sides of a trade in a clear manner.
The necessary type of data in a confirmation, depending on the product, are:
o Economic, such as initial and final amounts, rates.
o Dates including trade day, initial day, final day, settlement day and any relevant
day during the life of the trade.
o Identification of product, counterparty, currency, index.
o Legal provisions that are not included on the Master Agreement that governs the
trade or the legal aspects when there is no Master Agreement signed between the
parties. When there is a Master Agreement signed by parties it has to be referred
to in the confirmation.
o Market conventions that will be used during the whole life of the trade and which
affects dates, calculation of the amounts, and events of the trade.
o Instructions to be used for settlement actions during the life of a trade (even if
these instructions are the standard settlement instructions (SSI), should be sent to
the counterparty
All of the aforementioned information should be expressed in the clearest manner
in order for both parties to acknowledge their responsibilities. When a confirmation
is governed by a Master Agreement the confirmation should conform to the
formats specified for the market/instrument.
k) Review of Amendments
If a discrepancy creates any risk this should be closed out in the market without
inference that either party is wrong pending the final resolution of the dispute. Any
difference should be reconfirmed. A new confirmation should be provided by the
counterparty whose original confirmation was incorrect.
In the event that a trade is amended by one or both parties, then a new
confirmation should be generated, and the confirmation cycle should restart and
continue until the trade is completely matched by both parties.
All amendments with change in financial trade details should be sent to the
counterparty via a cancellation and a new confirmation or a cancellation and an
amend confirmation. Changes to settlement instructions should also be
reconfirmed via an amend confirmation.
Advice of cancelled deals should be issued within two hours of a trade being
cancelled. Failure to issue a cancellation can result in confusion between parties
and increases the risk of settlement issues.
Amendments to transaction details should be conducted in a controlled manner
that includes sales, trading and operations in the process. If operations staff is