Clifford Chance

ISDA releases new documentation for repurchase and securities lending transactions under the ISDA Master Agreement - same, but different?

12 May 2022

On the face of it, repurchase transactions and securities lending transactions ("SFTs") documented under master agreements have several features in common with transactions under ISDA Master Agreements, including incorporating similar risk reducing concepts (for example the use of collateral and close-out netting). But look closer at the SFT products and there are significant distinctions in how they and their relevant markets operate, which reflects how their master agreements have developed.

The nature of SFTs necessitates distinct terms to reflect market practice (for example SFTs have different possible remedies following defaults) and there are variations in methodologies used to achieve the commercial agreement (such as in calculating margin and valuing any close-out amount). Though it has always been possible (in theory) to document a SFT under the ISDA Master Agreement, in reality, the three markets have historically traded under their own master agreements (with each also following their own market practices) and market participants have navigated around their intricacies. However, this may change (to some degree), following the publication by ISDA of provisions and definitions enabling SFTs to be documented under a single ISDA Master Agreement.

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