Netting + Collateral Reviewer

Both EU and UK EMIR require in-scope entities to perform an “independent legal review” of netting and collateral enforceability on a continuous basis. This obligation is set out in the following articles of the EMIR Margin RTS:

Article 2(3):
“Where counterparties enter into a netting or an exchange of collateral agreement, they shall perform an independent legal review of the enforceability of those agreements. That review may be conducted by an internal independent unit or by an independent third party”.

Article 2(4):
“Counterparties shall establish policies to assess on a continuous basis the enforceability of the netting and the exchange of collateral agreements that they enter into.”

The obligation applies to counterparties subject to the EMIR Margin RTS. This covers financial counterparties (FCs) (e.g. UCITS, AIFs with authorised AIFMs and IORPs) and non-financial counterparties above the clearing threshold (NFC+).

Articles 2(3) and 2(4) do not expressly state that the requirement does not apply to non-financial counterparties below the clearing threshold (NFC-), and NFC would need to consider the scope and whether helpful from a counterparty credit risk perspective to ensure enforceability.

The N+CR covers:

(1) the ISDA Master Agreement and related documentation (“ISDA Module”)
(2) the German Master Agreement (Rahmenvertrag für Finanztermingeschäfte) (the “DRV”) and related documentation (“DRV Module”).

ISDA Module:

The ISDA netting matrix covers the following:

• 1992 ISDA Master Agreement (Multicurrency–Cross Border)
• 2002 ISDA Master Agreement

The ISDA collateral matrix covers the following:

• 1995 ISDA Credit Support Annex (Bilateral Form – Transfer), governed by English law
• 2016 ISDA Credit Support Annex for Variation Margin (VM) (Title Transfer – English Law)
• 1995 ISDA Credit Support Deed (Security Interest English law)
• 1994 ISDA Credit Support Annex (Security Interest New York law)
• ISDA 2016 Credit Support Annex for Variation Margin (VM) (Security Interest – New York law)

Where your clients and funds are subject to UMR initial margin, there is an add-on for the ISDA UMR-IM documentation, which covers the following:

• ISDA 2016 Phase One IM Credit Support Deed (Security Interest – English law)
• ISDA 2018 Credit Support Deed for Initial Margin (IM) (Security Interest – English law)
• ISDA 2018 Credit Support Annex for Initial Margin (IM) (Security Interest – New York law)
• ISDA 2019 Bank Custodian Collateral Transfer Agreement for Initial Margin (IM) (Security Interest – governing law of relevant ISDA Master Agreement)
• ISDA 2019 Security Agreement for Initial Margin (IM) (Security Interest – Belgian law)
• ISDA 2019 Security Agreement for Initial Margin (IM) (Security Interest – English law)
• ISDA 2019 Security Agreement for Initial Margin (IM) (Security Interest – Irish law)
• ISDA 2019 Security Agreement for Initial Margin (IM) (Security Interest – Luxembourg law)
• ISDA 2019 Security Agreement for Initial Margin (IM) (Security Interest – New York law)
• ISDA Clearstream 2019 Collateral Transfer Agreement (Security Interest – governing law of relevant ISDA Master Agreement)
• ISDA 2019 Clearstream Security Agreement (Security Interest over Clearstream collateral in account in the name of the Security-provider in favour of the Security-taker –
  Luxembourg law)
• ISDA 2019 Clearstream Security Agreement (Security Interest over Clearstream collateral in account in the name of the Security-taker in favour of the Security-taker –
  Luxembourg law)
• ISDA Euroclear 2019 Collateral Transfer Agreement (Security Interest - governing law of relevant ISDA Master Agreement)
• ISDA 2019 Euroclear Security Agreement (Security Interest – Belgian law)
• ISDA 2022 Euroclear Security Agreement (Security Interest – Belgian
  Law)

DRV Module

The DRV netting matrix covers the following:

• German Master Agreement for Financial Derivatives Transactions (Rahmenvertrag für Finanztermingeschäfte) as published in 2001 by the Association of German Banks (Bundesverband deutscher Banken)
• The DRV collateral matrix covers the following:
• Collateral Addendum (Besicherungsanhang)
• Collateral Addendum for Variation Margin (Besicherungsanhang für Variation Margin)

The tool considers the enforceability against a credit institution or investment firm in the relevant jurisdiction. You should determine: (1) in which jurisdictions you are facing such counterparties, and (2) the form and governing law of the documentation you are trading under. Note, Scotland is a separate jurisdiction for these purposes.

ISDA Module:

• Australia**
• France**
• Luxembourg**
• Switzerland**
• Belgium**
• Germany**
• Netherlands
• USA**
• Canada**
• Hong Kong
• Scotland
• Denmark
• Ireland**
• Spain**
• England & Wales**
• Japan
• Sweden

** Covered by ISDA IM Add-on. Additionally, the ISDA IM Add-on covers: Italy

DRV Module:

• Canada
• Ireland
• Denmark
• Italy
• England & Wales
• Netherlands
• France**
• Spain
• Germany**
• Switzerland

** Covered by DRV IM Add-on. Additionally, the DRV IM Add-on covers: Belgium, Luxembourg

If there are jurisdictions that you would need and which are not listed above, please let us know by emailing products@simmons-simmons.com.

Subscribing to the tool will point towards compliance. There is also an audit function, with an auto-generated email confirming access, by whom and when per matrix, and an on-tool record of such access.

Quarterly.

Yes – the tool is a full reliance tool, subject to the T&Cs.

For information on pricing, please contact us at products@simmons-simmons.com or reach out to your usual Simmons & Simmons contact.