FIA announced on 1 December 2025 that the new FIA-sponsored European Agent Trustee Model (EATM) has gone live at LCH Ltd for its SwapClear service. Read on to find out more about this new client clearing model for OTC derivatives.
What is the EATM?
The EATM is a new European client clearing model for OTC derivatives, created by FIA in collaboration with a group of bank clearing members.
The introduction of an alternative to the established European principal-to-principal model marks a significant development in the European client clearing landscape.
Under the existing principal-to-principal model, separate transactions are entered into between the entities in the clearing chain. Taking a simple chain where a clearing member (CM) is providing clearing services to clients, the CM would enter into transactions with the relevant central counterparty (CCP) (CM-CCP transactions) as well as back-to-back transactions with each client (CM-Client transactions).
Under the EATM (English law version), there is instead an arrangement whereby (i) the CM/CCP transactions are held by the CM, as trustee, for the account of its clients; and (ii) each client agrees to pay to the CM payments/collateral due in respect of the transactions that are held for its account. A German law version of the EATM is also under development for CMs based in Germany, utilising a different trust arrangement. Crucially, there are no back-to-back CM-Client transactions under the EATM, and the arrangement starts to look more like the US agency model - which we understand was the intention behind the design.
The EATM looks to bolster the capacity of CMs offering client clearing in Europe. Costs, including capital requirements, are factors in the capacity of CMs, and it is understood that global systemically important banks (G-SIBs) in particular can incur greater capital charges on client clearing activity under the principal-to-principal client clearing model for OTC derivatives. As discussed above, the EATM is quite different to the principal-to-principal model and represents a move toward the US agency model, thereby creating the potential for more favourable capital treatment, which could expand capacity.
The launch of the EATM (English law version) by LCH Ltd's SwapClear marks its official go-live. UK-based clearing members of SwapClear can now offer the EATM to their clients, regardless of where those clients are located. Eurex Clearing is also in the process of implementing the EATM. The FIA has also confirmed that both CCPs plan to introduce the EATM for Germany-based clearing members in due course.
Initial points to note
From a buy-side perspective, some initial points to note:
New structure, new legal documentation. Existing clearing documentation cannot simply be repurposed for the EATM; you would need to negotiate and enter into a new form of EATM client clearing agreement produced by the FIA and the group of clearing members. While the new form of agreement has been based on the FIA 2018 Terms of Business (TOBs), there are material differences, particularly to reflect the trust arrangement. We suggest starting your review of the new structure and the agreement soon if you are considering moving across, especially if your existing arrangements were papered using the Addendum and you are less familiar with the TOBs as a starting point.
Impact on existing trades. Due to the structure of the EATM, a clearing client will not be able to clear under both the EATM and the principal-to-principal model with the same clearing member at the same CCP in respect of the same CCP service. We suggest discussing this in more detail with your clearing member.
For further information on the EATM, please speak to your usual Simmons & Simmons contacts or any of the contacts named in this article.
