Even in these early days, the collapse of MF Global is proving significant for a number of reasons. In addition to being one of the ten largest bankruptcies in U.S. history, MF Global’s collapse potentially involves missing customer assets amounting to hundreds of millions of dollars. In the long run, however, one of the larger distinctions may prove to be that the liquidation of MF Global will require the unprecedented application of two vastly different bankruptcy and customer asset protection regimes to a sizeable brokerage firm.
In anticipation of growing demand for swap clearing with the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Futures Industry Association (FIA) and the International Swaps and Derivatives Association, Inc. (ISDA) today published their first standardized form of agreement covering cleared swaps. The “Cleared Derivatives Execution Agreement” will allow parties entering into swaps that are intended to be cleared to address certain issues that may arise in connection with the execution of such transactions. In the near future FIA also will be publishing a standardized form of addendum for futures clearing agreements between customers and their futures commission merchants (FCMs) that addresses terms related to the clearing of swaps.