The Margin Agreement serves as a critical risk management tool in South African financial markets, establishing the framework for collateral arrangements between counterparties engaging in financial transactions. This document becomes necessary when parties enter into trading relationships requiring collateral posting, particularly in derivatives, securities lending, and other financial transactions. The agreement must comply with South African regulatory requirements, including the Financial Markets Act and Exchange Control Regulations, while also considering international best practices. It details the mechanisms for calculating, posting, and managing margin, defines eligible collateral types, and establishes procedures for dispute resolution. The agreement is particularly important in light of global regulatory reforms requiring mandatory margin for certain types of transactions, adapted to the South African context.
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1. Parties: Identification of the contracting parties and their legal capacity
2. Background: Context of the agreement and relationship between the parties
3. Definitions and Interpretation: Key terms, calculation methodologies, and interpretation principles
4. Margin Requirements: Core obligations to provide margin, including timing and thresholds
5. Calculation of Margin: Methodology for calculating initial and variation margin requirements
6. Eligible Collateral: Types of acceptable collateral and their valuation methods
7. Delivery and Return of Margin: Procedures and timing for posting and returning margin
8. Rights and Obligations: Key responsibilities of each party regarding margin maintenance
9. Events of Default: Circumstances constituting default and consequences
10. Close-out and Set-off Rights: Rights and procedures following an event of default
11. Representations and Warranties: Standard and specific declarations by the parties
12. Dispute Resolution: Procedures for resolving disagreements about margin calculations or calls
13. Governing Law and Jurisdiction: Choice of South African law and jurisdiction provisions
14. General Provisions: Standard boilerplate clauses including notices, amendments, and assignment
1. Cross-Currency Arrangements: Provisions for handling margin in different currencies, used when parties operate in multiple currencies
2. Automated Systems: Provisions relating to electronic margin calculation and calling systems, included when parties use automated platforms
3. Third-Party Custodian: Arrangements for third-party holding of collateral, used when parties agree to custodial services
4. Rehypothecation Rights: Rights to reuse posted collateral, included when parties agree to allow rehypothecation
5. Minimum Transfer Amount: Provisions for minimum transfer thresholds, included for operational efficiency
6. Special Entity Provisions: Additional provisions for regulated entities or special counterparties
7. Initial Margin Segregation: Special provisions for segregating initial margin, required for certain regulatory regimes
1. Schedule 1 - Eligible Collateral Schedule: Detailed list of acceptable collateral types and associated haircuts
2. Schedule 2 - Margin Calculation Methodology: Detailed procedures and formulae for margin calculations
3. Schedule 3 - Contact Details and Notice Information: Operational contact information for margin calls and disputes
4. Schedule 4 - Form of Margin Call Notice: Standard template for margin call notifications
5. Schedule 5 - Custody Arrangements: Details of any third-party custody arrangements if applicable
6. Appendix A - Standard Settlement Instructions: Banking and settlement details for margin transfers
7. Appendix B - Valuation Procedures: Detailed procedures for valuing posted collateral
8. Appendix C - Systems and Operations Manual: Technical specifications for any automated systems used
Relevant legal definitions
Clauses
Relevant Industries
Banking
Financial Services
Investment Management
Insurance
Securities Trading
Asset Management
Hedge Fund Management
Corporate Treasury
Financial Market Infrastructure
Pension Fund Management
Relevant Teams
Legal
Compliance
Risk Management
Treasury
Operations
Collateral Management
Trading
Finance
Regulatory Affairs
Credit Risk
Settlement
Documentation
Front Office
Middle Office
Back Office
Relevant Roles
Legal Counsel
Compliance Officer
Risk Manager
Treasury Manager
Operations Manager
Collateral Manager
Trading Manager
Financial Controller
Chief Risk Officer
Chief Legal Officer
Regulatory Affairs Manager
Portfolio Manager
Credit Risk Manager
Trading Operations Officer
Settlement Manager
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