Common use of Master Agreements Clause in Contracts

Master Agreements. As discussed in Chapter 5, there is an extensive analysis of collateral trans- actions in practice and in particular, the role financial collateral and margin play within the relevant master agreements. For that reason, this section will not discuss the role of financial collateral or margin as it operates in the master agreements. The master agreements will therefore only be briefly discussed here.76 Master agreements77 are standardised documents “fondly referred to by… insiders as a piece of private legislation”.78 These documents outline the respective contractual terms of a repo, securities lending and/or derivatives transaction between parties and are important legal tools providing adjudica- tion, enforcement and defining rules by which market participants must adhere.79 According to IOSCO, master agreements allow fora “flexible, effective and efficient means to provide the necessary protections in today’s ever-▇▇▇▇▇- ing global” and financial marketplace.80 Their existence enables market parti- cipants to swiftly adapt to changing market conditions and business needs.81 This is especially important given that advances in technology ensure financial markets remain increasingly global and trade is conducted without regard to national boundaries. Significantly, master agreements adapt to financial innovation in ways that national and regional regulation cannot, with trans- actions crossing national boundaries, often where regulatory powers cannot.82 By their very nature, master agreements allow greater flexibility for market participants to tailor their agreement, such as the type and amount of financial collateral, the appropriate margin/haircut levels and events of default.83 75 ▇▇▇▇▇▇▇▇▇▇▇ (n 60) 3 at 33. See also, Eidenmuller (n 61) 407 at 408-409; B Muscat, Insolvency Close-out Netting: A Comparative Study of English, French and US Law in a Global Perspective (2020) 1 at 44. 76 For an in-depth discussion of the master agreements and related issues, such as property law, choice of law and conflict of laws, see generally Chapters 3 and 5. 77 Including the Global Master Repurchase Agreement (“GMRA”) for repurchase agreements, the Global Master Securities Lending Agreement (“GMSLA”) for securities lending trans- actions and the International Swaps and Derivative Association (“ISDA”) Credit Support Annex under the ISDA Master Agreement for derivatives transactions.