As discussed in 2.1.1 "What is ISDA?" parties need to enter into a Confirmation to set out the economic terms of each Transaction that they enter under an ISDA Master Agreement.
ISDA includes suggested confirmations for a variety of derivative transactions in all its Definition booklets. Copies of these Definition booklets are available from ISDA. Order forms and an online purchase facility are available on www.isda.org.
The Guide also contains some additional Confirmations that have been developed by AFMA for the Australian legal and financial environment. Confirmations for specific products can be found in the relevant part of the Guide relating to that product. It is recommended that participants carefully read the commentary that is provided with these Confirmations to ensure they are appropriate for their Transaction.
If participants elect to use a non-ISDA recommended Confirmation, participants need to be particularly careful to ensure that:
- appropriate cross referencing to the relevant Master Agreement occurs; and
- if ISDA Definitions are to be used within the Confirmation, the appropriate definitions are incorporated in the Confirmation.
The sample Confirmations are in the form of a letter. If participants want to send Confirmations by telex, then the heading and closing should be replaced with the heading and closing for telexes set out in Exhibit I on page 107 of the 2006 Definitions. The Guide applies to Confirmations sent by letter or telex.
The Confirmation assumes that the participants have already entered into an ISDA Master Agreement. Participants should verify that there is an agreement in existence between the entity specified as Party A and the entity specified as Party B. An agreement between different companies in the same group will not create legal obligations between Party A and Party B.
Commentary on confirmations are included in this Guide for:
- 3.2.1 "Interest rate swaps";
- 3.2.2 "Swaptions";
- 3.2.4 "Interest rate caps, collars and floors";
- 3.2.5 "Forward rate agreements";
- 3.3.2 "Currency options";
- 3.8.9 "Electricity";
- 3.11.3 "Environmental products transactions"; and
- 3.12.4 "Gas transactions".
Last Update Date 04 Jul 2011