3.2.1.40 Confirming through Austraclear

Austraclear provides functionality for confirming and settling swaps. However, not all of the terminology used by Austraclear matches ISDA terminology. Following is a form of letter agreement which participants can enter into which clarifies the terminology usage.

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Sample form of letter agreement confirming terminology usage

[sender letterhead]

 

[counterparty (recipient) name & address]

[reference]

[date]

 

Dear Sir/Madam,

Applicability of ISDA Master Agreement to Australian dollar interest rate swap transactions confirmed and/or settled through the Austraclear System


 

Austraclear Limited ("Austraclear") has amended its Regulations to permit Australian dollar interest rate swap transactions between its Members to be confirmed and settled through its System.

As you and we are both Members of Austraclear and we both have either already agreed for, or intend for Australian dollar interest rate swap transactions between us (each an "A$ IRS Transaction") to be subject to a 2002 version of the ISDA Master Agreement (as published by International Swaps and Derivatives Association, Inc) between us, we now propose as follows.

Where you and we have already signed a Master Agreement, we would like to amend it (by an exchange of this letter) to expressly permit any A$ IRS Transaction to be confirmed and settled through the System. We would also like to record chosen existing A$ IRS Transactions (if any) on to the System so that every ongoing payment obligation required pursuant to Section 2(a)(i) in respect of those A$ IRS Transactions will be settled through the System and in accordance with the Austraclear Regulations.

Where we both have not yet signed, or have only agreed to sign a Master Agreement, we propose or confirm (as the case maybe) that we will both promptly negotiate and sign one and we propose that each A$ IRS Transaction confirmed or settled on the System form part of and be subject to that document. Until that Master Agreement is signed, we propose that every A$ IRS Transaction confirmed or settled on the System be deemed to be subject to the terms contained in the 2002 version of the ISDA Master Agreement (as published by the International Swaps and Derivatives Association, Inc), as if we had both signed that Master Agreement without amendment except that:

(a) the Termination Currency is to be Australian dollars; and

(b) the Governing Law is to be the laws of [insert applicable law; eg "Victoria"]; and

(c) A$ IRS Transactions be permitted to be confirmed or settled on the System in the manner provided for in this letter.

We specifically propose the following:

1 Each A$ IRS Transaction matched on the System (whether before or after the date of this letter), will be a "Transaction" for the purposes of, and be subject to the terms of the actual or deemed Master Agreement referred to above ("MasterAgreement"). Further, the definitions and provisions contained in the 2006 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc) will apply (whether or not any record or confirmation created in respect of the A$ IRS Transaction expressly states so).

2 EachA$ IRS Transaction matched on the System (whether before or after the date of this letter), will be deemed to be an exchange of Confirmations by electronic message for the purposes of Section 9(e)(ii). In this regard, the Master Agreement shall be a "relevant agreement" for the purposes of Austraclear Regulation 4.2.9.

3 Each A$ IRS Transaction matched on the System (whether before or after the date of this letter), will constitute the sending of a notice and shall be effective for the purpose of Section 12.

4 For the purposes of interpreting certain expressions and words used in the System on various electronic screens, the following words and expressions used in the System shall have the following meaning for the purposes of the Master Agreement:

 

Austraclear
word/expression/meaning

ISDA word/expression

"Principal"

"Notional Amount"

"Maturity Date"

"Termination Date"

"Reset Period"

"Designated Maturity"

"Accrual Basis"

"Fixed Rate Day Count Fraction" and
"Floating Rate Day Count Fraction"

"Actual/Actual"

"Actual/365 (Fixed)"

"Floating Rate Opt"

"Floating Rate Option"

The dates specified for the "Start" field.

"Reset Dates"

"Bus. Day Convention"

"Business Day Convention"

"Initial Float Rate"

"Floating Rate for initial Calculation Period"

"Modified Follow"

"Modified Following"

"Succeeding"

"Following"

"BBSW"

"AUD-BBR-BBSW"

"Payment Amount" specified in the "FIX-Payments" field

"Fixed Amount"

 

 

Austraclear
word/expression/meaning

ISDA word/expression

"Payment Amount" specified in the "FLOAT-Payments" field

"Floating Amount"

The Member expressed to pay fixed.

"Fixed Rate Payer"

The Member expressed to pay floating.

"Floating Rate Payer"

For an in arrears swap, the "End/pay" dates.
For an in advance swap, the "Start/pay" dates.

"Fixed Rate Payer Payment Dates"

For an in arrears swap, the "End/pay" dates.
For an in advance swap, the "Start/pay" dates.

"Floating Rate Payer Payment Dates"

Austraclear shall be deemed to act as agent for the Calculation Agent.

"Calculation Agent"

A day on which commercial banks typically settle A$ IRS Transactions in each city of registration (with Austraclear) of each Member's System Member Code (as entered for the relevant A$ IRS Transaction on to the System).

"Business Day"


5 Where an A$ IRS Transaction has been matched on the System (whether before or after the date of this letter), and we have both indicated on the System that we wish for "Payment Settlement" to apply, we shall both, unless either of us otherwise notifies the other, settle all payments or exchanges due in respect of that A$ IRS Transaction using the System and in accordance with the Austraclear Regulations. To the extent that doing so in any way is inconsistent with the payment netting provisions of Section 2(c), that Section 2(c) shall not apply.

All words and expressions used in the Master Agreement and the Austraclear Regulations (as each may be amended from time to time) shall have the same meaning in this letter unless the context otherwise requires. A reference to a Section in this letter shall mean a reference to a Section in the Master Agreement.

If you are in agreement with all of the foregoing, would you please have an authorised officer (or officers as required) sign and date the copy of this letter enclosed and return the same to us at the above address. Once we receive the copy of this letter signed by you, we shall consider the foregoing terms effective as of the date of this letter.

Should you have any questions in relation to any aspect of this letter, please do not hesitate to contact the undersigned.

Yours faithfully

[Company name of Sender]

Signed:

Signed:

Name:

Name:

Title:

Title:

Date:

Date:

We acknowledge and agree with the foregoing.

[Insert counterparty name]

Signed:

Signed:

Name:

Name:

Title:

Title:

Date:

Date:

 


Last Update Date 29 Jun 2011