Master netting agreement: Difference between revisions
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An agreement, like the [[Cross-Product Master Agreement]] or most [[prime brokerage agreement]]s, that allows you to net ''across'' different [[master agreement]]s. | {{g}}An agreement, like the [[Cross-Product Master Agreement]] or most [[prime brokerage agreement]]s, that allows you to net ''across'' different [[master agreement]]s. | ||
{{netting across master agreements}} | |||
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*[[CPMA]] | |||
*[[Close-out netting]] | |||
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Latest revision as of 09:44, 13 December 2019
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An agreement, like the Cross-Product Master Agreement or most prime brokerage agreements, that allows you to net across different master agreements.
If a master agreement allows set-off, can I net down across master agreements?
So if one of my master agreements has a broad set-off provision (as well as its close-out netting provision), and my netting opinion says the set off (of amounts due under other master agreements) would also be enforceable, can I then treat all my exposures against that counterparty, across all master agreements, as nettable down to a single obligation?
Sorry to be the bearer of the buzzkill, but no. You need a “written, bilateral netting agreement that creates a single legal obligation, covering all included bilateral master agreements and transactions” (a “cross product netting arrangement”), itself supported by a netting opinion. See Rule CRE53.61-9 of the Basel framework[1] This might be, for example, the joint-association-published Cross-Product Master Agreement - and most prime brokerage agreements do this too.
But even if you have got a master netting agreement, also check whether your own firm’s operational systems are capable of recognising cross-product netting arrangements as a practical matter. From personal experience, the JC suspects many aren’t. If the computers can’t do it, your CPMA and your netting opinions are as good as a chocolate starfish.