Long-form confirmation

A long form confirmaion, or "LFC", generally refers to the documentation for a financial transaction between two parties which have not (yet) formally signed a master agreement for that type of transaction. Instead they document the trade on a "long form" which deems a basic version of the relevant master agreement be in existence between the parties for the purposes of the transaction.

Example: ISDA LFC

For example, an ISDA LFC incorporates by reference the ISDA Master Agreement, without a Schedule, pulling in the provisions in the ISDA Master Agreement concerning termination and close-out, representations, and (subject to the proviso below) close out and settlement netting.

Drawbacks

While LFCs "do the job", they're not ideal for a number of reasons:

• They incorporate the basic ISDA protections whcih are in the preprinted ISDA Master Agreement. However, most counterparties significantly enhance these protections with additional provisions and elections in the Schedule and with a 1995 CSA. The standard form LFC does not capture any such enhancements, and does not have a 1995 CSA.
• The standard LFC deems eachy separate transaction to be executed under s "stand-alone" ISDA Master Agreement. Without additional amendment, there would not be cross-transactional close-out netting between two LFCs exectuted with the same party (though this language may be overcome provided there is some "aggregation language" in every LFC, and every LFC has the same designated Termination Currency).