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Deutsche Bank

Derivative instruments traded in OTC markets have certain terms need to be specifically established, including the form and date of payment, obligations, netting and different events.
When the OTC derivative market developed, each trade and its specification were documented individually.
The first attempts to standardize documentation were codes of standard terms and conditions developed by different industry associations.
At the same time, in-house master agreements were developed to govern all trades with the same counterparty which gave possibility to net different transactions.
This was the primarily advantage over the codes and thus there are a number of internationally recognized master agreements such as ISDA, GMRA, GMSLA, FXC master agreements etc.

Master agreements contain at least the following items:

Standardization and contractual framework
Events that trigger early termination, such as events of default
Netting agreement including payment, close-out, insolvency, capital adequacy requirements
The methods of determining the amounts payable and receivables
Credit protection mechanism

In addition to the master agreement, an annex and confirmations are used to specify the rules for different transaction.

Depending on the type of derivative transaction there are a number of well-known master agreements for:

FX transactions
OTC derivative transactions
Repurchase transactions
Security lending transactions
FXC Agreements

The Foreign Exchange Committee (FXC) worked in association with the British Bankers’ Association (BBA), the Canadian Foreign Exchange Committee, Tokyo Foreign Exchange Market Practices Committee and the Japanese Bankers Association to provide the following agreements:

The 1997 International Foreign Exchange Master Agreement (IFEMA) covers foreign exchange transactions such as spot and forward transactions
The 1997 International Currency Options Master Agreement (ICOM) covers currency option transactions
The 1997 International Foreign Exchange and Options Master Agreement (FEOMA) is a combination of the IFEMA and ICOM Master Agreements
The 2005 International Foreign Exchange and Currency Option Master Agreement (IFXCO) is the most up-to-date of the FXC forms. In particular, it is more in line with the 2002 ISDA Master Agreement


ISDA covers a wide range of OTC derivative transactions such as:

Interest rate swaps
Currency swaps
Forward rate agreements
Equity index swaps
Foreign exchange transactions
Caps, collars, and floors
Credit derivatives

There is considerable overlap in the FXC and ISDA Master Agreements, at least in regard to some of the major concepts but today the trend is towards greater use of the ISDA Master Agreement.

Public Securities Association (PSA was incorporated in 1976, retitled The Bond Market Association TBMA in 1997 and in 2006 merged into the Securities Industry and Financial Markets Association (SIFMA)) provides the Agreement for OTC options contracts.
Two main standard agreements govern the international securities lending and repo industry: The Global Master Securities Lending Agreement (GMSLA) and the Global Master Repurchase Agreement (GMRA).


PSA/ISMA (International Securities Market Association renamed the International Capital Markets Association (ICMA) in October 2005) issued GMRA in November 1992.

This is the market standard repo document used as the legal basis for repo in non-US dollar markets. It was updated 3 years later to include UK gilts, buy/sell transactions and relevant agency annexes. Today the agreement is used for interbank repos and sell/buy back transactions. The GMRA sets out the procedures for margining and events of default. This document is governed by English law. TBMA also published the 1996 Master Repurchase Agreement (MRA) governed by New York law.

There are two parts to the GMRA, the main body of the agreement and various annexes. The main body of the agreement cannot be varied and covers such standard terms as initiation, confirmation and termination, margining, payment of income and events of default. The various annexes to the GMRA are available to specify different requirements.

The 2000 and 2011 versions have significant improvements and is a preferred choice for the majority of counterparts.

Other agreements can be used to document repos, such as ISDA Master Agreement and the European Master Agreement. The European Master Agreement is used primarily in the Eurozone and is s standardized master agreement developed by the European Federation.

There is considerable overlap in the agreements as well but again, the ISDA Master Agreement is used more widely


Security lending transactions involve a transfer of securities to a third party are regulated by using GMSLA.
GMSLA is issued by the International Securities Lending Association (ISLA) and supersedes the Master Equity & Fixed Interest Stock Lending Agreement (MEFISLA) and the Overseas Securities Lending Agreement (OSLA).

ISLA is a trade association established in 1989 to represent the common interests of the Securities lending industry.

The agreement is split into two sections, the main agreement and the schedule.
The terms in the main body cover such matters as events of default, arrangements for the delivery and return of the securities being borrowed, general terms for the use of collateral and treatment of corporate actions.
Any variations of terms between the two parties signing the agreement are included in the schedule to the agreement.