NIGERIA Law and Practice Contributed by: Fred Onuobia, Michelle Chikezie, Chima Uzochukwu-Obi and Anita Ebbi, G Elias
are generally licensed and regulated at the national level by the SEC.
Annex for Variation Margin (CSA VM). The Derivatives Trading Rules (Rule 13 (1)(b)) require CCPs to pay to or receive from participants and clients, variation mar - gins for gains or losses resulting from mark to market of positions. There has been no change in the documentation of the exchange of variation margins, especially as the Nigerian derivatives market is a developing one. The authors are not in scope for initial margin under regulatory initial margin requirements. With regard to the authors’ clients who are participants in the Nige - rian derivatives market, the Derivatives Trading Rules (Rule 13 (1)(a)) mandate that a CCP shall receive and maintain initial margin from participants before accepting to clear contracts from them. This places the participants in scope for initial margin where an SEC-regulated CCP is involved in the transaction. 4.1.3 Other Agreements Other trading agreements used in the Nigerian finan - cial markets include: • the Global Master Repurchase Agreement (GMRA) (1995, 2000, and 2011) and the various annexes and confirmation; • the Global Master Securities Lending Agreement (GMSLA) (2000, 2009, 2010, and 2018); and • the Nigerian Master Repurchase Agreement. 4.2 Clearing Documentation Clearing brokers in Nigeria rely on a range of docu - mentation to facilitate their clearing activities, which may vary depending on the type of cleared derivative and the specific requirements of counterparties and the clearing house. Common types of documentation include clearing agreements, the foundational deriva - tives contract (whether the ISDA Master Agreements, the Nigerian FX Master Agreement, or some other agreement), clearing house documentation outlining rules and procedures, customer account documenta - tion for KYC compliance, and product-specific docu - mentation tailored to the type of cleared derivative. Issues of greatest concern to clearing brokers and their customers when negotiating clearing documentation typically revolve around margin requirements, netting,
4. Documentation Issues 4.1 Trading Documentation
4.1.1 Industry Standards and Master Agreements In Nigeria, the documentation of derivatives transac - tions typically follows international standards, with significant influence from globally recognised frame - works. The most widely used documentation for derivatives transactions in Nigeria (especially OTC contracts), as in many other jurisdictions, is the ISDA Master Agreement. This is particularly the case where a foreign counterparty is involved. This framework is favoured for its comprehensive and standardised approach, providing legal certainty and operational efficiency. The ISDA Master Agreement ‒ along with the sched - ule thereto, the Confirmations and (where applicable) the Credit Support Annexes ‒ constitutes the suite of documents under which most cross-border deriva - tives transactions involving a Nigerian counterparty are documented. FX spot and forward contracts are also documented under the Nigerian Master FX Agreement and relevant confirmations. Parties may also execute Long-Form Confirmations where they have not executed a formal ISDA Master Agreement. Parties to OTC derivatives contracts can exercise discretion with regard to documentation of the con - tracts. However, master confirmation agreements are not used very often in the Nigerian derivatives market. Parties would usually opt to document all the terms of each individual transaction separately in distinct Generally, the exchange of variation margin in respect of exchange-traded derivatives is completed in accordance with the rules of the relevant exchange. For OTC derivatives transactions, however, the doc - umentation of arrangements for the exchange of variation margin involving a Nigerian counterparty is primarily handled through the ISDA framework ‒ in particular, by utilising the ISDA 2016 Credit Support confirmations. 4.1.2 Margins
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