SPAIN Law and Practice Contributed by: Miguel Cases and Claudi Rossell, Cases & Lacambra
also drafted in Spanish. However, the CMOF standard has no definitions beyond its Annex II and must be adapted to document transactions other than inter - est rates transactions. Although this standard may be used in any Spanish-speaking country, it is mainly used in Spain as a domestic documentation standard. Although framework agreements are the most com - monly used option in Spain, forward transactions represent a notable exception. Two factors can fully explain this situation. First, when such transactions are not characterised as derivatives, and this is the only type of contract negotiated between the parties, the use of framework agreements may be controver - sial because the scope of close-out netting provisions is limited to qualified transactions. Second, some for - wards, such as energy forwards, are usually entered into between non-qualified entities, which excludes these transactions from the scope of Spanish close- out netting provisions. The current version of the CMOF standard, made public in 2020, was adapted to EMIR and Regulation (EU) 2016/1011 (Benchmark Regulation). Accordingly, this version has two forms of Annex III pertaining to the posting of collateral by means of property transfers: (i) one adapted to the regulation on variation margin and (ii) a simplified model for all other cases. In Spain, ISDA standard documentation is commonly used for international agreements, including: • the 1995 ISDA Credit Support Annex (Transfer – English Law, amended when used with the 2002 ISDA Master Agreement); • the 2016 ISDA Credit Support Annex for Variation Margin (VM) (Title Transfer – English Law); and • the Master Agreement for Financial Transactions or European Master Agreement (EMA). EMIR 3 permanently exempts all uncleared single- stock equity options and equity index options from the mandatory exchange of initial and variation margin. This new exemption is to be reviewed by ESMA every three years and is removable by the European Com - mission, but the market will have at least two years’ notice should the Commission decide to remove it. However, although this development may spur the use of single documents to document these types of
derivatives, as far as the authors know, there is no interest in changing current practice. 4.1.2 Margins As mentioned in 4.1.1 Industry Standards and Master Agreements , the current version of the CMOF stand - ard, made public in 2020, was adapted to EMIR and Regulation (EU) 2016/1011 (Benchmark Regulation). Accordingly, this version has two forms of Annex III pertaining to the posting of collateral by means of property transfers: (i) one adapted to the regulation on variation margin to be used between FCs and FC-s and (ii) a simplified model to be used in transactions with commercial end users. In connection with inter - national agreements, the authors have used ISDA standard documentation: 1995 ISDA Credit Support Annex (Transfer – English Law, amended when used with the 2002 ISDA Master Agreement) and 2016 ISDA Credit Support Annex for Variation Margin (VM) (Title Transfer – English Law). In connection with initial margin, a new Annex V was added to the CMOF to document such margin exchange based on the creation of pledges governed by Spanish law pursuant to Royal Decree-Law (RDL) 5/2005. Since the pledged assets should be deposit - ed in accounts opened at an insolvency-remote entity, the BME is offering a deposits management service to its clients. In connection with international agreements complying with initial margin provisions, profession - als belonging to this law firm have been involved in the negotiation and documentation of this regulatory requirement. In all cases, the collateral was held in accounts opened at Euroclear and Clearstream. The following ISDA documentation standards are used: the ISDA 2019 Clearstream Collateral Transfer Agree - ment, ISDA 2019 Clearstream Security Agreements (Luxembourg Law), ISDA 2019 Euroclear Collateral Transfer Agreement and ISDA 2019 Euroclear Security Agreements, coupled with the corresponding triparty margining services agreements. 4.1.3 Other Agreements International standards such as Global Master Repur - chase Agreements (GMRAs), Master Repurchase Agreements (MRAs), Master Securities Forward Transaction Agreements (MSFTAs), Global Master Securities Lending Agreements (GMSLAs) and Mas -
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