SWITZERLAND Law and Practice Contributed by: Olivier Favre and Tarek Houdrouge, Schellenberg Wittmer Ltd
4. Documentation Issues 4.1 Trading Documentation
counterparties. In such capacity, they benefit from the following: • neither they nor the counterparty are subject to the margin requirements for the transactions traded with the small non-financial counterparty (neither variation margin, nor initial margin requirements); • they are not subject to a reporting obligation (to the extent that the proposed new rules will be adopted on the context of the pending FinMIA reform, not even after 1 January 2028); • the transactions they trade do not fall into the scope of an obligation to clear derivatives; and • the transactions entered into with such counterpar - ties do not fall into the scope of an obligation to perform portfolio reconciliations. 3.2 Local Switzerland does not have regulatory authorities on a local level (cantons or municipalities) that would be competent in this field. 3.3 Self-Regulatory Organisations, Independent Authorities, and Exchanges For the derivatives market, there are no self-regulatory organisations or independent authorities that would be competent in this field. However, Switzerland has trade associations such as the Swiss Bankers Association that are setting standards in respect of the documentation used (eg, by publishing the Swiss Master Agreement for OTC Derivatives Transactions or Other Master Agreements) and by being the most relevant forum for the discus - sion of the industry position to new rules and laws and developing best practices. Given that the country does not have a Swiss exchange for derivatives and no Swiss CCP for clearing deriva - tives, Switzerland does not have such Swiss market participants. However, as the Swiss securities custodian, SIX SIS offers a solution for the custody of securities for the purposes of using this with respect to initial margin assets under either SMAs for OTC Derivatives or ISDA documentations.
4.1.1 Industry Standards and Master Agreements Documentation of OTC Derivatives Transactions Use of ISDA terms The industry standard documentation used in OTC derivatives transactions traded on a cross-border basis are ISDA Master Agreements and the defini - tions published by ISDA for the different asset classes, jointly with the relevant supporting documents pub - lished by ISDA (including credit support documents, such as VM credit support annexes (CSAs) for trans - actions subject to variation margin requirements, and IM collateral transfer agreements (CTAs) with the rel - evant security agreements for transactions subject to initial margin requirements). For transactions traded in the domestic Swiss mar - ket, such ISDA documentation is also frequently used, to the extent that the transactions are entered into between financial counterparties or the transactions are subject to terms that mirror transactions traded For OTC derivatives traded with Swiss end-users or transactions traded between banks and their clients, an SMA for OTC derivatives transactions in the form published by the Swiss Bankers Association is often used. This agreement is subject to Swiss law as the governing law and is available not only in English, but also in German, French and Italian. The SMA was first published in 2003 and a revised version was pub - lished in 2013. The SMA of 2013 has a set of its own definitions that allow documentation with confirma - tions referring to such definitions. To the extent that the parties wish to use ISDA definitions under an SMA, the SMA of 2013 can be entered into in a version that includes the relevant bridge language, allowing the incorporation by reference of the most frequently used ISDA definitions into the relevant SMA. The Swiss Bankers Association also published CSAs as the relevant supporting documents to be used for the purposes of exchanging collateral. This includes a CSA that may be used for the purposes of exchanging internationally. Use of SMAs
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