SWITZERLAND Law and Practice Contributed by: Olivier Favre and Tarek Houdrouge, Schellenberg Wittmer Ltd
variation margins, to the extent that the parties are in scope for the exchange of variation margins. Where an SMA is used to document derivatives trans - actions with private wealth management clients of a bank, such counterparties are not in scope of varia - tion margin requirements and the banks usually do not enter into a bilateral margin documentation with such clients, but a one-sided general deed of pledge under which the client provides collateral to the bank for its exposure to the client. Use of own documentation of the relevant banks A Swiss bank may also have its own trade documen - tation for trading OTC derivatives, particularly to the extent that derivatives transactions are entered into with private wealth management clients. Such docu - mentation is usually governed by Swiss law and the banks do not enter into a bilateral margin documenta - tion with such clients, but a one-sided general deed of pledge under which the client provides collateral to the bank for its exposure to the client. Such master agreements may be limited to certain asset classes (eg, for the purposes of trading FX derivatives). Documentation of ETDs As regards ETDs, Swiss banks providing indirect clearing services to clients usually have their own trade documentation to use in ETDs with clients. However, the Swiss Bankers Association also pub - lished a standard Master Agreement for Exchange Traded Derivatives, which is sometimes used by cer - tain banks. In relations between a Swiss bank and international clearing services providers, the prevailing international documentation is used. 4.1.2 Margins Under ISDA documentations, the exchange of vari - ation margin is usually documented in the VM CSA published by ISDA or by amending a CSA to be in line with the variation margin requirements. To the extent that an SMA is used, the exchange of variation margin is usually documented with the VM CSA published by the Swiss Bankers Association.
The Swiss rules for the exchange of initial margin are aligned with the rules of EMIR and apply to transac - tions with counterparties other than small non-finan - cial counterparties, provided that both parties cross the threshold of CHF8 billion in aggregate average notional amounts (AANA) and the amount of initial margin to be exchanged reaches the threshold of CHF50 million. Where parties are within the scope of the exchange of initial margin, they usually opt for the use of ISDA doc - umentation as opposed to an SMA. However, Swiss parties may choose to appoint SIX SIS to act as the custodian of the initial margin. SIX SIS has the relevant documentation in place for a solution to document the exchange of initial margin both under ISDA terms and, as regards transactions with domestic counterparties, in the event that an SMA is used. 4.1.3 Other Agreements In the repurchase agreement (Repo) market, where a Swiss counterparty is involved in a cross-border transaction, global master repurchase agreements (GMRAs) are widely used. In the domestic repo mar - ket, many firms participate in the repo trading platform operated by SIX SIS under the terms of the Swiss master repo agreement (SMRA), which is entered into by adhering to such SMRA on a multilateral basis. However, the trading occurs bilaterally between the relevant firms that both adhered to the SMRA. In the securities lending market, where a Swiss coun - terparty is involved in a cross-border transaction, glob - al master securities lending agreements (GMSLAs) are widely used. As regards domestic transactions, no standard master agreement prevails, but each firm has its own template documentation that is used. 4.2 Clearing Documentation Clearing brokers and Swiss firms offering indirect clearing services usually use their own trade docu - mentation to document the clearing terms. Such terms are usually the same for all asset classes. The Swiss clearing brokers and indirect clearing ser - vices providers usually have a set of disclosure docu - mentation that is prepared on the basis of the Futures
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