Linklaters advises FIA on new client clearing model in Europe
Linklaters has advised the Futures Industry Association (FIA), the leading global trade organisation for the futures, options and centrally cleared derivatives markets, on the European Agent Trustee Model (EATM), an alternative clearing model in Europe.
The EATM is designed to broadly replicate the Futures Commissions Merchant clearing model in the US, with the aim of increasing the clearing capacity of globally systemically important bank clearing members, particularly for over‑the‑counter derivatives.
Today marks an important milestone in the multi-year project between FIA, Bank of America, Barclays, Citi, Goldman Sachs and J.P. Morgan, as well as LCH Ltd, Eurex Clearing and Linklaters, with the new model now live at leading clearing house, LCH Ltd, for its SwapClear service.
UK-based clearing members of SwapClear can now offer the EATM to their clients, irrespective of their clients’ location. Under the EATM (English law), clearing members may enter trades with a CCP on behalf of their clients and hold those trades on trust for them. This differs from Europe’s predominant ‘principal model’ in which clearing members act as financial intermediaries between their clients and the CCP.
The Linklaters team was led by Capital Markets Partner Michael Voisin and Capital Markets Counsel Sarah Willis, working with Managing Associate Hannah Pilkington and Associate Megan Gosling. They were by supported by Tax Partners Rhian Parker and Gabriel Grossman, Tax Counsel Ulrich Johann and Omer Harel and Trusts Counsel Leah Parry. Work on a German law version of the EATM, was led by Capital Markets Partner Burkhard Rinne and Capital Markets Counsel Marc Voelcker. Both the English and German law versions of the EATM brought together legal expertise from England and Wales, Germany, the US and other jurisdictions.
Michael Voisin, Capital Markets Partner at Linklaters, commented:
"We are delighted to have helped the industry bring such a complex project to a successful conclusion. We began working on the legal analysis which underlies the EATM over 10 years ago and, over the last five years, have built on our initial feasibility study to design and implement the model.”
Sarah Willis, Capital Markets Counsel at Linklaters, commented:
“Bringing the EATM to life at LCH is a landmark moment for cleared derivatives in Europe. We’re proud to have been a part of this new alternative clearing model, which will increase the clearing capacity of globally systemically important bank clearing members.”
