The Financial Markets Lawyers Group, sponsored by the Federal Reserve Bank of New York's foreign exchange committee, has published a master forex give-up agreement. In give-up relationships a party designated by a prime broker executes transactions with a dealer that are then switched to the prime broker. The prime broker then has one trade with the dealer and an offsetting trade with the party.
"The agreement is a benefit to clients in that a client can consolidate all of its fx positions with a single bank," said Robert Spielman, director and senior counsel at Deutsche Bank in New York, who helped negotiate the agreement. He said it allows the client to net across all its positions, which means more efficient use of collateral. It has operational benefits as well because the client deals with a single prime broker. Spielman emphasized the agreement gives the client access to many banks with which, without the give-up relationship, it may not have had a credit line.
The International Swaps and Derivatives Association hopes to complete its own standardized give-up agreement by year-end which will cover foreign exchange, credit derivatives and interest rate swaps (DW, 12/20). Spielman said many FMLG members, who represent firms such as Bear Stearns, Lehman Brothers, are also participating in ISDA's initiative.