Laws Concerning Secondary Loan Trading

Markit Clear
Legal Overview

Scott Kostyra – Markit
Bridget Marsh – LSTA
March 3, 2011

CONFIDENTIAL

Markit Clear documentation overview
 Industry standard documentation
– Large number of market participants
 Approximately 50 active banks
 Over 650 fund managers

– Standard documents posted on-line

 Developed via collaborative process
– Legal documentation working group
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Markit
LSTA
Banks
Lenders

 LSTA/LMA legal framework subsumed

2

Legal differences
ClearPar vs. Markit Clear
ClearPar:
 Buy-side user
– No legal agreements

 Trade documents executed
– PIN code entered to execute each document
– Confirm at Sub-trade

Markit Clear:
 Everyone must be a Member
– Execute legal agreements

 Trade Matching binds parties
– Master trade
– Auto-execution based on trade match  Trade documents generated

 KYC

3

 Trade match (LSTA T&Cs), transfer notice, funding memo
 Known Party

Trade Matching & Processing
Trade Date

Buy Side
Trade
Messages

Bank
Markit Clear
Matching Pool

Trade
Messages

Matched Master
Trade
(Legally Binding)

Markit Clear
Trade Processing
Allocation
Messages

•Position Check
•Credit Agreement Check
•Known Party
•Pricing Calculations

Parties bound at allocated trade level

Transfer Notice

Funding Memo
4

Document – auto executed
Document

T+1

Markit Clear documentation structure
I. Legal Documentation
 Markit Clear User Terms (Master Agreement)
– Sets forth the key contractual terms and responsibilities of Markit and
User

 Schedules / Annexes
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–
–
–
–

User Service Addendum
Lender Inventory Services
Trade Settlement Services
Contributing Agent Services
User Registration Forms

II. Operating Procedures
 Lender Inventory Operating Procedures
 Trade Settlement Services Operating Procedures
 Contributing Agent Services Operating Procedures

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Together the Markit Clear legal documents