Hungarian netting legislation welcomed by Isda

Close-out netting of derivatives transactions reduces credit risk arising from over-the-counter derivatives transactions by allowing counterparties to net their obligations. It is an enforceable mechanism for calculating a claim against an insolvent counterparty under CMA.

Isda said the passing of CMA means close-out netting cannot be treated as an agreement intended to defraud other creditors and decrease the assets of the debtor. CMA also defines the term 'close-out netting' to include the latest derivatives products in the calculation mechanism, the association added.

“We are extremely pleased with the passage and implementation of this important legislation,” said Robert Pickel, Isda chief executive. “The CMA is a significant achievement ensuring the enforceability of Isda Master Agreement netting provisions in Hungary.”

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