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Collateral Exchange Agreement

Two counterparties may have negotiated multiple security arrangements when trading with different types of financial instruments. A framework contract is required for derivatives trading, although the CSA is not a mandatory element of the global document. Since 1992, the framework contract has been used to define the conditions for trading derivatives and make them mandatory and enforceable. Your publisher, ISDA, is an international trade association for participants in futures, options and derivatives markets. When participating in margin trading, the securities of the brokerage account serve as collateral in the event of a margin call. In this case, the guarantee is similar to that provided to the lender when providing collateral in exchange for a loan. The value of the securities gives the certainty that the lending institution can recover the funds if necessary.