Netting provisions in repos and derivatives transactions would be enforceable in insolvency scenarios if the Capital Markets Reform Bill is passed.
The Bill to Reform the Capital Markets Law (the "Capital Markets Bill") -see "Bill to Reform the Capital Markets Law" in this edition of Marval News- expressly regulates derivative and repurchase transactions and includes provisions which would make close out netting provisions and collateral agreements enforceable in insolvency scenarios if certain conditions are met.
The Capital Markets Bill defines derivative agreement and repurchase transaction. While the definitions of derivate transactions and repurchase agreements have certain ambiguities, the Capital Markets Bill expressly provides that: (i) the definition of derivatives includes, but is not limited to forward, futures, options, swaps and credit default swaps and/or a combination of them or any of them; and (ii) the definition of repurchase agreement includes, but is not limited to, repurchase agreements. The name of the contracts included in the definition is also in English in the Spanish original version. Therefore, it is clear that the most widely used derivative transactions and repurchase agreements are covered by the definition.
The Capital Markets Bill includes insolvency regulations for derivative transactions and repurchase agreements that are:
executed and/or registered in a markets authorized by the Comisión Nacional de Valores ("CNV", the Argentine Securities Exchange Commission) if the settlement of those transactions is carried out through the market, clearing house or central counterparty; executed and registered in a market authorized by the CNV, if the settlement of those transactions is not carried out through a market, clearinghouse or central counterparty; and executed between...