Standard Forms / Documentation / Guidelines

October 8, 1999

Mr. Spiros V. Bazinas
Legal Officer
International Trade Law Branch
Office of Legal Affairs
United Nations Commission on International Trade Law
Vienna International Centre
P.O. Box 500
A-1400 Vienna
AUSTRIA

Re: UNCITRAL Draft Convention on Assignment in Receivables Financing

Dear Mr. Bazinas:

The Bond Market Association1 is writing to associate our organization with the views expressed by the Financial Markets Lawyers Group (the "FMLG") and the British Bankers Association (the "BBA") in their October 8, 1999 letter regarding the UNCITRAL Draft Convention on Assignment in Receivables Financing (the "Draft Convention"). Like the FMLG and the BBA, we support the efforts of the Working Group on International Contract Practices (the "Working Group") to facilitate trade financing. However, we have a number of concerns regarding the scope of the Draft Convention and its potential effects on the operability of standardized master netting agreements.

One of our leading institutional priorities is the development, publication, and periodic modernization of industry-standard documentation designed to facilitate fixed-income transactions. Our Master Repurchase Agreement and Global Master Repurchase Agreement, for example, provide financial market participants with reliable methods for documenting funding transactions that add liquidity and efficiency to securities markets throughout the world. With input from other trade associations and market professionals, we are in the advanced stages of developing a Cross-Product Master Netting Agreement that will encourage sound risk management practices by allowing counterparties to evaluate and manage their exposures to one another within and across product classes.

Many such standardized agreements include contractual provisions that expressly prohibit the assignment of underlying rights or obligations by one counterparty without the prior written consent of the other counterparty. These provisions lend certainty and predictability to the set-off and netting provisions of the agreements that aid market participants in managing risk. In accordance with the recommendations of the FMLG and the BBA as described in their October 8, 1999 letter, we therefore urge the Working Group to clarify that the scope of the Draft Convention excludes the types of transactions and obligations covered by industry standard master netting agreements.

Again, we commend the Working Group’s efforts to improve the facilities of global trade financing. We would be pleased to provide the Working Group with any further information it may require.

Sincerely,

/s/ Andrew V. Waskow
Assistant General Counsel

cc: Joyce M. Hansen, Chair, The Financial Markets Lawyers Group
William Mason, Director, British Bankers Association
Legal and Regulatory Staff, The Bond Market Association

FOOTNOTES

1 The Bond Market Association represents securities firms and banks that underwrite, distribute and trade debt securities, both domestically and internationally. In their activities throughout the fixed-income markets, the Association's members are active developers and users of a wide range of standard documents and agreements. More information about the Association, its members, and our numerous standardized agreements may be found at our Internet website, located at http://www.sifma.net.