London, 13th September 2017 – The International Islamic Financial Market (IIFM) organised a Workshop on its Islamic Hedging and Liquidity Management Standards, which was hosted by Clifford Chance at their London workplace. The Workshop was held at the side of The IFN Europe Forum 2017.
The Workshop was attended by greater than 60 delegates from round 40 establishments, which included regulators, banks, regulation companies, lecturers and different market practitioners from UK and overseas. The individuals got detailed technical briefings on IIFM’s requirements on Islamic hedging and liquidity administration by main specialists within the discipline.
In his Welcome Address, Malcolm Sweeting, Senior Partner at Clifford Chance, stated “The ability to hedge market risks and to access and mange liquidity are both essential for the continued growth and internationalisation of Islamic Finance. IIFM’s work in developing documentary standards for these activities has been crucial, and we at Clifford Chance have been proud to be able to support IIFM and contribute to their work”.
The first session of the Workshop was on “Islamic Hedging Standards” the place Ijlal Ahmed Alvi, Chief Executive of IIFM, gave a quick historical past of the event of the Islamic hedging phase, IIFM’s pioneering function and its 10 plus years of fruitful cooperation with its joint associate ISDA which has led to the publication of an entire set of Islamic hedging requirements, together with a Master Agreement, Product Confirmations and Credit Support Deed.
Habib Motani, Partner at Clifford Chance gave an in depth presentation on the authorized elements of the Tahawwut Master Agreement together with an in depth briefing on key clauses corresponding to early termination, transactions and designated future transactions, occasions of default and termination occasions, using Musawama and many others. He additionally briefed the viewers on the important thing options of the Credit Support Deed for money collateral developed to deal with the latest variation margin regulatory necessities.
Ijlal defined the working of Hedging Product Confirmations particularly these referring to Islamic Profit Rate Swaps, Islamic Cross Currency Swaps and Islamic FX Forwards, that are required to mitigate foreign money or price of return mismatch threat. He additionally defined why Murabahah and binding unilateral Wa’advert are utilized in Islamic Profit Rate Swap (IPRS) and Islamic Cross Currency Swap (ICRCS) documentation, whereas Islamic FX Forward product buildings contain solely a binding single Wa’advert or two binding unilateral Wa’advert, because the cash-flow threat related to FX Forwards is way lower than with IPRS or ICRCS merchandise.
Dr. Peter Werner, Senior Counsel at International Swaps & Derivatives Association (ISDA) then supplied an summary of the governing regulation and netting provisions and the significance of the popularity of the netting of monetary contracts notably in cross-border transactions. He careworn the significance of standardized documentation and product templates for the Islamic hedging phase.
The second session, led by Ismail Dadabhoy, Advisor at IIFM, briefed the viewers on IIFM’s Collateralized Murabahah Standard, which is the very best different to traditional Repo. He briefed the viewers on this liquidity administration software which has now grow to be crucial as a consequence of new laws impacting financial institution capital in addition to from a credit score threat perspective. He additionally supplied reasoning on why commodity Murabahah is used within the IIFM normal taking into consideration Shari’ah necessities for Rahn (collateral) as per AAOIFI Shari’ah normal. Habib then defined the mechanics of the IIFM Master Collateralized Murabahah Master Agreement (MCMA) from the authorized perspective, such because the creation of a safety curiosity, the kind of collateral usable, substitution with consent and many others. Sara Cescutti, Deputy Head of Sales and Relationship Management at Euroclear SA/NV supplied particulars of the Euroclear’s Tri-party collateral administration service whereas Lawrence Oliver, Deputy CEO of DDCAP Limited spoke on the necessity for Murabahah in sure Islamic transactions and function of commodity suppliers.
The final session was on “Islamic inter-bank market and the benefit of IIFM Unrestricted Wakalah standard”. Dr. Ahmad Rufai, Head of Shari’ah Compliance at IIFM, supplied the Shari’ah foundation for creating IIFM requirements with particular concentrate on sure phrases of the IIFM Unrestricted Wakalah normal and its Guidance Memorandum. Ijlal then supplied technical particulars on anticipated revenue, early termination, segregated or comingled Wakalah pool and accounting evaluation.
Ijlal Alvi in his concluding remarks thanked Clifford Chance for its assist in offering the venue and use of its services which had enabled IIFM to arrange this briefing for the advantage of market gamers who’ve curiosity in Islamic finance. He additionally acknowledged the help of REDmoney Group in managing the occasion.
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