How Does the Legal Documentation Differ between Standardized and Customized Derivatives?
Standardized derivatives rely on brief, uniform contract specifications set by the exchange. Customized OTC derivatives require extensive, bilateral legal agreements, often using a master agreement like the ISDA Master Agreement, supplemented by a Credit Support Annex (CSA), which details the collateral and netting arrangements.
The documentation is a major cost and time factor for OTC trades.
Glossar
Customized OTC Derivatives
Structure ⎊ Customized OTC derivatives represent privately negotiated financial contracts referencing cryptocurrency assets, differing from standardized exchange-traded instruments through bespoke terms and counterparty risk management.
Credit Support Annex
Documentation ⎊ This legal supplement, typically attached to an ISDA Master Agreement, specifies the terms under which collateral is exchanged between counterparties to mitigate credit exposure in derivative transactions.
Legal Documentation
Framework ⎊ Legal documentation within cryptocurrency, options trading, and financial derivatives establishes the contractual basis for participation, defining rights and obligations of involved parties.