IslamicFinance.de

On March 1, 2010 after many months of work, ISDA (the International Swaps and Derivatives Association) and IIFM (International Islamic Financial Market) jointly issued the first Shari'ah-compliant master agreement for over-the-counter (OTC) derivatives.[1] Styled the "ISDA / IIFM Ta'Hawwut Master Agreement" (ta'hawwut signifies "hedging" in Arabic), the new template master agreement (the "Ta'Hawwut Agreement") provides a framework for the expansion of derivatives activity in the Middle East, South Asia and many regions throughout the world where hedging is not currently standard practice due to ethical concerns. While based on the 2002 ISDA Master Agreement (the "2002 Master Agreement") and with many terms familiar to participants in swap markets, the Ta'Hawwut Agreement has been developed under the guidance and approval of the IIFM Shari'ah Advisory Panel. The Ta'Hawwut Agreement is therefore expected to be used as a reference for market participants where they or their customers need to hedge risks in line with Shari'ah principles.

This Alert will discuss the place of derivatives transactions within Shari'ah-compliant finance principles, will discuss the types of transactions to which the Ta'Hawwut Agreement could apply and will discuss some of the salient differences between the Ta'Hawwut Agreement and the 2002 Master Agreement.

Full article at the link below.