Module 2 · Chapter 4
One Agreement: the Master, the Schedule and the People Who Negotiate It
A derivatives relationship runs on one contract, signed before any trade. This chapter explains why it must be one contract, which document wins a clash, and where the real negotiation happens.
In this chapter
- Why the master agreement and every trade form one contract
- Which document wins when two disagree, and where the parties negotiate
- What each side gave up, and why you write it down
4.1The master agreement in one paragraph
Atlas and the bank will not sign a new contract for each trade. They first sign one framework, the master agreement, and add each trade to it later. The bank's draft pack holds four documents:
- the master agreement itself, thirteen printed clauses
- a Schedule, where the two parties make their choices
- a collateral annex, for cash posted against exposure
- a rate definitions annex, for how the floating rate is read
None of the four mentions the swap's amount, rate or dates. Each trade arrives later in a two-page confirmation. The documents call Pellhaven Bank plc “Party A” and Atlas “Party B”, because the dealer comes first by custom.
Key point
The master agreement is signed once, and trades are added to it one at a time. Everything inside it counts as one contract. That is what lets the parties end it all with one net figure.
Also in this chapter
- Why every trade sits inside one agreement
- Which document wins a clash
- Why the parties negotiate the Schedule, not the printed clauses
- What counts as a term, and when a trade binds
- Who negotiates for each side
- What each side gave in the negotiation
- The negotiation note
- Your job
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