Eligible Master Netting Agreement. Under the CFTC’s and Prudential Regulators’ uncleared swaps margin rules, in order to reflect offsetting exposures for initial and variation margin, swaps must be subject to the same EMNA. The rules define EMNA as a written, legally enforceable agreement that, among other things, (i) creates a single legal obligation for all individual transactions covered by the agreement upon an event of default, including an insolvency-related event of default; (ii) provides the covered swap entity subject to margin requirements with the right to accelerate, terminate, and close out on a net basis all transactions under the agreement and to liquidate or set off collateral promptly upon an event of default of the counterparty, subject to applicable law relating to the close-out of transactions against banks and systemically important institutions; (iii) does not contain a “walkaway clause” permitting a non-defaulting counterparty to make a lower payment than it otherwise would make under the agreement, or no payment at all, to a defaulting party; and (iv) has been subject to sufficient legal review by the CSE (which is required to establish and maintain written procedures to ensure that the agreement continues to satisfy the regulators’ requirements) that the CSE may conclude with a well-founded basis that the agreement constitutes an EMNA and, in the event of a legal challenge, including an insolvency-related proceeding, would be ruled to be legal, valid, binding, and enforceable under the law of the relevant jurisdictions.

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