Framework Agreement for Financial Operations
The Framework Agreement for Financial Operations (CMOF) is a contractual compensation agreement primarily used as a framework contract for financial derivatives operations between Spanish counterparties.
As the CMOF is, as stated, a framework contract, all financial operations agreed under its auspices, through the corresponding confirmation document (mainly financial derivatives), are understood to be integrated within the scope of said framework contract, with the provisions therein applying, without prejudice to any specific conditions that may be contained in the confirmations of the operations.
The CMOF is also a contractual compensation agreement, meaning that through it the parties agree to create a single legal obligation encompassing all operations concluded under its auspices and, by virtue of which, in the event of early termination, the parties are only entitled to demand the net balance from the settlement of said operations, calculated as stipulated in the framework contract.
The CMOF was born as a replica in the Spanish domestic market of other international contractual compensation framework contracts. There are four versions of the CMOF, from 1997, 2009, 2013, and 2020. The first version of the CMOF, from 1997, was prepared by the Spanish Banking Association (AEB), while the 2009, 2013, and 2020 versions have been jointly developed by AEB and CECA.
The CMOF, in all its versions, comprises a “contract body”, which includes its operative part and is completed with various annexes: (i) an Annex I that serves to modify said “contract body”, (ii) an Annex II that contains the definitions of the terms used in the framework contract, (iii) an Annex III, relating to the guarantees that may accompany the operations covered by the framework contract, (iv) an Annex IV that is based on the need to compensate a large part of the derivatives operations, and (v) an Annex V, relating to the initial guarantee that may be applicable between certain counterparties.
Additionally, modifications to the CMOF are included, consisting of: a) A Novation Contract modifying the CMOF for the incorporation of provisions relating to emission rights; b) Additional Provisions to Annex I of the CMOF relating to Emission Rights. These documents will be voluntarily used by any parties that wish, as part of Annex I of the CMOF, and aim to harmonize the documentation on derivatives relating to emission rights.