Master Agreement for Financial Transactions (CMOF)

The Master Agreement for Financial Transactions (CMOF) is a contractual netting agreement that is mainly used as a master agreement for financial derivative transactions between Spanish counterparties.

As the CMOF is, as indicated above, a master agreement, all the financial transactions agreed thereunder, through the corresponding confirmation document (mainly financial derivatives), are deemed to be included within the scope of this master agreement, and the provisions thereof apply to such transactions, without prejudice to the specific terms and conditions that may be contained in the transaction confirmation documents.

The CMOF is also a contractual netting agreement. This means that, through this agreement, the parties agree to create a single legal obligation that covers all the transactions concluded thereunder and, by virtue of which, in the event of early maturity, the parties are solely entitled to demand the net balance of the result of the settlement of these transactions, calculated as established in the master agreement.

The CMOF was conceived to replicate, in the Spanish domestic market, other international master contractual netting agreements. There are four versions of the CMOF: 1997, 2009, 2013 and 2020. The first version of the CMOF, dating back to 1997, was drawn up by the Spanish Banking Association (AEB), although the 2009, 2013 and 2020 versions were drawn up jointly by the AEB and CECA.

The CMOF, in all its versions, comprises the 'body of the agreement', which includes the operative part thereof and which is supplemented by several annexes: (i) Annex I, the purpose of which is to amend this 'contractual body', (ii) Annex II that contains the definitions of the terms used in the master agreement, (iii) Annex III, relating to the guarantees that may be associated with the transactions subject to the master agreement, (iv) Annex IV that is derived from the need to clear a large part of derivative transactions, and (v) Annex V, relating to the initial guarantee that may be applicable between certain counterparties.

In addition, amendments to the Master Agreement for Financial Transactions (CMOF) are included, consisting of: a) A Novation Agreement amending the CMOF to include provisions relating to emission allowances; b) Additional Provisions to Annex I of the CMOF relating to Emission Allowances. These documents are to be used voluntarily between willing parties as part of Annex I of the CMOF and are intended to harmonise the documentation relating to derivatives on emission allowances.