Tri Party Collateral Agreement for Hong Kong

Tri Party Collateral Agreement Template for Hong Kong

A comprehensive legal agreement governed by Hong Kong law that establishes and regulates a three-way relationship between a collateral provider, collateral taker, and custodian for the purpose of managing and safeguarding collateral assets. The agreement details the rights, obligations, and operational procedures for all parties, including collateral transfers, valuations, substitutions, and enforcement rights, while ensuring compliance with Hong Kong securities regulations and financial markets legislation. It provides a secure framework for collateral management while addressing risk allocation and default scenarios.

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What is a Tri Party Collateral Agreement?

The Tri Party Collateral Agreement is a sophisticated legal instrument used in Hong Kong's financial markets to facilitate secure collateral management arrangements. It is typically employed when parties require a neutral third-party custodian to hold and manage collateral assets, ensuring proper segregation and reducing counterparty risk. The agreement is essential for financial institutions engaging in securities lending, derivatives trading, secured financing, or other transactions requiring collateral arrangements. It must comply with Hong Kong's Securities and Futures Ordinance, Banking Ordinance, and other relevant financial regulations. The document details comprehensive operational procedures, including collateral eligibility, valuation methods, transfer mechanisms, and default management, while clearly defining the roles and responsibilities of all parties involved.

What sections should be included in a Tri Party Collateral Agreement?

1. Parties: Identifies and defines the three main parties: Collateral Provider, Collateral Taker, and Custodian

2. Background: Sets out the context of the agreement and the relationship between the parties

3. Definitions and Interpretation: Defines key terms and establishes interpretation principles

4. Appointment of Custodian: Formal appointment and acceptance of the custodian's role

5. Custody Arrangements: Details of how collateral will be held and segregated

6. Collateral Requirements: Specifications for eligible collateral, valuation methods, and maintenance requirements

7. Transfer and Substitution of Collateral: Procedures for delivering, withdrawing, and substituting collateral

8. Rights and Obligations: Core responsibilities of each party

9. Instructions and Communications: Procedures for giving and acting on instructions

10. Fees and Expenses: Custodian's fees and allocation of costs

11. Default Events: Definition of events of default and consequences

12. Enforcement: Rights and procedures following an event of default

13. Liability and Indemnity: Allocation of risks and indemnification obligations

14. Representations and Warranties: Standard and specific representations by each party

15. Term and Termination: Duration of agreement and termination provisions

16. Miscellaneous: Standard boilerplate provisions including notices, amendments, governing law

What sections are optional to include in a Tri Party Collateral Agreement?

1. Security Interest: Required when a separate security interest needs to be created over the collateral

2. Tax Provisions: Include when tax implications need specific addressing, particularly for cross-border arrangements

3. Regulatory Compliance: Added when specific regulatory requirements need detailed coverage

4. Sub-Custodian Provisions: Include when sub-custodians may be appointed

5. Electronic Trading Platform: Required when collateral management involves specific trading platforms

6. Multiple Currency Provisions: Include when collateral may be denominated in multiple currencies

7. Rehypothecation Rights: Include when collateral taker has rights to reuse collateral

8. Force Majeure: Detailed force majeure provisions where market standard provisions insufficient

What schedules should be included in a Tri Party Collateral Agreement?

1. Eligible Collateral Schedule: Detailed list of acceptable collateral types and their characteristics

2. Valuation Procedures: Detailed methodology for valuing different types of collateral

3. Operating Procedures: Detailed operational procedures for custodian services

4. Fee Schedule: Detailed breakdown of custodian fees and charges

5. Form of Notices: Standard forms for various notices under the agreement

6. Security Interest Documentation: Forms and procedures related to security interest creation

7. Authorized Persons: List of persons authorized to give instructions for each party

8. Service Level Agreement: Detailed service standards and performance metrics for custodian

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Hong Kong

Publisher

Genie AI

Document Type

Confirmation Letter

Sector

Sales

Cost

Free to use
Relevant legal definitions
Relevant Industries

Banking

Securities and Investment

Asset Management

Insurance

Financial Services

Investment Banking

Prime Brokerage

Custody Services

Fund Management

Treasury Services

Relevant Teams

Legal

Compliance

Risk Management

Operations

Trading

Treasury

Portfolio Management

Custody Operations

Credit

Documentation

Transaction Management

Client Services

Securities Services

Relevant Roles

Legal Counsel

Compliance Officer

Risk Manager

Operations Manager

Collateral Manager

Relationship Manager

Treasury Manager

Trading Manager

Portfolio Manager

Custody Operations Officer

Chief Operating Officer

Credit Risk Officer

Legal Documentation Specialist

Transaction Manager

Securities Services Manager

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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