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IIFM and ISDA launch Tahawwut (Hedging) Master Agreement
March 1, 2010--The International Islamic Financial Market (IIFM) and the International Swaps and Derivatives Association, Inc. (ISDA) today launched the ISDA/IIFM Tahawwut (Hedging) Master Agreement.
The development is a breakthrough in Islamic finance and risk management, and marks the introduction of the first globally standardized documentation for privately negotiated Islamic hedging products. The ISDA/IIFM Tahawwut (Hedging) Master Agreement is the first financial industry framework document that is applicable across all jurisdictions where Islamic finance is practiced. The launch of the Tahawwut Master Agreement was officially announced at a launch event in Bahrain hosted by IIFM and ISDA under the patronage of H. E. Rasheed Mohammed Al Maraj, Governor, Central Bank of Bahrain.
IIFM and ISDA jointly developed the Tahawwut documentation under the guidance and approval of the IIFM Shari’ah Advisory Panel for this project and in consultation with market participants. The published document consists of the Tahawwut Master Agreement and an Explanatory Memorandum, both of which are part of the official Shari’ah Pronouncement.
“Given the growing nature of the Islamic finance industry, the institutions operating on Shari’ah principles can no longer afford to leave their positions un-hedged,” said Khalid Hamad, Chairman of IIFM and Executive Director of Banking Supervision at Central Bank of Bahrain. “Hence, some key hedging products are now becoming common across jurisdictions to mitigate risk. The ISDA/IIFM Tahawwut Master Agreement gives the industry access to a truly global framework document which is neutral in terms of treatment to both the transacting parties and at the same time strictly conforms to Shari’ah principles. IIFM is honored to have achieved this milestone in collaboration with ISDA and I am confident that such joint efforts will continue in the future.”
“Demand for customized, privately negotiated hedging tools that conform to the principles of Islamic finance has increased in momentum,” said Eraj Shirvani, Chairman of ISDA and Managing Director, Head of Fixed Income for the EMEA Region, Credit Suisse. “The Tahawwut Master Agreement provides the critical framework for the growth and evolution of Shari’ah-compliant hedging instruments.”
The ISDA/IIFM Tahawwut Master Agreement provides the structure under which institutions can transact Islamic hedging transactions such as profit-rate and currency swaps, which are estimated to represent most of today’s Islamic hedging transactions.
It is designed to be used between two principal counterparties as a master agreement. Parties understand that no interest shall be pay¬able or receivable and no settlement based on valuation or without tangible assets is allowed. Moreover, the counterparties to the Tahawwut Master Agreement make representations as to the fact that they enter into Shari’ah-compliant transactions only.
It is a completely new framework document though the structure of the document is similar to the conventional ISDA Master Agreement. However, the key mechanisms and provisioning such as early termination events, closeout and netting are developed based on the Islamic Shari’ah principles.
“Standardization is a key element in the progress of Islamic finance though it is not a simple process as evident from the efforts put in to the development of this master agreement,” said Ijlal Ahmed Alvi, Chief Executive Officer, IIFM. “A record number of drafts - 24 drafts – were developed during the industry consultation and Shari’ah guidance process before ultimately reaching the final version, which is comprehensive as well as practical in terms of usage with no compromise to Shari’ah principles. It was indeed a pleasure to work with such an experienced and dedicated execution team and the efforts were supplemented by exemplary understanding and cooperation shown by ISDA, our joint partner. We express our heartfelt thanks to the Central Bank of Bahrain for their continuous support and to all who were involved in completing this important project. ”
“ISDA is pleased to have partnered with the IIFM as part of its own on-going efforts to promote prudent risk management and to support the efficient development of privately negotiated hedging products,” said Robert Pickel, Executive Vice Chairman, ISDA.” The Tahawwut Master Agreement represents a major milestone in the development of risk management in Islamic finance.”
“IIFM has taken a lead in preparing Shari'ah complaint Master Agreements for specific areas of Islamic finance, which a number of financial institutions globally have recognized and adopted in order to avoid misunderstanding, uncertainty, and confusion; and also to seek clarity and sound business activities. The adoption of these Master Agreements will pave the way not only for Shari'ah compliance but also product innovation” said Dr Ahmad Rufai, IIFM Shari'ah Head. “The IIFM Shari'ah Advisory Panel have considered the Tahawwut Master Agreement to be a necessary step forward for promoting global standardization for Islamic financial product standards, because the absence of a global Shari'ah compliant standardized agreement may lead to negative effect in the industry. On this occasion, the IIFM Shari'ah Department would like to thank the IIFM Shari'ah Advisory Panel for their indispensable and greatly appreciated support. We don't know where the TMA development would be without their invaluable help and patience in reviewing many of the drafts. Maybe it would not have seen the light.”
In addition to developing documentation for Islamic transactions, ISDA in coordination with IIFM is in contact with various regulators in a number of Islamic jurisdictions, such as the Gulf Cooperation Council (GCC) region, namely UAE, Bahrain and Qatar, plus Pakistan to improve the local legal framework for hedging products and close-out netting provisioning.
The ISDA/IIFM Tahawwut Master Agreement is available at IIFM’s website www.iifm.net or at ISDA’s website www.isda.org.
ETF Landscape: Industry Review January 2010
February 26, 2010--At the end of January 2010 the global ETF industry had 2,055 ETFs with 3,941 listings, assets of US$984.0 Bn from 114 providers on 40 exchanges around the world.
Buy-out groups consider Asian sales
February 25, 2010--Global private equity groups are considering the sale of profitable Asian units to pay down debts held by their portfolio companies in the US and Europe.
Bain Capital, the US private equity fund, is in talks to divest the north Asian business of Outback Steakhouse, a global restaurant chain.
World trade 'picking up', says WTO
WTO Director General Pascal Lamy said the Organization had revised its previous estimate of a contraction, raising it to 12% from 10%, Reuters has reported.
Asked about world trade in 2010, he declined to give any figure but said: 'Certainly there is a pick-up. Whether this pick-up is short term ... or whether this is sustainable ... is difficult to say but we certainly are picking up.'
February 2010 “Islamic Market’s Measure” – Preliminary Report -Monthly Report On The Performance Of The Dow Jones Islamic Market Indexes
February 24, 2010--Based on the close of trading on February 23, the global Dow Jones Islamic Market Titans 100 Index, which measures the performance of 100 of the leading Shari’ah compliant stocks globally, gained 0.68% month-to-date, closing at 2048.83. In comparison, the Dow Jones Global Titans 50 Index, which measures the 50 biggest companies worldwide, posted a gain of 0.08%, closing at 164.86.
The Dow Jones Islamic Market Asia/Pacific Titans 25 Index, which measures the performance of 25 of the leading Shari’ah compliant stocks in the Asia/Pacific region, increased 2.66%, closing at 1834.75. The Dow Jones Asian Titans 50 Index, in comparison, posted a gain of 2.01%, closing at 132.40.
Measuring Europe, the Dow Jones Islamic Market Europe Titans 25 Index, which measures the performance of the 25 of the leading Shari’ah compliant stocks in Europe, closed at 2038.34, a loss of -1.88%, while the conventional Dow Jones Europe Index lost -2.46%, closing at 243.25.
Measuring the performance of 50 of the largest Shari’ah compliant U.S. stocks, the Dow Jones Islamic Market U.S. Titans 50 Index increased, closing at 2080.66. It represents a gain of 1.38%. The U.S. blue-chip Dow Jones Industrial Average increased 2.14%, closing at 10282.41.
February 2010 “Market’s Measure” - Preliminary Report - A Monthly Report From Dow Jones Indexes And STOXX Ltd. On The Performance Of U.S., European, Asia And Other Global Stock Market Indexes
February 23, 2010--Dow Jones Industrial Average Posts 3.14% Gain in FEBRUARY, European Stocks Gain 1.30%, Asia Rises 1.57% and World Equities Rise by 1.19%
Basic Materials Sector Posts Biggest Gain for February in U.S.
Automobiles & Parts Sector Takes the Hardest Hit for February in Europe
As of February 22 the Dow Jones Industrial Average rose 3.14% in February, closing at 10383.38. Stock market indexes in Europe, Asia and globally was up in February, according to preliminary monthly figures from global index providers, Dow Jones Indexes and STOXX Ltd.
The Dow Jones Industrial Average rose 3.14% in February, closing at 10383.38. Year-to-date, the index is down -0.43%
. Measuring Europe, the Dow Jones STOXX 50 Index is up 1.30% for February, closing at 2510.61. Year-to-date, the index is down -2.89%.
Measuring Eastern Europe, the Dow Jones STOXX EU Enlarged Total Market Index is down -2.14% for February, closing at 209.11. Year-to-date, the index is up 0.78%.
The performance of the Dow Jones STOXX EU Enlarged 15 blue-chip index is down -3.29% for February, closing at 2181.84. The index is down -0.53% so far this year.
The Dow Jones Asian Titans 50 Index rose 1.57% in February to 131.84. So far this year, the index is down -1.81%.
The Dow Jones Global Titans 50 Index rose 1.19% in February, closing at 166.68. Year-to-date, the index is down -4.01%
Standard & Poor's Announces Changes In The S&P/TSX Venture Composite Index
February 23, 2010--Standard & Poor's will make the following changes in the S&P/TSX Venture Composite Index after the close of trading on Tuesday, February 23, 2010:
Gleichen Resources Ltd. (TSXVN:GRL) will be removed from the index. The company will graduate to TSX where it will trade under the same ticker symbol.
Castle Gold Corporation (TSXVN:CSG) will be removed from the index. The company will be delisted from TSX Venture Exchange at the request of the Company.
Company additions to and deletions from an S&P equity index do not in any way reflect an opinion on the investment merits of the company.
Eurekahedge-Industry Review: February 2010
February 23, 2010--Eurekahedge Highlights for the month:
The size of global hedge fund industry currently stands at just under US$1.5 trillion – assets expected to hit US$1.68 trillion by the end of 2010.
Distressed debt hedge funds returned 2.51% for January, making it the 10th consecutive month of positive returns, gaining 44.01% over this period.
European long/short equity hedge funds delivered 0.76% in January, outperforming regional markets by 6.71%.
S&P adds Asia infrastructure and natural resources to risk control indices
January 23, 2010--Standard & Poor’s has expanded its family of risk control indices with a series of launches based upon the S&P Asia Infrastructure Index and the S&P Global Natural Resources Index.
The S&P Asia Infrastructure and S&P Global Natural Resources Daily Risk Control Indices integrate a volatility control within the index rules and are designed to offer investors a way to gain exposure to infrastructure and natural resource investments while controlling the level of risk.
February 2010 Monthly Preliminary Performance Report Dow Jones-UBS Commodity Indexes
February 22, 2010--The Dow Jones-UBS Commodity Index was up 4.48% for the month of February. The Dow Jones-UBS Single Commodity Indexes for Lead, Cotton and Zinc had the strongest gains with month-to-date returns of 16.41%, 12.57% and 11.91%, respectively. The three most significant downside performing single commodity indexes were Sugar, Cocoa and Tin, which were down -10.62%, -3.34%, and -1.26% respectively, in February.
Year to date, the Dow Jones-UBS Commodity Index is down -3.12% with the Dow Jones-UBS Nickel Sub-Index posting the highest gain of 11.57% so far in 2010. Dow Jones-UBS Corn Sub-Index has the most significant downside YTD performance, down -13.13%.
