On 11 May, the New Capital Markets Law No. 27,440 (the Law) was published. The Law creates a legal framework regulating derivative contracts which had remained unregulated until the Law.
The Law expressly provides that the definition of derivatives includes, but is not limited to, forwards, futures, options, swaps and credit default swaps and/or a combination of them or any of them. The Law also includes a definition for repurchase agreements (an agreement in which parties simultaneously agree the sale of a financial asset and the repurchase of it in a determined term).
In accordance with international standards, the Law contains three fundamental provisions for the execution of this type of contracts: (a) the possibility of early or automatic termination upon reorganization process or bankruptcy of the counterparty; (b) the possibility of offsetting positions (netting); and (c) the automatic and extrajudicial execution of the guarantees.
Said exceptions to the general regulation of the Bankruptcy Law and the Civil and Commercial Code shall be applicable only under derivatives contracts that are entered into and/or registered in stock markets authorized by the National Securities Commission (CNV) (with or without intervention of the market or central counterpart) or between national and/or foreign counterparts outside the scope of negotiation of such markets as long as they are registered in accordance with the regulations of the CNV.
In this regard, the Law establishes that the counterparties of financial entities in derivative contracts, which are suspended to operate by the Argentine Central Bank or in a restructuring process, may also exercise the contractual mechanisms of early termination, setting, compensation and execution of guarantees.