Understanding The Shari'ah-Compliant Hedging Master Agreement ­ Part I

On March 1, 2010 after many months of work, he International Swaps and Derivatives Association and the International Islamic Financial Market jointly issued the first Shari'ah-compliant master agreement for over-the-counter derivatives. Named the "ISDA / IIFM Ta'Hawwut Master Agreement" it provides a framework for the expansion of derivatives activity in the Middle East, South Asia and many regions throughout the world where hedging is not standard practice.. Based on the 2002 ISDA Master Agreement, the Ta'Hawwut Agreement has been developed under the guidance and approval of the IIFM Shari'ah Advisory Panel. The Ta'Hawwut Agreement is therefore expected to be used as a reference for market participants where they or their customers need to hedge risks in line with Shari'ah principles.