Ukraine: Draft Law on Derivatives passed on first reading

On 31 March 2016, the Ukrainian Parliament passed Draft Law No. 3498 on Regulated Markets and Derivatives (the “Draft Derivatives Law”) following its first reading.

The Draft Derivatives Law is part of ongoing finance reform, which Ukraine is undertaking in line with the Ukraine-EU Association Agreement. The Draft Derivatives Law is aimed at creating a regulatory framework for using both OTC and exchange-traded derivatives. It anticipates amendments to numerous existing laws, including the Civil Code of Ukraine and the Laws of Ukraine “On State Regulation of the Securities Market of Ukraine”, “On Securities and the Stock Market”, “On Joint-Stock Companies”, “On Banks and Banking Activities”, etc.

The Draft Derivatives Law envisages the implementation of certain provisions of the European Directives and Regulations, including EMIR, MiFIR, MiFID II and the Settlement Finality Directive. It also aims to create a legal framework for master agreements for financial transactions, such as the ISDA Master Agreement.

Additionally, the Draft Derivatives Law establishes definitions of new legal terms and concepts (e.g. netting, escrow funds, master agreement, qualified and unqualified investor, clearing, central counterparty etc.) which are currently not expressly recognised under Ukrainian law.

If adopted, the Draft Derivatives Law will create the infrastructure for a functioning of the derivatives market, thereby improving the overall business and investment climate in Ukraine. The Draft Derivatives Law is now being prepared for its second reading in Parliament.

Legislation:

Draft Law No. 3498 “On Amendments to Certain Legislative Acts of Ukraine (regarding the Regulated Markets and Derivatives)” dated 20 November 2015