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In the case of CFH Clearing Ltd v Merrill Lynch International, The Court of Appeal has held that a bank was not obliged to reprice or cancel foreign exchange spot trades entered into at a time of severe market disruption in accordance with "market practice": The court upheld that an ISDA Master Agreement was not varied by the defendant bank’s standard terms to incorporate market practice.


CFH Clearing (CFH) regularly entered into FX transactions with Merill Lynch International (MLI), whereby it bought Swiss francs and sold Euros. These transactions were governed by a 2002 ISDA Master Agreement and an FX Confirmation Agreement. MLI's relationship with CFH was also governed by MLI’s Standard Terms and Conditions of Business (the Standard Terms).

Following the Swiss National Bank's "de-pegging" of the Swiss Franc from the Euro in 2015 (which removed the currency floor applied to the Swiss Franc against the Euro), there were severe fluctuations in the FX market which lead to extreme exchange rates being quoted.  CFH entered into a number of FX trades with MLI which were filed almost instantly at the low rates being streamed by MLI at the time. MLI's rates of 0.182 were substantially below the "official low" of 0.85 declared by the principal EUR/CHF trading platform. Later that day other banks amended the pricing of trades executed with CFH to reflect the official low.

MLI declined to re-price the transactions to match the official low but offered to re-price the trades at 0.75. CFH brought a claim arguing that the FX trades were entered into at a time of severe market disruption and seeking either the re-pricing or cancellation of the transactions.

Issues considered

Following dismissal of the case at first instance, CFH argued on appeal the following:

  1. The Standard Terms, which provided that “all transactions are subject to all applicable laws, rules, … and, where relevant, the market practice of any  exchange, market, trading venue …” (emphasis added), recognised the potential for conflict between the agreement and market practice.
  2. Market practice was therefore incorporated into the transactions and amended the ISDA Master Agreement.
  3. "Market” was a broad term that meant any market in which the transaction took place, and the “practice” of re-pricing or cancelling trades in the case of extreme events was reflected in provisions of the Model Code published by the Financial Markets Association.


The Court dismissed CFH's appeal, noting that the parties had agreed their FX transactions would be governed by the amended 2002 ISDA Master Agreement, which the Standard Terms expressly stated would take precedence. To hold otherwise would have undermined the certainty, clarity and predictability of the ISDA and made the transactions unworkable. The Model Code itself recognises the desirability of entering into an ISDA Master Agreement to promote legal certainty, including in regards to market practices. A practice to override the ISDA Master Agreement could not therefore be derived from the Model Code either.

The parties had chosen to use the industry standard agreement, which itself reflects market practice, and had further negotiated and tailored it to suit their needs, without making express provision for market disruption. The transactions were thus governed by a detailed contractual regime and there was, according to the Court, "no reason why CFH should not be held to its bargain".


The Court is clear that the concept of "market practice" cannot be used as a term of art to override express contractual requirements. The parties in this case used the ISDA Master documentation as they were in agreement that the trades would be governed by ISDA Master terms. CFH could not claim that a reference to "market practice" in their Standard Terms was sufficient to override the contractual agreement CFH and MIL had entered into.

This decision serves as a simple yet important reminder to market participants that transacting on non-standard terms will require an express drafting of those terms, rather than reliance on creative interpretation.