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Afme Form Block Trade Agreement

The Association for Financial Markets in Europe (AFME) has launched model block agreements for bulk transactions in Europe, the Middle East and Africa (EMEA) that arise when banks, with or without backstop, acquire banks as agents, with or without backstop, buy publicly traded shares with a discount to selling shareholders. “Both models are not designed to be firm forms with binding conditions or to restrict the right of the parties to negotiate the terms or forms of block agreements. However, the model offers user-friendly formulations for most standard terms that allow negotiations to focus on important trade concepts such as commission levels and structure. Over the past 18 months, AFME has developed model agreements in response to requests from stock market participants to conduct these transactions quickly and in agreement with its member banks and more than 20 international law firms involved in EMEA equity transactions. “The challenge now is to get the message out to the market, and we are confident that market participants will see significant benefits over time in the use of model agreements.” Many block trades are subject to time and legal constraints that can make it difficult to establish appropriate contractual conditions. The model will help streamline agreements, improve time and cost efficiency for bulk transactions, which Dealogic says have their highest annual values in 2013. [1] Between January 1, 2013 and September 13, 2013, $69 billion in block trades was organized, up from $62.7 billion in 2012 (Source: Dealogic) “Using block trade type agreements will save intermediaries and sellers a lot of time and costs. Two versions of the AfME model block agreement are made available: one is a simple agency agreement with no obligation to backstop underwriting, and the second version has incorporated a backstop underwriting commitment that offers a seller a firm and hard-signed minimum price, to which he monetizes the shares sold. Bill Ferrari, Managing Director of AFME`s Equity Capital Markets Division, commented:

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