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A new template to standardise distribution of open account trade assets should make it easier for investors to enter the sector, industry advocates say.

The template, the Master Account Receivables Assignment Agreement (Mara), was developed in 2018 by HSBC and law firm Dentons. After being honed through several years of use, it has now been released for market-wide use through the International Trade and Forfaiting Association (ITFA).

ITFA and other parts of the industry have pushed in recent years to broaden investor interest in trade finance assets, particularly among deep-pocketed capital markets firms.

The Mara is designed partly to help further that goal by acting as a framework for how trade finance providers can sell beneficial interests in open account trade assets such as supply chain finance and receivables finance.

It provides a blueprint for how participants in a distribution programme can receive a beneficial interest in a receivable without needing to notify the buyer, ensuring “a seamless transfer of interests from seller to participant, addressing concerns over counterparty credit risk”, according to Dentons partner Ian Clements.

Selling participation in such deals helps originators manage their liquidity.

But distributing open account assets has typically been more complicated than other trade products such as loans or letters of credit, because they involve rolling programmes that finance large volumes of invoices.

Governed by English law, the Mara is adapted from the 2018 version of the master participation agreement developed by the Bankers Association for Finance and Trade, which is a widely used template for distribution of traditional trade assets.

Participants in open account distribution accounts are generally banks, and ITFA is urging its bank members to adopt the template to help standardise distribution practice across the industry.

Paul Coles, an ITFA board member and chair of the association’s market practice committee, says the template should help banks avoid the need to seek external legal advice on many distribution arrangements and encourage new investors to fund open account trade.

“It’s harder for new participants in the market… if there’s nothing to turn to that’s off the shelf,” he tells GTR. “It makes it more difficult to know what a good document looks like.”

“The Mara will hopefully make the distribution of these products even more accessible,” he adds.

ITFA says HSBC received positive feedback from other lenders when it first deployed the Mara framework.

“As a two-way agreement with balanced provisions, the Mara has allowed HSBC to participate and distribute a range of trade finance assets, striking a balance between protecting the interests of investors and originators,” says Bhriguraj Singh, HSBC’s chief product officer for global trade and receivables finance.

Coles, who was formerly HSBC’s head of global transactional distribution, helped drive the industry-wide release of the template alongside colleagues at the bank. He says it made sense for the bank to make it available to the wider market rather than keeping it for the bank’s exclusive use.

“When you work in the distribution of trade finance, you realise it’s entirely dependent on collaboration,” says Coles, who is now treasury director at working capital provider Orbian.

“There is pretty much no ‘secret sauce’ to how the secondary market for trade finance works, it’s all about trying to create better partnerships that will support transactions being done for the underlying clients. Anything you can do to make it better will be beneficial for everyone.”

There is increasing interest in participation in open account programmes from institutional investors, according to Coles, who adds that the template can be applied to many transaction structures.