The launch of the Tahawwut (Hedging) Master Agreement (TMA) earlier in March 2010 by the Bahrain-based International Islamic Financial Market (IIFM) in cooperation with the International Swaps and Derivatives Association, Inc. (ISDA) gives the global Islamic financial industry the ability to trade Shariah-compliant hedging transactions such as profit-rate and currency swaps, which are estimated to represent most of today's Islamic hedging transactions.
While Ijlal Ahmed Alvi, the CEO of IIFM, hails the TMA as "a breakthrough in Islamic finance and risk management, and marks the introduction of the first globally standardized documentation for privately negotiated Islamic hedging products," it may be wise to remember that it remains a financial industry framework document that may be used on a voluntary adoption basis, as almost all standards issued by various relevant international bodies such as IIFM, AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) and the IFSB (Islamic Financial Services Board) in the Islamic finance space.
As such, it is premature to suggest that the Tahawwut Master Agreement "is applicable across all jurisdictions where Islamic finance is practiced" because it would be subject to the vagaries of the legal and political governance process in various jurisdiction...
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