After 24 drafts and a consultation process lasting three-and-a-half years, the International Swaps and Derivatives Association and the International Islamic Financial Market (IIFM) finally unveiled the sharia-compliant tahawwut (hedging) master agreement for Islamic derivatives on March 1.
The document is based on the 2002 Isda master agreement, but has been adapted to meet the strict demands of Islamic law. For example, it excludes default interest and explicitly states trades must only be entered into for hedging purposes rather than speculation.
The protracted negotiations to draw up the agreement looked to be moving forward in September 2006, when Isda and the IIFM signed a memorandum of understanding and committed to convene regular meetings of a joint working group. But discussions between those drafting the document, sharia scholars and market participants delayed publication.