CDEA

A CDEA is a Cleared Derivatives Execution Agreement, it can be a level of fallback security when trading Cleared OTC Derivatives to make sure that the trade will still stand if clearing fails.

The principle is that a SEF/MTF provides a trading platform/venue and anyone who has access to that venue will be able to trade with any of the dealers providing prices whether or not any other legal documentation is in place, however should the Clearing Member for whatever reason be unable to allow the trade to clear the CDEA is a document that says (in a roundabout way) "If we trade on venue and it fails to clear then we'll fall back to a Bilateral OTC trade with all the same economic terms".

Some venues however have made the CDEA largely redundant, before a request for price (RFQ) is sent to the dealers a message is sent to the Clearing Member who will deliver certainty that the trade will clear - with this in place there is no need for fallback provisions, however that does mean that you can only trade comfortably without a CDEA on platforms with that checking mechanism.

As a result most Sell-side dealers have done away with the need for CDEAs.