THIS FAQ DOES NOT PURPORT AND SHOULD NOT BE CONSIDERED TO BE A GUIDE TO OR EXPLANATION OF ALL RELEVANT ISSUES OR CONSIDERATIONS IN CONNECTION WITH THE REVISED 2005 DELPHI CDS INDEX PROTOCOL. PARTIES SHOULD THEREFORE CONSULT WITH THEIR LEGAL ADVISERS AND ANY OTHER ADVISER THEY DEEM APPROPRIATE PRIOR TO USING OR ADHERING TO THE 2005 DELPHI CDS INDEX PROTOCOL. ISDA ASSUMES NO RESPONSIBILITY FOR ANY USE TO WHICH ANY OF ITS DOCUMENTATION OR OTHER DOCUMENTATION MAY BE PUT.
Please note that capitalized terms used in this FAQ page are as defined in either the Revised 2005 Delphi CDS Index Protocol or in the related ISDA Master Agreement or 2003 ISDA Credit Derivatives Definitions.
This FAQ page may be updated over time. (The last update was on October 28, 2005)
This FAQ is divided into five sections:
What is the purpose of the Revised 2005 Delphi CDS Index Protocol?
The purpose of the Protocol is to enable parties to Covered Index Transactions to confirm their intentions in respect to certain matters arising in relation to Delphi declaring bankrupty by filing for Chapter 11 on October 8, 2005.
How does the Revised 2005 Delphi CDS Index Protocol work?
The Protocol reflects an innovative procedure which allows for various standardized amendments to be deemed to be made to the relevant ISDA Master Agreement and Index Documentation relating to confirmations or master confirmations in connection with a Covered CDX Untranched Transaction, a Covered CDX Tranche Transaction, a Covered TRAC-X Tranche Transaction, a Covered TRAC-X Series I Untranched Transaction, a Covered TRAC-X Series 2 Untranched Transaction or a covered TRACERS Transaction. It builds on the principle that parties may agree with one or more other parties that certain terms and provisions will apply to their respective relationships (unless and until they specifically agree otherwise).
The Protocol provides a multilateral mechanism which enables multiple parties to agree that, in respect of any Index Documentation between any two of them, various standardized amendments will apply.
Market participants (“Adhering Parties”) indicate their participation in the Protocol arrangement by sending a letter (an “Adherence Letter”) to ISDA by email to email@example.com. The Adherence Letter allows the Adhering Party to specify that Schedule 1 to the Revised 2005 Delphi CDS Index Protocol, containing standardized amendments to its Index Documentation, will apply with other Adhering Parties.
By submitting the Adherence Letter, an Adhering Party agrees that the provisions of Schedule 1 will apply in respect of Covered Index Transactions with another Adhering Party submitting an Adherence Letter.
The amendment and adherence process, among other matters, is set out in the Protocol itself, which is published on ISDA’s web site (www.isda.org), along with a form of the Adherence Letter. For further detail on the adherence process, please see the Protocol Mechanics section of this FAQ.
What documents are covered by the Revised 2005 Delphi CDS Index Protocol?
The following documents are covered:
Why should I consider participating in the Revised 2005 Delphi CDS Index Protocol?
The Protocol has a number of significant advantages. In summary:
For whom is the Revised 2005 Delphi CDS Index Protocol designed?
The Protocol is designed for all types of participants in the OTC derivatives markets, including (but not limited to) any bank, corporation, government, investment firm, insurance company, pension fund and other fund entity, partnership and private individual that has entered into Covered Index Transactions with respect to Delphi. The Protocol was not designed with any particular type of derivative user in mind and in no way discriminates between different types of users.
Do I need to be an ISDA member to participate in the Revised 2005 Delphi CDS Index Protocol?
No. The Protocol is open equally to members of ISDA and non-members of ISDA.
Is the Revised 2005 Delphi CDS Index Protocol in any way related to previous ISDA Protocols (e.g., the 2002 ISDA Master Agreement Protocol or other CDS Index Protocol)?
No. This Protocol is separate and independent from each other ISDA Protocol. Whether or not a party has adhered to any other ISDA Protocol is irrelevant for purposes of this Protocol.
What alternatives (if any) are there to participating in the Revised 2005 Delphi CDS Index Protocol?
The issues relating to Covered Index Transactions in connection with Delphi could be addressed by way of individually negotiated provisions or by incorporating relevant provisions of the Protocol by reference. However, in either case, bilateral negotiations would be required and these could be time consuming and therefore costly.
How can I check the signing authority of other Revised 2005 Delphi CDS Index Protocol Adherents?
For security reasons, Adherence Letters on ISDA’s web site will have signatures conformed into type and signing authority information will not be displayed. Any supporting documents delivered to ISDA will not be made available (except in special cases). However, should parties wish to take steps to ascertain signing authority, the posted Adherence Letter will include a contact name and contact details.
Can I obtain copies of supporting documents or hard copies of Adherence Letters?
Yes. If you wish to obtain hard copies of Adherence Letters, each Adherence Letter posted on ISDA’s web site will include a contact name and contact details for the person who can send such documents. In special circumstances only (e.g., in litigation, when properly subpoenaed by a court of law), ISDA can provide certified copies of the documents held.
Which party in a corporate group must adhere?
Each legal entity that has entered into a Covered Index Transaction with respect to Delphi must adhere separately in its own capacity if it wishes to adhere to the Protocol. The Protocol does not contemplate adherence by a group of separate legal entities.
Can I use one Adherence Letter for all my firms' affiliates?
No. A separate Adherence Letter must be submitted for each legal entity adhering to the Protocol. This is to ensure that all Adherence Letters are submitted in the same form and to preserve a straightforward mechanical process of administration.
How long do I have to participate in the Revised 2005 Delphi CDS Index Protocol. Is there a deadline?
The Protocol will be open for adherence beginning on Friday, October 28 and ending on Wednesday, November 2, 2005.
Why is there a limited adherence period for the Revised 2005 Delphi CDS Index Protocol?
There is a limited adherence period to provide Adhering Parties (as well as ISDA) with a measure of certainty and finality. The limited adherence period should also encourage market participants to consider the issues addressed by the Protocol sooner rather than later, thereby assisting with the smooth and efficient functioning of the OTC derivatives markets.
How will I know who has adhered to the Revised 2005 Delphi CDS Index Protocol?
A list of Adhering Parties, updated at least twice every day during the Protocol period, is displayed on ISDA’s web site.
Can I modify the wording of the Revised 2005 Delphi CDS Index Protocol or the substantive clauses?
No. Any changes to the standardized wording set out in the Protocol or to the standard form Adherence Letter will be considered invalid and unenforceable.
Counterparties can, of course, negotiate and agree to any changes bilaterally outside the scope of the Protocol. The Protocol in no way inhibits freedom of contract whether the parties have adhered to the Protocol or not. If parties to a Covered Index Transaction do wish to vary the terms of the Protocol as they would otherwise apply, Section 5(b) of the Protocol describes how they should do so.
Can I revoke my participation in the Revised 2005 Delphi CDS Index Protocol?
Once an Adherence Letter has been accepted by ISDA, an Adhering Party is bound by all amendments elected by way of the matching procedure with other parties that have already adhered to the Protocol or, subject to the discussion below, that adhere before the end of the Adherence Period.
However, an Adhering Party may, at any time during the Adherence Period deliver to ISDA a further notice specifying an earlier cut-off date in respect of its own adherence in accordance with Section 5(c) of the Revised 2005 Delphi CDS Index Protocol. The effect of such a letter will be to withdraw adherence as of the future date specified. Although amendments already made will not be revoked, any subsequent adherence by one of the Adhering Party’s counterparties will be ineffective in respect of a Covered Index Transaction between them.
What is ISDA’s role in the Revised 2005 Delphi CDS Index Protocol?
ISDA acts, for certain purposes, as an agent for participating parties. It will receive Adherence Letters and update the web site daily during the Adherence Period. ISDA also publishes the Protocol and provides information about it to interested parties.
What will ISDA do with evidence of authority submitted to it?
ISDA will hold any evidence of authority in its files
for safekeeping. Copies of this evidence of authority will only be provided
in special circumstances, such as in litigation, when properly subpoenaed
by a court of law. Parties are encouraged to contact their counterparties
directly if they require such evidence for their files. Each Adhering
Party will provide in their Adherence Letter details of a person to contact
regarding such information.
How can I participate in the Revised 2005 Delphi CDS Index Protocol?
Market participants can participate by downloading all necessary information from ISDA’s web site and then submitting a signed Adherence Letter in the proper form (together with a conformed copy of the Adherence Letter) by email to firstname.lastname@example.org.
Are parties required to provide evidence of authority to ISDA?
No. Parties can provide evidence of authority to ISDA if they so choose, but they are not required to do so.
What do I need to do after emailing my Adherence Letter to email@example.com?
Adhering Parties will wish to monitor adherence by others and satisfy themselves as to signing authority. They may also wish to negotiate with non-adhering counterparties.
How much does adherence to the Revised 2005 Delphi CDS Index Protocol cost?
There is no charge to adhere to the Protocol.
How can I get a copy of the Revised 2005 Delphi CDS Index Protocol and other relevant information?
Copies of the Protocol, the form of Adherence Letter and information about ISDA’s role and other aspects of the Protocol are available on the Association’s web site here.