Frequently Asked Questions

Please note that capitalized terms used in this FAQ page are as defined in the 2005 Novation Protocol.

This FAQ page may be updated over time. (The last update was on September 12, 2005.)

This FAQ is divided into four main sections:

Introduction and Overview of 2005 Novation Protocol

What is the purpose of the 2005 Novation Protocol?

The purpose of the Protocol is to offer parties to the various Master Agreements published by ISDA an opportunity to agree to a uniform process by which consents to transfer of interests in Credit Derivative Transactions and Interest Rate Transactions (Covered Transactions as defined in the Protocol) are obtained. The Protocol sets out a process by which the Transferor, the Transferee and the Remaining Party will communicate prior to or concurrent with a transfer by novation of a Covered Transaction and anticipates that the consent to transfer must be requested and provided using one of the specified electronic means such as email, electronic messaging systems or electronic communication systems. The Protocol makes clear that the effectiveness of the transfer between Transferor and Transferee is conditioned solely on receipt of the consent of the Remaining Party, and provides that if by the end of the day on which the transfer is agreed the consent of the Remaining Party is not received or if the Remaining Party withholds its consent the Transferor and the Transferee will instead book a new trade between them. The Covered Transaction which was the subject of the proposed transfer by novation will remain in place between the Remaining Party and the Transferor. The Protocol also provides that the parties will follow up the transfer and consent with appropriate novation documentation as soon as practicable after the consent of the Remaining Party is obtained.

What is the Implementation Date?

The Implementation Date is the date on which parties who adhere to the protocol agree to implement the procedures regarding novations set forth in Annex 1 to the Protocol. Parties who adhere to the protocol on or prior to October 24, 2005, will implement those procedures with respect to other adhering parties from and after October 24. Parties who adhere to the protocol after October 24, 2005, will implement those procedures with respect to other adhering parties when adherence of both parties to the Protocol is effective pursuant to Section 2(c) of the Protocol.

What is the purpose of the form of Standard Email/Bloomberg Message attached as Exhibit A to the 2005 Novation Protocol?

In order to facilitate the efficient processing of transfer requests, parties that adhere to the protocol agree to use a standard form of electronic request to obtain the consent of the Remaining Party. It is also required that, the proposed Transferee should be copied on both the message from the Transferor requesting consent and on the return response from the Remaining Party.

Why do the terms of the Protocol apply only to Credit Derivative Transactions and Interest Rate Transactions?

The experience of market participants is that issues with novations are most acute with respect to Credit Derivative Transactions and Interest Rate Transactions. Accordingly, ISDA decided that the Protocol should apply to these types of transactions only. ISDA will consider a subsequent protocol that would expand the applicability of the terms of the 2005 Novation Protocol to all transactions subject to an ISDA Master Agreement.

How does the 2005 Novation 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. 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 Master Agreement 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 The Adherence Letter allows the Adhering Party to specify that Annex 1 to the 2005 Novation Protocol, containing standardized amendments to its Master Agreement, will apply with other Adhering Parties.

By submitting the Adherence Letter, the Adhering Party agrees that the provisions of Annex 1 will apply in respect of Covered 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 (, along with a form of the Adherence Letter. For further detail on the adherence process, please see the Protocol Mechanics section of this FAQ.

Why should I consider participating in the 2005 Novation Protocol?

The Protocol has a number of significant advantages. In summary:

  • The procedures contemplated by Annex 1 are standardized and the result of widespread industry consultation.
  • The multilateral procedure saves time and expense that would otherwise be spent on bilateral negotiations with individual counterparties.

For whom is the 2005 Novation 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, hedge fund, investment firm, insurance company, pension fund and other fund entity, partnership and private individual that has entered into Covered Transactions governed by an ISDA Master Agreement. 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 2005 Novation Protocol?

No. The Protocol is open equally to members of ISDA and non-members of ISDA.

Is the 2005 Novation Protocol in any way related to previous ISDA Protocols (e.g., the EMU Protocol or the 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 2005 Novation Protocol?

The issues relating to Covered Transactions could be addressed by way of individually negotiated agreements 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.

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2005 Novation Protocol Mechanics


Is ISDA providing accompanying legal opinions on the 2005 Novation Protocol?

Yes. ISDA's English and New York counsel, Allen & Overy, has prepared legal opinions on the effectiveness of the Protocol arrangement under New York and English law. Copies of these opinions are available here.

How can I check the signing authority of other 2005 Novation 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 Master Agreement pursuant to which it has entered into Covered Transactions 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 2005 Novation Protocol. Is there a deadline?

The Protocol will be open for adherence between Monday, September 12 and Monday, October 31, 2005. Please note that pursuant to the terms of the Protocol, the original deadline of October 31, 2005 was extended to November 30, 2005.

Why is there a limited adherence period for the 2005 Novation 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 2005 Novation Protocol?

A list of Adhering Parties, updated at least once every day during the Protocol period, is displayed on ISDA's web site.

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Modification and Amending

Can I modify the wording of the 2005 Novation 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 Transaction wish to vary the terms of the Protocol, Section 5(c) of the Protocol describes how they should do so.


Can I revoke my participation in the 2005 Novation Protocol?

No. Unlike previous ISDA protocols where a limited right to revoke was provided, an Adhering Party may not revoke its participation in the Protocol. Once an Adherence Letter is submitted, it will be considered to be an offer to amend its Master Agreements with other Adhering Parties for the entire term of the Protocol remaining from the date of such adherence.

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ISDA’s Role

What is ISDA's role in the 2005 Novation 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 to Participate

How can I participate in the 2005 Novation 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) to ISDA by email at

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 sending in my Adherence Letter?

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 2005 Novation Protocol cost?

There is no charge to adhere to the Protocol.

How can I get a copy of the 2005 Novation 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.

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