ISDA has prepared this brief
summary of frequently asked questions to assist in your consideration
of the 2006 Calpine CDS Protocol (the “Calpine Protocol”).
THIS FREQUENTLY ASKED QUESTIONS DOES NOT PURPORT TO BE AND SHOULD NOT
BE CONSIDERED A GUIDE TO OR AN EXPLANATION OF ALL RELEVANT ISSUES OR CONSIDERATIONS
IN CONNECTION WITH THE CALPINE PROTOCOL. PARTIES SHOULD CONSULT WITH THEIR
LEGAL ADVISERS AND ANY OTHER ADVISER THEY DEEM APPROPRIATE PRIOR TO USING
OR ADHERING TO THE CALPINE PROTOCOL. ISDA ASSUMES NO RESPONSIBILITY FOR
ANY USE TO WHICH ANY OF ITS DOCUMENTATION OR OTHER DOCUMENTATION MAY BE
This Frequently Asked Questions webpage is divided into three sections:
(i) questions relating to the submission of Adherence Letters; (ii) questions
relating to the election of an entity not to participate in the Calpine
Protocol; and (iii) questions relating to the substance of the Calpine
Adherence Letter Submission Process
When do I need to send in my Adherence Letter?
The Calpine Protocol is open between Monday, January 9, 2006 and Thursday,
January 12, 2006. Any entity must email its Adherence Letter to ISDA by
5:00 p.m. New York Time on Thursday, January 12, 2006, or it will not
be able to participate in the Calpine Protocol.
How do I send in my Adherence Letter?
All Adherence Letters must be delivered by email to firstname.lastname@example.org.
In the email, you must submit both your conformed and
executed copies of the Adherence Letter.
The Adherence Letter(s) should be on your institution’s letterhead.
Nothing in the form Adherence Letter available on ISDA’s website
may be changed with the exception of completing the details of your institutional
name, date and signature block.
You are not required to send your original Adherence Letter(s) by mail
What is a conformed copy?
A conformed copy of the Adherence Letter means that the name of the authorized
signatory (for example, Patricia Smith) is typed rather than having Patricia
Smith’s actual signature on the letter. ISDA only posts on its website
the conformed copy of all Adherence Letters.
You must also submit an executed, or signed, copy of the Adherence Letter
in addition to the conformed copy of the Adherence Letter. ISDA keeps
the executed copy of the Adherence Letter for its files and does not share
the executed copy with anyone else.
Who is an authorized signatory?
An authorized signatory to the Adherence Letter is an individual who has
the legal authority to bind the adhering institution.
What if I am an investment or asset manager – how do I complete
the signature block?
If you are an investment or asset manager and act on behalf of multiple
funds, you must indicate the following in the signature block: “Investment/Asset
Manager, acting on behalf of the funds and accounts listed in the relevant
Master Agreement between it and another Adhering Party”. A separate
Adherence Letter for each fund or account does not need to be submitted
to ISDA. Further, no specific names of clients of the investment/asset
manager will be publicly disclosed on the ISDA website in connection with
the Calpine Protocol.
However, in order for Market Orders to be calculated by Participating
Bidders, each such investment/asset manager is required to provide a list
of all funds and accounts that it acts on behalf of to each Participating
Bidder that has (or whose affiliate has) entered into a Master Agreement
with any of those funds or accounts. As provided in paragraph (1) of the
Auction Methodology set out in Exhibit 3 of the Calpine Protocol, on the
Business Day prior to the Auction Date, the Administrators (Markit and
Creditex) will publish a list of the Participating Bidders on their respective
websites. In addition, contact details will be available for the Participating
Bidders through their Adherence Letters on the ISDA website.
Can I change the text of the Adherence Letter?
No. The Adherence Letter must be in the same format as the
form letter published in the 2006 Calpine CDS Protocol.
You may obtain a copy of the form Adherence Letter by visiting the ISDA
and clicking on “2006 Calpine CDS Protocol” and then clicking
on “Form of Adherence Letter”.
Does it cost any money to adhere to the Calpine Protocol?
Entities Electing Not to Adhere to the Calpine Protocol
What happens if my institution or fund does not adhere to the Calpine
If your institution or fund elects not to participate in the Calpine Protocol,
then you must bilaterally settle each of your trade(s) with each of your
counterparties as such trade(s) relate to Calpine Corporation. You will
not be able to take advantage of the auction mechanic and should contact
your counterparty or counterparties immediately if you do not plan to
participate in the Calpine Protocol.
Details relating to the Calpine Protocol
What changes were made to the Protocol since the draft version posted
on ISDA’s website on December 30, 2005?
The final version of the Calpine Protocol contains the following changes
from the draft version posted on ISDA’s website on December 30,
What is a single name trade?
- In response to suggestions from end users, the ability of Participating
Bidders to change their Market Orders in a Subsequent Auction has been
limited so that a Participating Bidder may only increase or decrease
its Subsequent Market Order by up to 50% of its original Market Order.
In a further change from the Revised 2005 Delphi CDS Index Protocol,
all Market Order information will be published by the Administrator
on the date of the auction.
- In response to end-user feedback, Crossing and Touching Markets will
no longer trade with one another, but instead will be matched against
any Open Interest in order to provide additional liquidity. In the previous
draft of the Calpine Protocol, as in the Revised 2005 Delphi CDS Index
Protocol, any Inside Market Bids submitted by Participating Bidders
that crossed or touched Inside Market Offers traded with each other
before the Open Interest was matched against the remaining unfilled
Bids and Offers. This arrangement has been modified to preserve maximum
liquidity to fill the Open Interest. Instead of trading with each other,
Participating Bidders whose Inside Market Bids and Offers cross or touch
will (a) have their Inside Market Bids and Offers matched against the
Open Interest, (b) enter into trades at the Final Price to the extent
such Bids or Offers are matched against the Open Interest and (c) make
Adjustment Payments to one another in amounts calculated to replicate
the economic impact of trades at the midpoint between such Tradeable
- An additional provision was also added to ensure that if, pursuant
to the regular operation of the auction, the Final Price would be higher
than the Inside Market Midpoint (in the case of an Open Interest on
the offer side) or lower than the Inside Market Midpoint (in the case
of an Open Interest on the bid side), the Final Price would be deemed
to be equal to the Inside Market Midpoint. In all likelihood, this provision
will not be relevant unless the Open Interest is relatively small.
A single name trade refers to a trade where there is a single Reference
Entity, such as Calpine Corporation. CDX-Dow Jones North America Index trades,
on the other hand, are trades linked to multiple Reference Entities through
a credit default swap.
Does adhering to the Calpine Protocol affect my single name trades?
Single name trades will not be part of the auction process provided for
by the Calpine Protocol. Thus, single name trades on Calpine Corporation
remain subject to the physical settlement procedures in those trades’
However, if you adhere to the Calpine Protocol, you are agreeing that
only the 6% Contingent Convertible Notes due 2014 are deemed to be Deliverable
Obligations for single name trades, while the 7.75% Contingent Convertible
Notes due 2015 will deemed not to be Deliverable Obligations for single
Who runs the auction?
The auction will be administered by Creditex and Markit and not by ISDA.
When is the auction?
The auction is scheduled for 10:00 a.m. New York Time on Tuesday, January
17, 2006. Details of the auction results will be posted on the Creditex
and Markit’s websites (www.creditex.com
When is the Cash Settlement Date?
The Cash Settlement Date is expected to be Tuesday, January 31, 2006.
How are accruals calculated?
In connection with the Calpine Protocol, the Event Determination Date
is December 21, 2005. Calculations on accruals should be for two days
- December 20 and 21, 2005.
Is a rebate necessary on the reduced notional amount?
No. The rebate concept was used in another protocol (Collins & Aikman
in May 2005) as in that situation, settlement occurred shortly before
a Fixed Rate Payer Payment Date. That condition does not exist in connection
with the Calpine Protocol.