ISDA has prepared this brief summary of frequently
asked questions to assist in your consideration of the ISDA European Variance
Swap Protocol (the "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 PROTOCOL. PARTIES SHOULD CONSULT
WITH THEIR LEGAL ADVISERS AND ANY OTHER ADVISER THEY DEEM APPROPRIATE
PRIOR TO USING OR ADHERING TO THE PROTOCOL. ISDA ASSUMES NO RESPONSIBILITY
FOR ANY USE TO WHICH ANY OF ITS DOCUMENTATION OR OTHER DOCUMENTATION MAY
Adherence Letter Submission Process
When do I need to send in my Adherence Letter?
The ISDA European Variance Swap Protocol is open between 9:00 a.m. New
York Time on Tuesday February 5, 2008 and 5:00 p.m. New York Time on February
29, 2008. THE CUT-OFF DATE FOR ADHERENCE TO THIS
PROTOCOL HAS BEEN EXTENDED from February 29, 2008 to March 21, 2008.
Any entity must email its Adherence Letter to ISDA by 5:00 p.m. New York
Time on March 21, 2008, or it will not be able to participate in the ISDA
European Variance Swap 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
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 ISDA European Variance
Swap Protocol. You may obtain a copy of the form Adherence
Letter by visiting the ISDA website, www.isda.org
and clicking on "ISDA European Variance Swap Protocol" and then
clicking on "Form of Adherence Letter".
Limited Right of Revocation
Can I revoke my participation in ISDA European Variance Swap
How do parties utilize the Variance Protocol to amend and
update Outstanding Transactions?
Does it cost any money to adhere to the Protocol?
- By entering into the ISDA Variance Swap Protocol (the Variance
Protocol), Outstanding Transactions under the Interdealer MCA
and the March 2007 MCA would be amended and restated as Transactions
under the Revised 2007 MCA without the need for a side agreement (there
would be language to preserve choices made by parties in the Outstanding
Transactions as to choice of Calculation Agent and Determining Party,
and there would be language to make clear that observations before the
Implementation Date would not be affected by this amendment and restatement).
Parties would, however, be free to use a side agreement, if they wished,
in relation to certain Outstanding Transactions under the Interdealer
MCA in order to preserve more customised amendments. However,
in contrast to the Equity Protocol, the use of a side agreement would
not be a condition to the effectiveness of the Variance Protocol.
- For those transactions not identified in (1), namely, Outstanding
Transactions done under Non-ISDA Documentation, by entering into a Side
Agreement with each other relevant market participant who has adhered
to the Variance Protocol and with whom it has such Outstanding Transactions.
The use of this Side Agreement would be a pre-condition to the effectiveness
of the Variance Protocol in relation to these Outstanding Transactions,
although the Implementation Date would remain the same (so that, where
the Side Agreement is entered into after the Implementation Date, the
effectiveness of the Variance Protocol would be retroactive to the Implementation
Date). The Side Agreement would be composed of two parts, namely:
(a)a grid listing all the Outstanding Transactions in this category
in the lefthand column with the remaining column headings corresponding
to the fields in the Transaction Supplement under the Revised 2007
MCA (likely with separate grids for index trades and share trades);
(b)a further section indicating which bilaterally negotiated provisions
in each such Outstanding Transaction would be preserved (whether in
their original form or in a modified form) and not conformed to the
Revised 2007 MCA (for example, as to the calculation agent function
and so on).
- In the alternative, and particularly useful for transactions discussed
in (2), parties could also achieve the amendment entirely by side letter
(that is, not entering into the Variance Protocol in relation to such
transactions), by utilizing the form of amendment published by ISDA,
with the same form of Annex as the Annex attached to the Variance Protocol,
in relation to transactions under (1), or form of grid and further section,
as described in (2), in relation to transactions under (2).