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| ISDA Novation Protocol offers parties
to the various Master Agreements published by ISDA an efficient means
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 ISDA Novation Protocol) may be obtained. ISDA Novation 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 transfer must be requested and provided using
one of the specified electronic means. ISDA Novation Protocol clarifies that the effectiveness
of the transfer between Transferor and Transferee is conditioned solely
on receipt of the consent of the Remaining Party. In addition, ISDA Novation Protocol 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 the Remaining Party withholds
its consent, the Transferor and the Transferee will instead book a new
trade between them. Finally, parties who adhere to the protocol commit
to exchange a novation confirmation confirming the details of the novated
trade.
The goal of ISDA Novation Protocol is to assist in remedying backlogs in confirmations due to novated trades. Difficulties in novations processing have been identified as a major cause for outstanding confirmations. Click here for a brief explanation of differences between ISDA Novation Protocol and the 2005 Novation Protocol. |