EU Variance Swap Protocol

On February 5, ISDA published its European Variance Swap Protocol.

The Variance Protocol will standardize treatment of variance swaps across the industry and will provide a unified approach to what constitutes a market disruption event.

“The protocol promotes efficiency and consistency of treatment across the European variance swap business and enhances operational efficiency for European variance swaps transacted by dealers and other counterparties not solely in the interdealer market,” said Robert Pickel, Executive Director and Chief Executive Officer, ISDA.

[click here for more on this story]

Distributor-Investor Exposure Draft Planned

Working jointly with four trade associations in the securities industry as the Joint Associations Committee (JAC), ISDA has established a draft set of principles on the distributor-investor relationship.

JAC’s goal is to release a public Exposure Draft in the spring. The Principles are intended to complement the Provider-Distributor Principles, published by the JAC in July 2007.

JAC also submitted a response to the EU ‘Call for Evidence on Substitute Products’, arguing that Market in Financial Instruments Directive (MiFID)’s standards provide sufficient harmonization of regulatory treatment for practical purposes, since they focus on a principles-based way distribution (of securities) rather than product prescription. Accordingly, no new legislation is warranted.

The response also stresses that, in practice, tax is a bigger driver of the ‘wrapper’ (or legal form) used than regulatory treatment. The four wrappers compared by the EU are: deposits; funds [UCITS]; life insurance; and the most widely used form notes.

[click here for more on this story]