ISDA PUBLISHES CREDIT DERIVATIVES DEFINITIONS
Provide Basic Framework for Documenting Credit Default Swaps

NEW YORK, Tuesday, July 20, 1999 - The International Swaps and Derivatives Association published today the 1999 ISDA Credit Derivatives Definitions, providing a basic framework for documenting privately negotiated credit derivative transactions.

ISDA said the definitions "are viewed as critical to the growth in demand for these types of transactions" and expected the documentation "to assist the smooth and efficient functioning of the credit derivatives market by providing a common set of terms for parties to use in preparing confirmations."

Developed by a working group of ISDA member institutions, including most of the world's leading participants in privately negotiated derivatives activity, the definitions apply to both sovereign and non-sovereign transactions. Practice notes are provided in amplification of issues related to credit events, including restructuring.

As described in the introduction to the documentation, the Definitions are intended primarily for contracts between credit default swap parties written under the ISDA master agreement. In a typical credit default swap transaction, one party sheds the risk of a loan or bond default by transferring it to another party willing to accept the possibility of such an event.

Robert Pickel, ISDA general counsel, pointed out that one benefit of a common set of definitions is that it enables parties to document transactions with far shorter confirmations. The Definitions contain a short-form confirmation model in an attached exhibit.

"More than any other ISDA documentation project, this set of definitions is viewed as critical to the growth in demand for these types of transactions," said Mr. Pickel. "We are hopeful that the inclusive approach we have taken in developing the definitions will help to achieve that outcome."

He said work is now starting on a User's Guide, scheduled for publication later this year. The guide will discuss in full the particular issues that parties should be aware of in using the Definitions and examine the definitions in their entirety. Related projects still in the planning stage include definitions for total rate of return swaps and a third-party dispute resolution mechanism for all types of credit derivatives.

The "Definitions" is listed in the ISDA Documentation section.
An order form is also available here.