For Immediate Release Wednesday, February 1, 2006
For More Information, Please Contact:
Louise Marshall, ISDA New York, 212-901-6000, lmarshall@isda.org
ISDA Opens ‘Evergreen’ Novation Protocol:
Enables New Entities to Expedite Assignment Process
The ISDA Novation Protocol II (‘NPII’) is the successor to ISDA’s highly successful 2005 Novation Protocol, launched in September last year to expedite the trade assignment process for privately negotiated derivatives. Like its predecessor NP II facilitates transfer of an existing trade to a third party. NP II is being opened to enable new entities to the CDS and rates markets to benefit from the same operative novation provisions offered in the 2005 Novation Protocol. NPII is a free-standing protocol intended for parties that did not adhere to the 2005 Novations Protocol and those that wish to do novations business with these parties. The 2005 Novations Protocol continues to operate without amendment
NP II addresses directly the potential for backlogs and uncertainty associated with the transfer of a party’s position in a privately negotiated derivatives transaction. In line with the increasing adoption of technological solutions to expedite and enhance the confirmation process, the protocol streamlines the process of transferring trades to same-day execution. Under the terms of the ISDA Master Agreement, the prior written consent of the remaining party is required when its counterparty in a trade wishes to ‘novate’ or ‘assign’ (i.e.: transfer) its position in a trade to a third party. The protocol enables the parties to modify this requirement to a simpler and more streamlined exchange of electronic communications among the parties involved. Like its predecessor, the protocol will apply to credit and interest rate derivatives.
ISDA is the global trade association representing leading participants in the privately negotiated derivatives industry. ISDA was chartered in 1985, and today has more than 675 member institutions from 50 countries on six continents. These members include most of the world's major institutions that deal in privately negotiated derivatives, as well as many of the businesses, governmental entities and other end users that rely on over-the-counter derivatives to manage efficiently the financial market risks inherent in their core economic activities. Information about ISDA and its activities is available on the Association's web site: www.isda.org.