The terms of the Protocol and the specific amendments effected by each Annex are discussed in the Commentary to the 2001 Euro Protocol. To address questions regarding the substantive provisions of the Protocol or any of the Annexes, parties are directed to review the Commentary. Questions regarding the substance of the Protocol and the Annexes will not be dealt with in the FAQ.

FREQUENTLY ASKED QUESTIONS

THIS FAQ DOES NOT PURPORT AND SHOULD NOT BE CONSIDERED TO BE A GUIDE TO OR EXPLANATION OF ALL RELEVANT ISSUES OR CONSIDERATIONS IN CONNECTION WITH THE PROTOCOL. PARTIES SHOULD THEREFORE CONSULT WITH THEIR LEGAL ADVISERS AND ANY OTHER ADVISER THEY DEEM APPROPRIATE PRIOR TO USING THE PROTOCOL. ISDA ASSUMES NO RESPONSIBILITY FOR ANY USE TO WHICH ANY OF ITS DOCUMENTATION OR ANY DEFINITION OR PROVISION CONTAINED THEREIN MAY BE PUT.

Please note that the FAQ will be updated over time. Last updated September 24, 2001.

The terms of the Protocol and the specific amendments effected by each Annex are discussed in the Commentary to the 2001 Euro Protocol. To address questions regarding the substantive provisions of the Protocol or any of the Annexes, parties are directed to review the Commentary. Questions regarding the substance of the Protocol and the Annexes will not be dealt with in the FAQ.

Introduction and Overview of the Protocol

Why is the 2001 Euro Protocol necessary?

The Annexes 1 to 4 of the 2001 Euro Protocol were the product of member input as a result of the replacement of certain European National Currencies by the euro. These Annexes provide parties with the opportunity to finalize details relating to payments, rate fixings, redenomination of notional amounts, accounts for payments and payment netting.

For an institution to amend all ISDA Master Agreements to incorporate these standard amendments would involve significant time and expense if undertaken through bilateral negotiation between all counterparties. ISDA is therefore sponsoring a multilateral amendment mechanism - the 2001 Euro Protocol.

Parties that have significant numbers of ISDA Master Agreements outstanding with counterparties may find the Protocol a useful means of affecting amendments to those existing arrangements.

How does the 2001 Euro Protocol work?

The Protocol reflects an innovative procedure that allows for the amendment of the ISDA Master Agreement. The Protocol builds on the simple principle that parties to such agreements may make an offer to one or more of their counterparties to amend any outstanding Master Agreements.

A bank, corporation or other derivative user would indicate its participation in the Protocol arrangement by sending an Adherence Letter (a signed original, together with a conformed copy) to ISDA's office in London or New York and by making provisions for payment of the adherence fee. This allows the firm to specify which of the four Annexes it wishes to make applicable, and in certain cases, to what extent it wishes to do so, with other Protocol adherents. By submitting the Adherence Letter, the firm agrees that each outstanding Master Agreement is amended in all areas where an election made in its Adherence Letter matches that made in an Adherence Letter submitted by one of its counterparties, as explained further in the discussion of Protocol Mechanics.

Names of Adhering Parties are listed on ISDA's web site, where there is access to scanned copies of Adherence Letters. For security reasons, only the conformed copies of Adherence Letters will be displayed. Protocol adherents therefore simply monitor the web site to determine which of their counterparties have adhered, the date of their adherence and the elections which they have made.

Annexes 1 to 4 of the Protocol will be open for adherence between September 24, 2001 and November 30, 2001 as explained in the Commentary to the 2001 Euro Protocol.

Protocol adherents may elect to make some or all of the Annexes applicable and may send subsequent Adherence Letters covering new Annexes and may specify a cut-off date in respect of their own adherence by submitting a Revocation Notice. Protocol adherents may not revoke agreement with matches once they are made and may not vary the standardized terms of the Annexes (except of course through direct bilateral negotiation and agreement).

Whom is the 2001 Euro Protocol designed for?

The Protocol is designed for all types of users of derivatives: banks, corporations, governments, investment firms, insurance companies, pension funds, and other firms with ISDA Master Agreements in place. The Protocol saves your firm money by cutting down on the time and expense involved in negotiating and agreeing to contractual changes bilaterally with all your counterparties. It provides an easy way to monitor changes through the web site.

Does my firm need to do anything after sending in the Adherence Letter?

Yes! Firms still need to monitor adherence, match Adherence Letters, satisfy themselves as to signing authority and negotiate with partly matched and non-adhering counterparties where necessary. However, even with these steps and procedures, the Protocol provides for significant cost savings over bilateral negotiation.

Top of Page

Protocol Mechanics

Does my firm have to accept all of the Annexes to the Protocol?

Firms do not have to accept all of the Annexes to the Protocol and the Adherence Letter allows adherents to elect to make one or more Annexes "Applicable" or "Not Applicable".

How are Adherence Letters matched?

In its Adherence Letter, a party must indicate the Annexes to which it is adhering by circling the word "Applicable" or "Not Applicable", or by including only the appropriate election.

ISDA Master Agreements between Adhering Parties are amended by the amendments in a particular Annex when both parties have adhered to the Protocol and have indicated that the relevant Annex is "Applicable" or "Not Applicable". Where one party has indicated in its Adherence Letter than a particular Annex is "Applicable" and its counterparty has indicated that the same Annex is "Not Applicable", the Annex will be deemed to be not applicable as between them and will not amend the ISDA Master Agreement between them.

Why is there a limited adherence period for the Protocol?

A limited adherence period is provided so that parties who need to enter into bilateral negotiations with a counterparty will be able to identify them and agree to any terms not agreed to through the Protocol process.

Also, the Annexes are subject to an inherent deadline. In the case of most of the Annexes, the deadline corresponds with the January 1, 2002 date for the disappearance of the national currencies. For Annex 1, however, the deadline arises out of certain problematic dates in the last weeks of December, 2001. In order to ensure that changes effected by the Annexes are in place prior to these deadlines, to give parties sufficient time to determine whether their counterparties have adhered to any of these Annexes and to put in place the relevant operational procedures, an end to the adherence period exists in respect of adherence to the Annexes which predates these deadlines. Those who wish to take advantage of the Protocol process to amend their ISDA Master Agreements on the terms of any of the Euro Annexes will therefore need to adhere to the Protocol in respect to the Euro Annexes on or before November 30, 2001.

What forms of ISDA Master Agreement are covered by this Protocol?

In regard to Annexes 1 and 2, all 1992 ISDA Master Agreements (Multicurrency - Cross Border), 1992 ISDA Master Agreements (Local Currency - Single Jurisdiction), 1987 ISDA Interest Rate and Currency Exchange Agreements and 1987 ISDA Interest Rate Swap Agreements between two adherents will be amended to the extent Adherence Letters match, as described above.

In regard to Annexes 3 and 4, all 1992 ISDA Master Agreements (Multicurrency - Cross Border) and 1987 ISDA Interest Rate and Currency Exchange Agreements between two adherents will be amended to the extent Adherence Letters match, as described above. The amendments in Annexes 3 and 4 deal with Agreements under which payments may be made in multiple currencies are not then relevant to the 1992 ISDA Master Agreement (Local Currency - Single Jurisdiction) or the 1987 ISDA Interest Rate Swap Agreement.

What documentation should be used if a party wants to amend its ISDA Master Agreements bilaterally?

ISDA is in the process of developing Forms of Amendment to allow for the incorporation of the Protocol Annexes bilaterally. When available, they will be posted on ISDA's web site.

Will the Protocol allow my firm to amend ISDA Master Agreements entered into after the date of adherence?

Because adherence to the Protocol by two parties to an ISDA Master Agreement amends the ISDA Master Agreement between them, it follows that the Protocol will only be effective in respect of ISDA Master Agreements actually existing at the time the second of the parties adheres. It would not be possible to amend something which does not currently exist. However, the Annexes to the Protocol may be used in connection with a pending or unexecuted ISDA Master Agreement by making express reference to the Annexes to the Protocol in such ISDA Master Agreement.

Will the Protocol be effective in respect of Transactions entered into after the date of adherence?

As noted above, the Protocol procedure itself is only relevant for ISDA Master Agreements existing at the time of adherence. However, where new Transactions are entered into after the date of adherence pursuant to an ISDA Master Agreement existing at the date of adherence, those Transactions will be subject to the amendment provisions contained in the Annexes to the Protocol. This is, of course, subject to any limitations contained in the Annexes.

Can a firm modify the wording of the Protocol or any of the Annexes to the Protocol?

No. Any changes to the standardized wording set out in the Protocol, the Annexes or the Adherence Letter will be considered invalid. Counterparties can, of course, negotiate and agree to any changes bilaterally outside the scope of the Protocol. The Protocol in no way inhibits this freedom of contract.

Can my firm revoke participation in the Protocol?

Once an Adherence Letter has been accepted by ISDA, a firm is bound by all Annexes which it made "Applicable" and which are matched with the Adherence Letters of its counterparties which similarly adhered to those Annexes of the Protocol before November 30, 2001.

However, a firm may send a further notice to ISDA, referred to as a Revocation Notice, specifying an earlier cut off date (prior to November 30, 2001) in respect of their own adherence. The effect of such a Revocation Notice will be to withdraw adherence as of the future date specified. Although amendments already made will not be revoked, any subsequent adherence by one of the firm's counterparties will be ineffective in respect of an ISDA Master Agreement between them.

Is ISDA providing accompanying legal opinions on the Protocol?

ISDA's London and New York counsel have prepared legal opinions on the enforceability of the Protocol itself under English and New York law. Copies of these opinions are available here.

How can I check the signing authority of other Protocol adherents?

For security reasons, Adherence Letters on the ISDA web site will have signatures conformed into type and signing authority information, if received by ISDA, will not be displayed. Any supporting documents delivered to ISDA will not be made available (except in special cases). However, should firms wish to take steps to ascertain signing authority, the posted Adherence Letter will include a contact name and details.

Can my firm get copies of supporting documents or hard copies of Adherence Letters?

Should firms wish to obtain hard copies, each Adherence Letter posted on ISDA's web site will include a contact name and details of the person who can send them these documents. In special circumstances only (e.g., litigation), ISDA can provide certified copies of the documents held.

Can I use one Adherence Letter for all my firms' affiliates?

No. A separate Adherence Letter is required for each legal entity adhering to the Protocol. This is to ensure that all Adherence Letters are submitted in the same form and to preserve a straightforward, mechanical process of administration.

Top of Page

ISDA's Role and How to Participate

What is ISDA's role in the Protocol?

ISDA acts as an agent for participating firms. It will receive Adherence Letters, update the web site and scan conformed Adherence Letters. ISDA also published the Protocol and provides information about the arrangement.

How can my firm participate in the Protocol?

Firms can participate by downloading all necessary information from the ISDA web site and then submitting a signed Adherence Letter, as well as a conformed copy of that Adherence Letter, accompanied by the appropriate payment, to either ISDA's London or New York office.

Must my firm be a member of ISDA to participate in the Protocol?

No. Participation in the Protocol process is available to non-member firms as well as member firms so long as the requirements for participation are met, being the submission to ISDA of a signed Adherence Letter, a conformed copy of that Adherence Letter and appropriate payment.

Are parties required to provide evidence of signing authority to ISDA?

No. Parties can provide evidence of authority to ISDA if they choose, but are not required to do so.

What will ISDA do with any evidence of authority submitted to it?

ISDA will hold any evidence of authority in its files for safekeeping. Copies of this evidence of authority will only be provided in special circumstances, such as litigation. Parties are encouraged to contact their counterparties directly if they require such evidence for their files. Each Adhering Party will provide in their Adherence Letter details of a person to contact regarding such information.

How much does adherence to the Protocol cost?

There is a flat charge of US$1000 for adherence, regardless of the number of Annexes adhered to by a parties or the number of Adherence Letters sent by a party. The payment must, however, be submitted with a party's first Adherence Letter for that Adherence Letter to be effective. Each legal entity requires a separate Adherence Letter and fee payment. Affiliates or subsidiaries cannot be dealt with in the same Adherence Letter and must each submit the fee for their Adherence Letter to be effective.

Why does the cost of the Protocol differ from the cost for the EMU Protocol?

The resources required by ISDA to develop the Protocol and Annexes, obtain opinions of outside counsel, monitor the receipt of Adherence Letters and Revocation Notices and update its web site regularly are significant. As a result, ISDA has determined that the flat charge of US$1000 is appropriate.

How can I get a copy of the 2001 Euro Protocol or Commentary?

Copies of the Protocol, the Adherence Letter, the Commentary relating to the Protocol and information about ISDA's role and other aspects of the Protocol are available on our web site here.

Top of Page