· Informational Meetings Planned · EMU Protocol a Success
· Protocol Use Grows · Protocol Draws Praise
· Accessing the Protocol via Internet


ISDA has scheduled a series of open meetings in several financial centers in Europe and North America to describe the EMU Protocol. ISDA also plans to schedule one or more meetings in Asia. The purpose of these meetings will be to inform end-users and other interested parties who may not be aware of the important benefits, time savings and cost efficiencies of the EMU Protocol. ISDA Members are also welcome to attend but the principal purpose of these sessions will be to assist ISDA Members who are trying to educate their end-user counterparties about the many benefits of the Protocol.

The dates and times of these meetings are as follows:
June 19 Trinkaus & Burkhardt
Königsallee 21-23
2:00 pm
June 24 ISDA
One New Change
2:30 pm
June 30 Morgan Stanley
1585 Broadway
New York
2:00 pm
July 7 Caisse det Depots et Consignations
Salle Corvetto
56 Rue de Lille 75007
2:30 pm
July 14 Le Royal Meridien
King Edward Hotel
37 King Street East
3:30 pm

Further details, including the location of each of these meetings, can be obtained from the ISDA New York or London office. Attendees are requested to RSVP to the ISDA offices if they plan to attend one of these sessions.
New York Office:(212) 332-1200 phone;(212) 332-1212 fax
London Office:(171) 330-3550 phone; (171) 330-3555 fax

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Following closely on the heels of the historic decision by 11 European countries to abandon their national currencies in favor of a new single European currency, the euro, ISDA launched its EMU Protocol on May 6. The Protocol was an immediate success with 43 entities adhering to it as this newsletter went to press. The EMU Protocol is an innovation and a first for an industry trade group: standardized provisions and an efficient, low-cost means to include them in existing documentation.

Unique Needs:From the beginning of the discussion of the single currency, it was clear that EMU would have major implications for the derivatives industry. ISDA formed EMU task forces in the areas of documentation, market practices, operations, legislation, tax and accounting to identify the issues of most concern to the industry. As they were identified, the need for an efficient, cost-effective mechanism to address them became apparent. Working with its European counsel, Allen & Overy, ISDA developed the protocol approach.

Innovative Process: A party, by submitting one letter to ISDA in which it adheres to the Protocol, can amend its ISDA Master Agreements with all of its counterparties who also adhere to the Protocol. ISDA, acting as agent, receives signed and conformed copies of letters from adhering parties and displays the scanned, conformed copies of the letters on its web site. Parties are then able to view the letters submitted by their counterparties.

Consensus Provisions: The ISDA task forces reached a consensus on five general issues relating to EMU, which are addressed in separate Annexes to the Protocol. The Annexes address continuity of contract, price sources, payment netting, definitions and bond options. Each Annex modifies existing ISDA documentation, and parties can specify which Annexes they wish to apply to their Master Agreements. Where two parties' letters each specify that a particular Annex is applicable, their Master Agreement is amended to include the provisions in that Annex.

Alternatives Unattractive: Other than simply leaving the issues unaddressed, the only alternative to the Protocol is the costly, time-consuming process of bilaterally negotiating amendments to existing Master Agreements. Throughout the task forces' discussions, there was unanimous support for a process that would minimize the demands on institutions adhering to the Protocol.

Who Should Use the Protocol: Any company with an active derivatives business, whether or not it is an ISDA Member, should strongly consider using the Protocol. The Protocol is open to both ISDA Members and non-Members. In addition, all parties should consider whether there are other entities, such as subsidiaries or affiliates, in their group of companies that would benefit from using the Protocol. The standard charge of $500 per legal entity is the only incremental cost for adding these entities. The EMU Protocol is open for adherence through September 30.

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The list of parties adhering to the Protocol has been growing from the day it was launched. The following is a list of the corporate groups that have signed on to the Protocol, with the number in parentheses indicating the number of affiliated companies in the corporate group that have submitted adherence letters:

Abbey National Enron (3)
Banca Commerciale Italiana GE Capital (2)
Bank of America (3) Lehman Brothers
Bankers Trust (2) Citibank (5)
Morgan Guaranty Trust Dresdner Bank
Banque Paribas Morgan Stanley
Bayerische Vereinsbank NationsBank (2)
Chase Manhattan Bank Sumitomo Bank (2)
Royal Bank of Scotland First Chicago
SBC Warburg Dillon Read Goldman Sachs (3)
Salomon Smith Barney (5) Societe Generale
Union Bank of Switzerland HSBC Midland (2)

Further details and copies of the letters from these firms can be obtained here.

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"Many trade associations sponsor master agreements. ISDA is the first to sponsor a process to facilitate the negotiation and execution of documentation."
-- Stephen Greene, Global General Counsel and Managing Director, Credit Suisse First Boston.

"The EMU Protocol reflects a major step towards legal and contractual security. It is an effective tool for every market participant trying to master ambiguous questions in connection with the emerging EMU."
-- Dr. Ulrich Parche, Head of Treasury Documentation, Bayerische Vereinsbank

"The innovative approach taken by ISDA in drafting the EMU Protocol will help to minimize legal risks by clearly identifying market practice."
-- David A. Lewis, Vice President and Assistant General Counsel, J.P. Morgan & Co.

"After six months of meetings, in-house and private practice finance lawyers from around the world have hammered out a protocol that should prevent tens of thousands of derivatives and swaps contracts having to be individually renegotiated because of the euro."
-- The Lawyer

". . . . Most of the major dealers have numbers in the estimated tens of thousands of affected contracts, which, as EMU kicks in, will become moot. These contracts can be amended quickly and easily through ISDA's documentation."
-- IFR International Financing Review

". . . . The protocol has emerged out of the need by many market participants to determine, for example, the price benchmarks to which their contracts will be referenced when the currencies in which they are denominated now are replaced by the euro."
-- The Wall Street Journal

"The International Swaps and Derivatives Association has launched an initiative to help swaps and options users pick a path through the minefield of legal uncertainties set to arise from European economic and monetary union next January . . . Bankers say the scheme . . . is the first serious attempt to seek industry-wide agreement on the many contentious issues surrounding derivatives pricing, trading and settlement in the run-up to EMU."

". . . Anyone with an ISDA master . . . can employ the protocol -- it is not limited to ISDA members."
-- Swaps Monitor

"The industry has solidly supported this innovative initiative from the start. The protocol simplifies adaptation of existing derivatives documentation to the single currency and significantly reduces the costs and labor involved."
-- Gay Evans, ISDA Chairman and Managing Director, Bankers Trust International

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The ISDA web site is an integral part of the EMU Protocol process. >From the ISDA home page (www.isda.org), anyone can access the EMU Protocol page. Visitors to the EMU Protocol page can obtain a copy of the EMU Protocol, review a description of ISDA's office procedures for handling adherence letters, access a list of frequently asked questions and answers and download copies of the opinions ISDA has obtained from English and U.S. counsel in support of the Protocol. Most importantly, a list of adhering parties and copies of their adherence letters can be accessed from the EMU Protocol page.