ISDA has launched a protocol to allow market participants to amend their legacy credit derivatives transactions to incorporate the Narrowly Tailored Credit Event Supplement to the 2014 ISDA Credit Derivatives Definitions.

Narrowly tailored credit events (NTCEs) are arrangements with corporations that cause a credit event leading to settlement of credit default swap (CDS) contracts while minimizing the impact on the corporation. ISDA published a statement from its Board of Directors in April 2018 noting concerns with the impact of such events on the efficiency, reliability and fairness of the overall CDS market.

The supplement amends the definitions of ‘outstanding principal balance’ and ‘failure to pay’ in the 2014 Definitions, and adds a guidance memo on the interpretation of the failure to pay definition.

The ISDA 2019 NTCE Protocol is relevant to all market participants that trade over-the-counter non-cleared credit derivatives that incorporate the 2014 ISDA Credit Derivatives Definitions. For those firms that solely have cleared trades, adherence to the protocol is not required.

The anticipated implementation date of the protocol is January 13, 2020. Central counterparties will also incorporate the supplement into cleared trades on the implementation date.

**IMPORTANT UPDATE on the ISDA 2019 NTCE Protocol:** The protocol reopened on Monday, January 6, 2020 and will remain open until 12 noon New York time on Friday, January 24, 2020 to allow new market participants time to adhere to the Protocol and for any adherence errors to be corrected. We note that entities that have already adhered do not need to do anything further, as your adherence remains valid. Please note that the anticipated Implementation Date is January 27, 2020.

You can access the protocol here.

A webinar about the protocol is available here.