The purpose of the ISDA OTC Derivatives Interest Compensation Claims Suggested Operational Practices (SOP) is to outline the guidelines for the submission and processing of interest compensation claims arising from payments relating to OTC Derivatives transactions confirmed under the terms of the 2002 ISDA Master Agreement (or the 1992 ISDA Master Agreement).
The SOP describe the industry suggested guidelines for compensation and claims arising out of failed settlement of coupon and fee payments on OTC derivative transactions. For claims arising out of parties’ failure to meet their obligations with respect to the movement of collateral (cash or securities), please refer to the 2021 Suggested Operational Practices for the OTC Derivatives Collateral Process.
The SOP address the procedure firms may follow to initiate, submit and process compensation claims. This document also provides an overview of certain factors that a party may wish to consider when determining the amount of a claim. However, this document does not (nor does it intend to) prescribe or provide guidance on how the compensation rate or the value of any claim may be determined.
This document is an update to the OTC Derivatives Interest Compensation Claims Best Practice guidelines that were published by ISDA on October 26th, 2010.