ISDA Chief Executive Officer Scott O'Malia offers informal comments on important OTC derivatives issues in derivatiViews, reflecting ISDA's long-held commitment to making the market safer and more efficient.

It’s well understood that people should hope for the best but be prepared for the worst. When it comes to the derivatives market, the ISDA Master Agreement does just that. Many of its most important clauses set out the steps firms should take if the worst does occur and a trading counterparty fails. These provisions have proved to be robust over three decades, but practical challenges can still arise, particularly when it comes to delivering critical notices to counterparties. ISDA has been working with members to consider possible solutions – and we think technology could be the answer.

For example, if a firm fails to pay an amount due on a derivatives trade, the ISDA Master Agreement states that the other party can deliver a notice of that non-payment. That triggers the start of a short grace period, and if the failing firm has not made the payment during that time, then the non-failing party can choose to terminate all outstanding transactions by delivering a second notice specifying the early termination date.

The ISDA Master Agreement stipulates that these notices must be delivered by certain prescribed methods, using the company address details listed in the agreement. This gives both parties certainty on how the termination process works. But questions can arise if the company has moved and the ISDA Master Agreement hasn’t been updated with the new details.

A firm might try to resolve this by delivering one copy of the notices to the address listed in the ISDA Master Agreement, even though it knows its counterparty is no longer there, and another to the new address, even though it’s not listed in the agreement.

This may help to mitigate one set of issues, but it can create others. Both parties need certainty on the time a notice was effectively delivered, as that determines the start and end of any grace period and the earliest point a portfolio of trades could be terminated and valued. Uncertainty over which notice was delivered first and at what time the termination was effective could have significant economic consequences – and might ultimately end up in the courts.

The pandemic caused other challenges. With so many offices located in areas subject to lockdown requirements, it became difficult for firms to deliver notices, as well as know if they had received any. Russia’s invasion of Ukraine has led to similar issues – it may be challenging to deliver notices to the listed address if it’s in a hostile environment.

ISDA and its members have considered a variety of options to address these issues, and we recently published provisions allowing use of email, but many of the potential challenges remain – it may be difficult to prove the time and date of receipt, and the email address details may not be kept up to date.

We’re now exploring an alternative solution – an industry notices hub. This would act as a central platform for firms to load notices, with automatic alerts sent to the receiving entity. Parties would agree by means of a protocol that uploading a notice to the hub would represent effective delivery. Multiple designated people at each firm would be able to access the hub from anywhere in the world, regardless of the situation at its physical location. The hub could also help parties keep their addresses and fax numbers in their ISDA Master Agreements up to date through a bulk update facility. That would help if delivery via the hub did not work for any reason.

This idea is still in the early stages – there are some legal and technological issues that need to be considered – but we think there’s an opportunity here, so we’re in the process of fleshing out the details. The ISDA Master Agreement has served the market well for over 35 years by spelling out the rights and obligations of both parties following a termination event. We now have the potential to leverage technology to tackle some of the operational issues that have emerged, bringing greater efficiency and certainty to the market.

If you would like to join a working group exploring this topic or have any questions, please email

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