Economic Sanctions Programs and Derivatives

ISDA published its whitepaper (available here) in 2019 to inform market participants and regulators of the unique challenges that economic sanctions programs could present to over-the-counter (OTC) derivatives markets.  Since that time, there has been a significant increase in the use of economic sanctions in furtherance of foreign policy goals in the US, the EU, the UK and beyond, which have raised issues for derivatives users.  These measures include the US Chinese Military company sanctions of 2020 and 2021 as well as the sanctions programs implemented across the globe in response to Russia’s invasion and ongoing occupation of Ukrainian territory from February 2022.  This paper examines the impact that sanctions programs have had on derivatives transactions since the publication of the 2019 whitepaper, considering the novel issues market participants have faced.  It also assesses if sanctions programs have been implemented in a manner broadly consistent with principles set forth in the whitepaper, and proposes where additional action or guidance from sanctions authorities would further reduce uncertainty around the scope of the sanctions measures and the related relief and further reduce the potential adverse effects on non-sanctioned entities.

Global Trading in INR Derivatives

Global trading in derivatives involving the Indian rupee (INR) has expanded significantly over the past decade, reflecting the currency’s growing role in international hedging and trading activity. According to the Bank for International Settlements (BIS) Triennial Central Bank Survey, the...

Response to FCA on Commodity Derivatives Clearing

On April 9, ISDA, the Commodity Markets Council Europe (CMCE), Energy Traders Europe (ETE) and FIA jointly responded to Chapter 7 of the UK Financial Conduct Authority’s (FCA) Quarterly Consultation CP26/8 on increasing the clearing threshold for commodity derivatives under the UK...

Response on EC’s SFR Proposal

On April 9, ISDA published technical comments on the European Commission’s (EC) proposed Settlement Finality Regulation (SFR) as it applies to designated EU systems and registered third-country systems. One significant concern is that the scope of insolvency protections provided to...