ISDA has published a new interactive digital framework that market participants can use to help prepare for potential terminations of collateralized derivatives contracts.
Launch of the ISDA Close-out Framework is in response to the March 2023 failure of Signature Bank and SVB in the US, which highlighted the complexities of potentially terminating over-the-counter derivatives trading relationships following various post-crisis regulatory reforms. Specifically, in-scope entities are now required to post margin for non-cleared derivatives transactions, while various jurisdictions have introduced mandatory stays on termination rights and remedies as part of bank resolution regimes.
The ISDA Close-out Framework is intended to be used as a preparatory resource to help firms coordinate internal business functions and stakeholders and internal and external legal, operational, risk management, infrastructure and other relevant service providers to ensure they are adequately prepared for any potential future stress events.
The framework includes high-level analysis of the default mechanics and collateral enforcement provisions in ISDA documentation, along with additional commentary on bank resolution legislation in the US and Europe.
“Recent stress events have drummed home that terminating a portfolio of derivatives trades is now much more complex as a result of regulatory reforms. The introduction of mandatory margining and segregation requirements, alongside the implementation of bank resolution regimes, means firms need to be able to quickly respond to complex legal and operational issues that will require input from different teams across the organization. The ISDA Close-out Framework provides an essential interactive tool that firms can use to prepare ahead of any potential stress event,” said Katherine Tew Darras, ISDA’s General Counsel.
The ISDA Close-out Framework is available here: https://close-out.isda.org/#/.
Further information on the ISDA Close-out Framework is available here: https://assets.isda.org/media/5e46315f/06731822.pdf
For Press Queries, Please Contact:
Nick Sawyer, ISDA London, +44 20 3808 9740, nsawyer@isda.org
Joel Clark, ISDA London, +44 20 3808 9760, jclark@isda.org
Christopher Faimali, ISDA London, +44 20 3808 9736, cfaimali@isda.org
Nikki Lu, ISDA Hong Kong, +852 2200 5901, nlu@isda.org
Documents (1) for ISDA Publishes Framework to Prepare for Close Out of Derivatives Contracts
Latest
The ISDA Notices Hub: One Year On
In times of war, armed forces are often required to mobilize over large distances at short notice. The most dreaded response to the question of how they are to be transported is ‘by LPC’, meaning ‘leather personnel carrier’ – the...
ISDA Response to OSC Call for Feedback
On June 26, ISDA responded to the Ontario Securities Commission’s (OSC) consultation on facilitating access to its regulatory framework and reducing the burden for capital markets participants by publishing a machine-readable dataset of regulatory instruments. ISDA's comments are supportive of...
ISDA Comments on EP's MISP Draft Reports
On July 15, ISDA shared comments with policymakers in the European Union on the European Parliament’s (EP) draft reports by Member of the European Parliament (MEP) Markus Ferber and MEP Eero Heinäluoma on the Market Integration and Supervision Package (MISP)....
Building Markets, Creating Opportunity
Deep and liquid derivatives markets are fundamental to the development of well-functioning financial markets and healthy economies. They support lending, investment and financial stability, creating the certainty needed for economic growth. But strong derivatives markets do not emerge by chance....