ISDA is pleased to present the proposed Charter for the Credit Derivatives Governance Committee and accompanying DC Rule changes to implement. Pursuant to the announcement made in 2024, an ISDA working group formed from ISDA’s Credit Steering Committee has worked on producing the Governance Committee solution.  ISDA views the Governance Committee as the first step in implementing the other recommended changes from the Linklaters’ report as part of an independent review on the composition, functioning, governance and membership of the DCs. ISDA was mandated to move forward with eight overall proposals that were supported by the public consultation held in the summer of 2024, which can be found here.

The proposal establishes a Governance Committee as an industry-wide, global governance body that provides governance and ensures long-term viability of the process by which uniform determinations and settlement for CDS are made and separating the role of making CDS determinations (such as Credit Events and Successors) from the role of determining the rules governing the structure and operational process for making those determinations. Having a single, industry-wide determination on whether a credit event has occurred is critical to enable the clearing of CDS transactions, so having a DC process that is strong, robust and transparent is essential to the safe and efficient functioning of this market.

The Governance Committee will be comprised of up to 20, with a minimum of 15, business-focused, decision-making leaders that represent a broad range of CDS market participants (up to 10 sell-side, 5 buy-side, 3 CCP/index provider members, and 2 additional infrastructure providers). The Governance Committee will be restricted from making DC Rule changes that could impact live Credit Events, therefore the DC Rules in effect when a question is accepted by the DC would continue to apply to determination of that question. DC Rule changes would be made by an 80% supermajority vote after it has been sent out for a public market consultation to incorporate feedback from market participants.

ISDA would appreciate any feedback on the proposed solution by June 6^th. Please email any feedback to Fred Quenzer, Senior Counsel, America, at fquenzer@isda.org.