No one wants to have to terminate a derivatives trading relationship – that usually means a counterparty has failed to make a payment or has become insolvent. At an already stressful time, the last thing anyone needs is to experience problems in delivering the critical termination notices necessary to close out and value affected trades. Delays slow everything down, creating uncertainty, risk and potentially millions of dollars in losses – making an already bad situation countless-times worse. The good news is this shouldn’t be a problem for too much longer: in a matter of weeks, we’ll launch the ISDA Notices Hub, an online platform that will enable the instant delivery and receipt of notices – and there are some key steps firms can take now to prepare for launch, including signing up to a new protocol.

The ISDA Notices Hub is scheduled to launch on July 15, and an industry outreach initiative conducted by ISDA last year showed a large number of institutions plan to adopt it, including two thirds of ISDA’s global primary dealer membership category and 42 buy-side institutions, ranging from large investment managers to pension and insurance companies. The platform will be free for all buy-side firms and dealers will have a discount for two years if they adopt early.

In advance of the launch, ISDA earlier this month announced the start of a pre-adherence process, enabling firms to sign up for a protocol that will change all ISDA Master Agreements between adhering firms to allow them to use the ISDA Notices Hub to update their physical address details and deliver and receive notices and waivers. Adherence to the protocol is free for all market participants, so we encourage firms to take advantage of it now.

As it stands, termination notices must be delivered in certain specific ways set out in the ISDA Master Agreement, including physical delivery, using the company address details listed in the agreement. However, issues emerged during the pandemic lockdowns when offices were closed, making it extremely difficult to deliver or receive notices. Similar problems occurred during Russia’s invasion of Ukraine, when the delivery of notices became a physically dangerous activity.

The problems are compounded if a counterparty has moved offices without updating its address details in the documentation. For example, when Lehman Brothers collapsed in 2008, hundreds of termination notices were delivered to an address in London it had vacated four years earlier. Even a small hold up – for example, from Friday afternoon to Monday morning – can result in significant losses.

The ISDA Notices Hub solves these problems by enabling firms to deliver notices quickly and efficiently via a secure online platform. Automatic alerts are sent to designated people at the receiving entity who can access the hub from anywhere in the world, regardless of whether the office is open or shut. The platform will also require market participants to update their physical address details in all their agreements via a single entry, creating an up-to-date golden source. And, in response to member demand, the Notices Hub will allow waivers, such as those for net asset threshold events, to be exchanged, bringing much needed structure to an important but ad hoc process.

No one wants a counterparty to fail and for a contract to be closed out, but this can and does happen. The ISDA Notices Hub means firms can respond with certainty and at speed, reducing risk and minimizing the potential for losses by sending termination notices instantly. That contributes to safer and more efficient derivatives markets.

Firms can sign up to the pre-adherence here.

A letter from ISDA CEO Scott O’Malia to market participants requesting their adoption of the ISDA Notices Hub is available here.

More information about the ISDA Notices Hub is available here.

Watch a new animation about the ISDA Notices Hub here.