When Enron announced a shock $618 million loss on October 16, 2001, it took a further 47 days until it filed for bankruptcy. For Bear Stearns, it took 266 days between its bailout of a structured credit fund run by Bear Stearns Asset Management and an eventual bridging loan from the Federal Reserve Bank of New York on March 14, 2008, and its sale to JP Morgan two days later. Compare that to Silicon Valley Bank (SVB), which collapsed on March 10, 2023, just two days after announcing a loss on the sale of securities and a plan to raise capital that prompted a devastatingly fast outflow of deposits. The SVB episode suggests that financial institution failures seem to be happening in an accelerated time frame, fueled by online banking and social media rumor – meaning counterparties need to be ready to move very quickly to terminate their derivatives trades if a counterparty gets into trouble.

Derivatives close outs have never been straightforward, but they’ve become even more complicated in recent years with the introduction of bank resolution legislation that applies a temporary stay on terminations and the implementation of margin requirements for non-cleared derivatives, which set strict rules on the segregation of collateral. It means firms must understand what they need to do when, and who to involve from the legal, operations and trading teams. Given the accelerated timeline of recent failures, this is not something that can be navigated in real time – institutions need to have an established and well understood playbook they can draw on.

To help with this, ISDA published a close-out framework last year that sets out key steps in the process, and outlines what actions counterparties need to take at what point. We’ve also run a series of close-out seminars over the course of the year in London, New York, Singapore and Sydney, enabling small groups of people from different parts of a financial institution, as well as resolution authorities and other public sector representatives, to come together in a classroom environment and better understand the decisions that need to be made. Overall, 257 people have attended these seminars so far, hopefully enabling those firms to act quickly and decisively in the event the worst happens and a counterparty is heading for failure.

An early but vital part of the close-out process is the delivery of a termination notice – this sets the clock ticking on when an ISDA Master Agreement can be terminated and the underlying transactions valued. But this theoretically straightforward process has been hampered by the fact that firms can move offices without updating the contact details in their documentation, which must be used as the address for delivery. A further problem occurred during the pandemic, when offices were closed during lockdown, and again in Russia following its invasion of Ukraine, when it became difficult to deliver notices in a hostile environment. The reality is that even short delays in delivery can lead to ballooning risk exposures and costs running into the tens, if not the hundreds, of millions of dollars.

A solution to those particular problems now exists, thanks to the launch of the ISDA Notices Hub earlier this year. The Notices Hub is an online platform that enables the rapid delivery and receipt of notices from anywhere in the world, with automatic alerts sent to the receiving entity, reducing the risk of unhedged exposures and potential losses from delivery delays. The Notices Hub also requires users to maintain current physical address details across all their agreements, which can be done via a single entry, creating an up-to-date golden source.

More than 145 buy- and sell-side entities, including 65% of global primary dealers and array of asset managers, pension and insurance companies and hedge funds, have now adhered to the ISDA 2025 Notices Hub Protocol, which provides the legal framework to allow delivery of notices via the platform, demonstrating strong industry support for the service. If you’re interested in adopting, you can contact the team here: NoticesHub@isda.org.

Dealing with a termination has never been easy, but the speed with which a failure can occur today means firms need to act quickly, and that means preparation is critical. ISDA’s close-out framework, the close-out seminars and the ISDA Notices Hub are intended to make that process a little easier.

ISDA will run a virtual series of close-out seminars in 2026. Watch out for further details here: https://www.isda.org/events