The 2014 ISDA Credit Derivatives Definitions Protocol amends certain credit derivative transactions to incorporate the 2014 ISDA Credit Derivatives Definitions in place of the 2003 ISDA Credit Derivatives Definitions. These changes are scheduled to go into effect on September 22, 2014, which is the planned date for trading on the new Definitions to begin.
Please refer to the “Frequently Asked Questions” below for more information on the background and substance of the Protocol, including the scope of covered transactions, Reference Entities excluded from the Protocol, and some of the key differences between the 2014 Definitions and the 2003 Definitions.
The Protocol is open to ISDA members and non-members. Parties will pay a one-time fee of $500 to ISDA to adhere to the Protocol.
**IMPORTANT UPDATE on the ISDA 2014 Credit Derivatives Definitions Protocol:** This protocol is now closed as of 12 noon, New York time, on Wednesday, September 17, 2014 and per the terms of the protocol agreement you are no longer able to submit an adherence letter for this protocol. ISDA has determined that all eight Reference Banks have adhered to the Protocol as at 5pm New York time on Wednesday September 17, 2014, and therefore the Protocol Effectiveness Condition is satisfied
Early adherence will help ensure parties have time to identify counterparty adherents, bilaterally negotiate with non-adherents and establish the operational and other internal policies and procedures that underpin the Protocol. We urge parties to adhere well before the deadline to reduce the risk of processing delays, either of the Adherence Letter or by counterparties.
IMPORTANT: If you do not include a DTCC account number, your trades will not automatically be included in DTCC's bulk update process and you will need to manually update DTCC trades to the 2014 Definitions, to reflect the amendments of the Protocol. We strongly encourage you to enter a DTCC number for each adhering principal or client/fund.
Please also note that Adherence letters will only be processed on business days and therefore parties should submit their adherence letters taking this into account.
ISDA has prepared this list of frequently asked questions to assist in your consideration of the ISDA 2014 Credit Derivatives Definitions Protocol (the Protocol).
THESE FREQUENTLY ASKED QUESTIONS DO NOT PURPORT TO BE AND SHOULD NOT BE CONSIDERED A GUIDE TO OR AN EXPLANATION OF ALL RELEVANT ISSUES OR CONSIDERATIONS IN CONNECTION WITH THE PROTOCOL. PARTIES SHOULD CONSULT WITH THEIR LEGAL ADVISERS AND ANY OTHER ADVISER THEY DEEM APPROPRIATE PRIOR TO USING OR ADHERING TO THE PROTOCOL. ISDA ASSUMES NO RESPONSIBILITY FOR ANY USE TO WHICH ANY OF ITS DOCUMENTATION OR OTHER DOCUMENTATION MAY BE PUT.
These frequently asked questions are divided into the following three sections:
- ADHERENCE PROCESS QUESTIONS (SEE BELOW)
- GENERAL & OPERATIONAL QUESTIONS (CLICK HERE)
ADHERENCE PROCESS QUESTIONS
1. Is there a closing date for adherence to the Protocol?
Yes. The cut-off date for adherence to this Protocol is September 12, 2014.
2. How do I submit my Adherence Letter?
Each entity executing an Adherence Letter will access the Protocol Management section of the ISDA website at www.isda.org to enter information online that is required to generate its form of Adherence Letter. Either by directly downloading the populated Adherence Letter from the Protocol Management system or upon receipt via e-mail of the populated Adherence Letter, the entity must print, sign and upload the signed Adherence Letter as a PDF (portable document format) attachment into the Protocol Management system. Once the signed Adherence Letter has been approved and accepted by ISDA, the Protocol adherent will receive an e-mail confirmation of the Protocol adherent’s adherence to the Protocol.
ISDA keeps the executed copy of the Adherence Letter for its files and does not share the executed copy with anyone else. Please do not send your original Adherence Letter(s) by mail to ISDA.
3. Can entities that are not ISDA members sign up to the Protocol?
Yes. The Protocol is open to any entity. ISDA members and non-ISDA members alike adhere to the Protocol in the same way.
4. What is a conformed copy?
A conformed copy of the Adherence Letter means that the name of the authorized signatory (for example, Patricia Smith) is typed rather than having Patricia Smith’s actual signature on the letter. ISDA only posts on its website the conformed copy of all Adherence Letters. A conformed copy of each Adherence Letter containing, in place of each signature, the printed or typewritten name of each signatory will be published by ISDA so that it may be viewed by all Protocol Participants.
5. Who is an authorized signatory?
An authorized signatory to the Adherence Letter is an individual who has the legal authority to bind the adhering institution.
6. Can I change the text of the Adherence Letter?
No. The Adherence Letter must be in the same format as the form of letter published in the Protocol and generated by the Protocol Management webpage.
7. Are there any costs to adhere to the Protocol?
Yes. Each party adhering to the Protocol must submit a one-time fee of U.S. $500 to ISDA at or before the submission of its Adherence Letter. Adhering Parties should review the documents to be amended to identify the entity that signed the documents, and the capacity in which such entity signed the documents, to determine which entity submits the Adherence Letter. For example, if a parent company/agent has signed the agreement on behalf of all entities within the group, then only the parent company/agent needs to adhere. However, if each group entity has its own agreement in place which it has itself executed as principal, then each such entity would need to adhere.
Each individual legal entity is considered a separate Adhering Party for this purpose and would need to pay the adherence fee, except that an Investment/Asset Manager/Agent that adheres on behalf of one or more underlying funds or principals for whom it has entered into a Protocol Covered Collateral Agreement, using a single Adherence Letter, would only pay a single adherence fee for that Adherence Letter.
8. Can I revoke my participation in the Protocol?
Yes. Parties have the right to revoke their adherence by submitting a written revocation notice in the form set out in the Protocol. Any revocation notice must be submitted by the cut-off date (Friday September 12). Although the cut-off date can be extended in certain circumstances set out in the Protocol, if the cut-off date is not extended, it will not be possible to revoke adherence after that date.
SPECIAL CONSIDERATIONS FOR INVESTMENT/ASSET MANAGERS
9. What if I am an investment or asset manager, and not all of my discretionary management agreements permit me to amend my client’s agreements?
If you are an investment or asset manager and act on behalf of multiple funds (each referred to here as a “client”), you may sign the Adherence Letter using one of the options below.
If you have authority to adhere on behalf of all of your clients but do not wish to identify them on the Adherence Letter, you may do so by selecting “Investment/Asset Manager/or other agent on behalf of a fund/multiple funds/or other principal” from the dropdown under “Adherence Type” and naming the Investment/Asset Manager/Agent. Standard language “acting on behalf of the funds, accounts or other principals listed in the relevant Agreement (or other agreement which deems an Agreement to have been created) between it (as agent) and another Adhering Party” will be provided for you.
If you do not have authority from all your clients (or do have authority from all your clients and wish to identify them), you can adhere on behalf of those clients whose permission you have by selecting “Investment/Asset Manager/or other agent on behalf of some but not all funds/or other principal it represents” and naming the Investment/Asset Manager/Agent. Standard language “acting on behalf of the funds, accounts or other principals listed in the appendix to this Adherence Letter in relation to the relevant Agreement (or other agreement which deems an Agreement to have been created) between it (as agent) on behalf of such fund, account or other principal and another Adhering Party” will be provided for you. You must then list the fund name(s) by either naming each in the field provided (“Name of Fund”) or selecting “Add more than 10 funds” and downloading a list of these funds.
The appendix to your Adherence Letter can either name the clients, or identify them with a unique identifier which will be known and recognized by all other Adhering Parties with which the relevant clients have entered into transactions. The appendix to your letter will be posted on the ISDA website with your Adherence Letter listing the clients or, if you have more than ten clients, we will add a link to a document listing these clients.
If you are using the second method above, any agreements or transactions which you enter into on behalf of clients that are not listed in your Adherence Letter(s) will not be covered by the Protocol. If you wish to implement the changes contained in the Protocol in those agreements or transactions, then you and the relevant counterparty would need to enter into a bilateral agreement to amend those Protocol Covered Agreements to include those changes.
If (a) you do not have authority from any of your clients or (b) you have authority from some clients only but you are not able to disclose such clients whether by name or a unique identifier, you cannot adhere to the Protocol on behalf of any such clients. In this case, you will need to enter into a bilateral amendment agreement with each relevant counterparty listing the clients whose agreements or transactions with that counterparty will be amended by incorporating the amendments made by the Protocol.
If you wish to adhere on behalf of clients, you must ensure that you have the authority to do so from all clients on whose behalf you enter into transactions covered by the Protocol.
If you add a client to an umbrella master agreement after the date you adhere to the Protocol on behalf of your clients (whether that client was an existing client on, or a client acquired after, the Implementation Date) that client will be added to that umbrella master agreement as amended by the Protocol, unless otherwise agreed.
10. Do I need to enter a DTCC Account Number?
This is an optional field, however, for the 2014 Credit Derivatives Definitions Protocol market participants are strongly encouraged to enter this number(s) for reconciliation purposes for each adhering entity. So if you are listing several funds, you should provide a DTCC number in the field provided for each fund. If you don’t know your DTCC Participant Account(s) there are a few options on obtaining this information. You can receive this information by contacting your Super Access Coordinator within your firm or you can email DerivSERV Operations at DerivSERV_Operations@dtcc.com.