The purpose of the protocol is to enable swap dealers that are parties to Covered Give-up Arrangements to incorporate into those agreements an apportionment of responsibilities, pursuant to a CFTC No-Action No. 13.-11 issued on April 30, 2013 for compliance with obligations under the CFTC's External Business Conduct Standards. ISDA, the FXC (Foreign Exchange Committee) and the FMLG (Financial Markets Lawyers Group) have developed Annex A to the protocol which provides for the allocation of responsibilities between two registered swap dealers as provided in the no-action relief.
Please refer to the “Frequently Asked Questions” below for more information on the Protocol’s substance.
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. There is no cut-off date to this Protocol. ISDA does, however, reserve the right to designate a cut-off date by giving 30 days’ notice on this site.
ISDA has prepared this list of frequently asked questions to assist in your consideration of the ISDA Derivatives/FX Prime Brokerage Business Conduct Allocation 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.
What does the protocol do?
The ISDA Derivatives/FX Prime Brokerage Business Conduct Allocation Protocol is relevant to CFTC registered Swap Dealers only. It provides for the allocation of responsibilities between the prime broker and the executing dealer as required in CFTC’s time-limited No Action Letter No. 13-11 (attached). CFTC registered Swap Dealers must agree to the allocation prior to May 15th.
Is there a closing date for adherence to the Protocol?
There is currently no cut off date for adherence, but ISDA reserves the right to designate a closing date of this protocol by giving 30 days notice on this site.
How do I submit my Adherence Letter?
Each Protocol Participant 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, each Protocol Participant 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 Participant will receive an e-mail confirmation of the Protocol Participant’s adherence to the Protocol.
The Adherence Letter(s) should be on your institution’s letterhead, which you are able to upload into the Protocol Management system during the online submission of information to generate the Adherence Letter. Nothing in the form of Adherence Letter available on ISDA’s website may be changed with the exception of completing the details of your institutional name, date and signature block. 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.
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.
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.
Can I change the text of the Adherence Letter?
No. The Adherence Letter must be in the same format as the form letter published in the Protocol and generated by the Protocol Management webpage.
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. Each individual legal entity is considered a separate Adhering Party for this purpose and would need to pay the adherence fee, except that an agent that adheres on behalf of one or more underlying principals for whom it has entered into an ISDA Master Agreement, using a single Adherence Letter, would only pay a single adherence fee for that Adherence Letter. Where multiple legal entities within a group structure have separate ISDA Master Agreements, each legal entity would need to adhere to the Protocol and pay the adherence fee unless an agency adherence can be used as described above. If an entity adheres as agent on behalf of other entities, this should be reflected in the signature block and the underlying entities should be listed in the Appendix to the Adherence Letter.
Can I revoke my participation in the Protocol?
No. Once an Adherence Letter has been accepted by ISDA, an Adhering Party is bound by all amendments with other parties that have already adhered to the Protocol.
You can, however, bilaterally agree to amend your Covered Master Agreement with your counterparty (the other Adhering Party) and any such subsequent amendments will supersede those made by the Protocol to the extent that they are inconsistent.