Big Bang Protocol


Through hardwiring, ISDA is incorporating into its standard documentation the auction settlement of contracts after a default or other credit event on a company referenced in credit default swap transactions.

This is implemented by way of a supplement to the 2003 ISDA Credit Derivatives Definitions.  The Auction Supplement amends the ISDA CDS Definitions to incorporate the CDS settlement auction terms that have to date been included in the auction protocols. It also includes provision for the ISDA Determinations Committee, which going forward will make binding determinations for issues such as whether a Credit Event has occurred; whether an auction will be held; and whether a particular obligation is deliverable.

The amendments made by the Auction Supplement apply to transactions entered into going forward.  ISDA has also published a Protocol to facilitate the amendment of existing transactions to reflect the new terms.

The Protocol opens for adherence on March 12, 2009 and closes on April 7, 2009. In accordance with paragraph 2(e) of the Protocol, there will be a Subsequent Adherence Period for the Protocol, which will open on July 14, 2009 and close on July 24, 2009. The Subsequent Implementation Date (as defined in paragraph 2(e)(ii) of the Protocol) will be July 27, 2009. Parties may only adhere to the Protocol during the Subsequent Adherence Period by adhering to the 2009 ISDA Credit Derivatives Determinations Committees, Auction Settlement and Restructuring CDS Protocol (the "Small Bang Protocol"). Please see the relevant webpages relating to the Small Bang Protocol for details.

ISDA also hosted a market-wide conference call on March 3 to assist in market participants' review of the draft documents made available to the market at that time and to discuss implementation timing.  A copy of the slide presentation used for the call is available here. A recording of the call is available here for those market participants that were unable to attend the call in person. You may need Windows Media Player to access this recording.

A further market education call was held on Friday 13 March 2009.  A copy of the slide presentation that was used on the call is available here.

To the extent that a market participant has any question that has not been addressed either in the FAQs on this website or on the market calls, they are welcome to raise such a question with ISDA. Any such question should be sent to

Related Press Releases


Adherence Letter Submission Process

The following documents must be submitted via email to the ISDA office in New York in order to adhere to the Big Bang Protocol:

  • One signed copy of the Adherence Letter, providing information on the contact person at the Adhering Party.
  • One conformed copy of the Adherence Letter. A conformed copy is an exact copy of the signed letter with the name of the person signing the letter typed on the signature line. A signature should not appear on the conformed copy of the letter.  Click here for example of conformed copy.

ISDA will only accept email delivery of Adherence Letters. An Adhering Party is not required to send original Adherence Letters to the ISDA offices.

Click here for the form of Adherence Letter.

Please submit all Adherence Letters via email to It is critical that both a scanned, signed Adherence Letter, as well as a scanned, conformed Adherence Letter is submitted. Entities will not be deemed to have adhered to the Protocol until both the signed and conformed Adherence Letters are submitted by email in accordance with the Adherence Period.

You are not required to send your original Adherence Letter(s) by mail to ISDA.

No other documents are required in order to adhere to the Big Bang Protocol. Supporting documentation, such as board resolutions or a list of authorized signatures, can be provided and will be held in safekeeping by ISDA, but it is not necessary to submit such documents in order to adhere to the Protocol. Access to supporting documentation will only be provided if requested in writing.

The Protocol will open for adherence on Thursday March 12, 2009.

Email address for Delivery of Adherence Letters:

Policy Regarding Conformed Copies
A signed copy and a conformed copy of an Adherence Letter must be received in order for ISDA to list a party as having adhered to the Big Bang Protocol.
The most common problem experienced in the adherence process for prior Protocols was the failure to include a conformed copy of the Adherence Letter. We remind parties that a conformed copy, together with a signed copy, must be submitted to ISDA in connection with adherence to the Big Bang Protocol.


Frequently Asked Questions



This Frequently Asked Questions webpage is divided into four sections: (i) questions relating to the substance of the Protocol and the Supplement; (ii) questions relating to the submission of Adherence Letters; (iii) questions relating to adherence by investment managers; and (iv) 100/500 Credit Derivative Initiatives


Where is this auction hardwiring I’ve heard about documented?

The 2003 ISDA Credit Derivatives Definitions (the “Definitions”) are being supplemented by the 2009 ISDA Credit Derivatives Determinations Committees and Auction Settlement Supplement to the Definitions (the “Supplement”).  After April 8, 2009, if parties entering into a credit derivative transaction incorporating the Definitions wish to settle the transaction by reference to a CDS Auction, the parties should incorporate the Supplement and elect 'Auction Settlement'.  This will be done automatically for certain types of credit derivative transactions.

Parties to existing credit derivative transactions which incorporate the Definitions can amend those existing transactions to incorporate the Supplement and apply Auction Settlement by adhering to the 2009 ISDA Credit Derivatives Determinations Committees and Auction Settlement CDS Protocol (the “Big Bang Protocol” or “Protocol”) as described below.

What does the Supplement do?

The Supplement achieves three main things:

  1. Establishes the Credit Derivatives Determinations Committees (the "DCs", and each a "DC") and incorporates the resolutions of the DCs into the Definitions;
  2. Adds Auction Settlement provisions; and
  3. Creates Credit Event and Succession Event Backstop Dates.

What are the Credit Derivatives Determinations Committees?

Each DC will be formed of 8 global dealers, 2 regional dealers, 5 non-dealer ISDA members, 1 non-voting dealers (for the first year, there will be 2 non-voting dealers), 1 non-voting regional dealer per region, and 1 non-voting non-dealer member.  A DC will be formed for each of the following regions:  the Americas, Asia excluding Japan, Japan, Australia-New Zealand and EMEA (Europe).  Each DC will resolve issues involving Reference Entities traded under Transactions Types that are relevant to the credit derivatives market as a whole in that DC's region.  These resolutions will pertain to Credit Events, CDS Auctions, Succession Events, and Substitute Reference Obligations.

The resolutions of the DC are binding on all transactions that have incorporated the Supplement (but will not have retroactive effect to alter any transaction that has already settled).

Annex A to the Supplement contains detailed rules concerning the composition, procedures and resolutions of the DCs (including how and when a resolution can be reviewed).

What are the auction settlement provisions?

The Supplement adds auction settlement as a settlement method for credit derivative transactions.  Annex B to the Supplement contains a form of Auction Settlement Terms that will be the basis for the terms of any auction the DC resolves to hold.  These are based on previous CDS auction terms and we would refer you to the plain English summaries of the auction methodology published in relation to previous CDS auctions.  Auction specific terms (e.g. Auction Date, times, inside market quotation amount, Deliverable Obligations etc) will be set by the DC on a case by case basis.

The Supplement incorporates a few changes to previous auction terms and methodology, principally concerned with fixing the Currency Rate to minimize FX risk and facilitating loan settlement in the chain that may be created through Physical Settlement Buy/Sell requests submitted in the auction.

What are the Credit Event and Succession Event Backstop Date provisions, what do they do and why?

Under the Supplement, the Credit Event Backstop Date is 60 days prior to (i) the date on which a request to the DC regarding such Credit Event is submitted or (ii) the date on which both a Credit Event Notice and Notice of Publicly Available Information (if applicable) are effectively delivered.  The Succession Event Backstop Date is 90 days prior to (i) the date on which a request to the DC regarding a Succession Event is submitted or (ii) the date on which a Succession Event Notice is effectively delivered.

Under the Supplement, no matter what the Trade Date or the Effective Date, a credit derivative transaction can only be triggered by a Credit Event and/or affected by a Succession Event occurring no more than 60 or 90 days, respectively, before the requests or notice described above are effective.  This is the case even if the event took place before the Trade Date or the Effective Date.  A Credit Event occurring more than 60 days before notice to the DC or a Succession Event occurring more than 90 days before notice to the DC will have no impact on any credit derivative transaction which incorporates the Supplement, even if such event takes place within the term (i.e. on or after the Trade Date and before the Schedule Termination Date) of that transaction.

The purpose of these backstop dates is to achieve consistency between transactions.  Under the Definitions (before amendment by the Supplement) if an entity entered into a credit derivative transaction on January 1 and then entered into an offsetting transaction on February 1, even where the Reference Entity, Obligations and all other terms were identical, those two transactions would not be completely back to back and the entity would not be fully hedged.  This is because, if a Credit Event occurred for example on January 15, the first trade would be triggered but the second trade would be unaffected by that event (since it occurred prior to the Effective Date of that second transaction).  The entity could, therefore, have found itself in a position where, as Protection Seller under the first transaction it had to pay out but was not entitled to claim any payment as Protection Buyer from the Protection Seller under the second trade.

By creating a single look back period applicable to all trades (that incorporate the Supplement), two offsetting transactions will have identical terms and allow entities to hedge their positions fully even if they cannot be entered into and be effective on the same date.  This also facilitates the compression of CDS transactions.

Can I trigger my CDS contract if the credit event occurred more than 60 days ago, but after the date I entered into the transaction?

No. If the event occurred more than 60 days ago, it cannot be used to trigger a CDS contract.  Please note that for certain Protocol Covered Transactions, the Credit Event Backstop provision will only be effective from June 20, 2009 (please see below).

What if I discover a credit event occurred - what can I do to trigger? What are the deadlines?

If a party believes that a credit event has occurred, it can "stop the clock" by requesting that the DC determine whether that credit event occurred.  The party's request to the DC must include Publicly Available Information relating to the event.  Alternatively, the party could send a Credit Event Notice and Notice of Publicly Available Information directly to its counterparty (as under the current CDS contract). The request to the DC or the Credit Event Notice and Notice of Publicly Available Information would need to be effective not more than 60 days after the event.

What if the DC does not address the question - how long do I have to trigger bilaterally?

The answer here depends on whether the DC originally accepts the question or not. If the DC accepts the question but later resolves not to determine the question, then the time limits for delivering a Credit Event Notice and Notice of Publicly Available Information are tolled while the DC is deliberating (i.e. any days during which the DC is considering the question will not be counted when calculating whether the relevant 60 day time limit has expired).  ISDA will publish on its website whether a DC has resolved to decide a Credit Event or Succession Event question.

If the DC does not accept the question, then the time limit will not toll. Under the DC rules, if no member of the DC accepts the question by 5:00 p.m. local time two business days after the request is notified to the DC members, then the question will be deemed to have been dismissed. Any time limits under the CDS contract will continue to run during those 48 hours.

What if an event occurs fewer than 60 days ago but after the Scheduled Termination Date of the transaction?

As with the current contract, if an event occurs after the Scheduled Termination Date of a transaction, then, subject to extension in some circumstances, it cannot be used to trigger that transaction.

How do I request that the DC consider a particular question?

ISDA’s website will contain a specific link and form for submitting requests to the DC Secretary.  There will also be information about requests that have already been received together with information about the status of such requests. You should ensure that your question is not already listed before submitting your request.  The DC Secretary (ISDA) will publish on its website the request that is forwarded to the DC for resolution.

So, what does the Big Bang Protocol do?

The Supplement applies to transactions going forward, provided that they incorporate the Supplement.  ISDA has published the Big Bang Protocol to enable market participants to eliminate distinctions in their book between transactions entered into before April 8, 2009 and those entered into on or after that date.  Market participants, by adhering to the Protocol, agree to amend their existing credit derivative transactions with all other adhering parties to implement the amendments incorporated by the Supplement.  Please note that certain existing transactions are not covered by the Protocol (see below)

The entire Supplement (incorporation of the DC and its resolutions, Auction Settlement methodology and the Credit Event and Succession Event backstops) is made applicable to all Protocol Covered Transactions (see below) except that the Auction Settlement method will not apply to "Covered Non-Auction Transactions" (see below).

The DC provisions of the Supplement are effective in respect of all previously existing Protocol Covered Transactions from April 8, 2009.

The Auction Settlement provisions are effective in respect of all previously existing Protocol Covered Transactions except Covered Non-Auction Transactions from April 8, 2009.

The Credit Event and Succession Event backstop date provisions do not take full effect for previously existing Protocol Covered Transactions until June 20, 2009.  Until that date, the Credit Event and Succession Event backstop dates are deemed to be the Effective Date of each Protocol Covered Transactions (i.e. until June 20, 2009, previously existing trades are in the same position as under the current Definitions).  This hardening period allows parties to such transactions time to notify the DC of any event which has occurred and which is relevant to their transaction even if such event occurred more than 60/90 days ago.  This avoids any such party immediately losing their rights in respect of such event in respect of legacy trades on signing the Protocol.

What Transactions are covered by the Protocol?

The Protocol will cover the same types of credit derivative transactions that have been included in the CDS auctions held to date, including:

  1. Covered Index Transactions (including CDX and iTraxx Tranched and Untranched);
  2. Covered Swaption Transactions (single name and portfolio); and
  3. Covered Non-Swaption Transactions (e.g. Single name, Nth to default, Recovery Lock, Bespoke Portfolio Transactions.

In addition to these transactions, the Protocol will also cover the following transaction types that are not typically included in the CDS auction, referred to as Covered Non-Auction Transactions (e.g. Reference Obligation only, Fixed Recovery, Preferred CDS, or Party Specified Non-Auction Transactions).  Covered Non-Auction Transactions will incorporate the Supplement (i.e., including the provisions relating to DC determinations) but will not specify Auction Settlement.

The types of Protocol Covered Transactions mentioned above fall into three categories: previously existing (or legacy) transactions; future transactions, and novated transactions.

For any previously existing transaction to be covered by the Protocol, it must be between two Adhering Parties to the Protocol and the Trade Date of such transaction is before April 8, 2009, the Scheduled Termination Date is on or after the April 8, 2009, and no Event Determination Date or Early Termination Date has occurred prior to April 8, 2009.

In addition, and in contrast to previous CDS protocols, the Big Bang Protocol covers future credit derivative transactions that are entered into between two Adhering Parties to the Protocol on or after April 8, 2008 but before January 31, 2011.  This is to reflect the fact that ISDA and other groups have produced various market standard form documents to facilitate entities wishing to enter into such transactions and which incorporate the Definitions but which will not have been updated to incorporate the Supplement before the close of the Protocol adherence period.  ISDA is committed to updating all of its standard documentation as soon as possible but until such time, Adhering Parties can ensure that such market standard transactions will be on the same terms as legacy transactions and future transactions which incorporate the Supplement.

Similarly, the Protocol covers novations of any credit derivative transaction of the types described above that are entered into after April 8, 2008 but before January 31, 2011, where the transferee and remaining party to the novation are Adhering Parties, and the underlying transaction that is being novated would have been a Protocol Covered Transaction if the parties thereto had been Adhering Parties to the Protocol.

The legacy transactions, future transactions and novated transactions described above are each Protocol Covered Transactions.

What Transactions are excluded from the Protocol?

The following credit derivative transactions are excluded from the scope of the Protocol and will not be amended to incorporate the provisions of the Supplement unless the parties bilaterally agree:

  1. Loan Only transactions;
  2. U.S. Municipal type transactions;
  3. Credit derivative transactions on asset backed securities; and
  4. Index transactions entered into between two of the main dealers (listed in the Protocol) relating to trust certificates linked to any Dow Jones CDX.NA.HY Index or CDX.NA.HY Index.

In addition, two Adhering Parties can bilaterally agree that any credit derivative transaction should not be a Protocol Covered Transaction and should not be amended by the Protocol.  This agreement can be recorded in the Confirmation or in a separate side agreement.

What are the overall consequences of the Big Bang Protocol to an individual institution?

It is not possible for ISDA to confirm what all the consequences of the Big Bang Protocol would be for an individual institution since it's application will depend upon the type of contracts that a particular institution has and their specific provisions.  Nor can ISDA give legal advice in this respect to its members.  Members must consult with their own legal advisers to the extent that they have specific questions about the application of the documents and their consequences for their particular institution.

What if my transaction is a hedging transaction that should settle in the same way as, for example, an underlying CLN?

Bespoke Portfolio Transactions that are expressly linked to a specific underlying portfolio, for example linked to CLNs are covered by the Protocol but are excluded from the auction by the Form of Auction Settlement Terms.  Such transactions will incorporate the Supplement but will not settle pursuant to the Auction.

Who will make the determination whether there has been a Credit Event or a Succession Event?

The DC will decide whether there has been an event and the relevant information will be posted on the ISDA website.

Will there still be Protocols for CDS Auctions when there’s a Credit Event?

No.  Since the Protocol applies Auction Settlement terms to historic trades and the Supplement allows for the parties to select Auction Settlement terms for future trades, there will no longer be a need for a Credit Event specific CDS Auction Protocol.  If parties do not elect Auction Settlement and do not adhere to the Protocol, they will need to bilaterally settle their trades in accordance with Settlement Method in the executed confirmation unless otherwise negotiated between the parties.

When does the fallback to Physical Settlement come into effect and what are some of the implications of this?  

This happens if the DC decides not to hold an Auction.  The DC will not hold auctions for Restructuring Credit Events and could decide against holding auction in other cases where a name is not very liquid and it would be very difficult to hold an auction.  For instance, if a name does not have any Deliverable Obligations, there would not be an auction, as you need Deliverable Obligations on which to bid to establish the auction price.

If we sign up for this auction hardwiring protocol, will we be forced to settle all defaults via the auction (assuming we own the covered CDS contract)?  Or will we still have the choice to settle physically prior to the auction?

As for previous CDS auctions, parties can obtain the same economic outcome as physical settlement by submitting a Physical Settlement Request into the auction. If the DC decides to hold an auction, parties will not have the option to physically settle prior to the auction, unless agreed bilaterally with the counterparty.

Will DTCC still provide the option for un-adherence in regard to the Credit Event Processing Tool for these transactions?

For Auction Hardwiring, DTCC will Auto-adhere all impacted trades in the Warehouse. Firms still have the ability to un-adhere trades from event processing in the Warehouse.

How do I know which parties have adhered to the Protocol?

The names and DTCC IDs, where provided, of Adhering Parties will be posted on ISDA’s website throughout each day of the adherence period, within a few business hours of ISDA’s receipt of a party’s Adherence Letters.  A list can be exported to Excel by clicking on “CDS Auction Hardwiring”, then selecting “Adhering Parties DTCC Account Number”.

What alternatives are there to adhering to the Protocol?

The changes that the Protocol makes could be made by way of individually negotiated agreements.

If we do not choose to sign up for the hardwiring protocol, will we be allowed to participate in the auction?  Would we have to sign an individual auction protocol to participate?

If a party does not sign up to the Protocol, then that party's transactions will have to be settled in accordance with the terms originally agreed with its counterparty (i.e. cash or physical settlement, as agreed) unless they otherwise mutually agree.  Of course it is open to the parties at any time to bilaterally agree that they will amend their transaction to cash settle at the Final Price determined by the auction but their trade will not automatically be subject to Auction Settlement and they will not be able to participate in the auction.  The Big Bang protocol will replace the individual protocols for future auctions (ISDA will not be publishing individual protocols for standard CDS Auctions going forward), therefore parties should adhere to the Big Bang protocol as it will not be possible to "opt in" to future auctions for transactions that are covered by the Big Bang Protocol.

Confirmation Questions

How do I confirm a prospective trade in DTCC inclusive of the March 2009 Supplement?

The March 2009 Supplement will be incorporated into the DTCC Operating Procedures.  It will automatically apply to any trade with a Trade Date or Novation Trade Date on or after April 8, 2009.  If parties are entering into a Covered Transaction to which the parties do not wish to apply the March 2009 Supplement, they will need to confirm the trade on paper.

How do I confirm a prospective trade on paper inclusive of the March 2009 Supplement?

The Protocol covers prospective trades with a Trade Date on or before January 31, 2011 to allow time for industry standard documentation to be updated with the appropriate changes.  As a result, it is not necessary to unilaterally update paper Confirmations for future Protocol Covered Transactions between Adhering parties.

Do I need to amend my bilateral MCAs?

Provided both parties are Adhering Parties to the Protocol, you do not need to amend your bilateral MCAs.  The Protocol includes necessary amendments that automatically amend market standard MCA forms executed between Adhering Parties based on the terms of the Supplement.

If firms have not signed up to the Protocol, can they continue to use DTCC to confirm their Covered Transactions?

Yes, they can continue to use DTCC; the Supplement applies to new trades even if a party has not adhered their historic trades.  However, parties should be aware that DTCC will include all trades in the TIW for Credit Event and Succession Event processing determinations made by the DC regardless of whether a party has adhered.

Can Non-Covered Transactions still be sent to DTCC for Adhering and Non-Adhering Protocol Parties?

Yes, non-covered transactions still go to DTCC.  The DTCC Operating Procedures will not apply the Supplement to Excluded Transactions like LCDS and CDS on ABS.

If a party does not adhere to the Protocol within the agreed timeframe, can this party still continue to reference the Supplement in DTCC for all their future trades?

Yes, the Supplement applies to future transactions regardless of Protocol adherence.   DTCC will automatically apply this to all covered trades going forward.  Note that in DTCC there is no way to exclude it on a counterparty or trade level.


Adherence Letter Submission Process
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.

Does it cost any money to adhere to the “Big Bang” Protocol?


When do I need to send in my Adherence Letter?

The Protocol is open for adherence from Thursday, 12 March 2009 until 5:00pm New York time on Tuesday April 7 2009.  An entity must email its Adherence Letter to ISDA by 5:00pm New York time on Tuesday April 7 or it will not be able to adhere to the Protocol
ISDA has the discretion to extend the adherence period or to re-open the Protocol for adherence at a later date but currently has no plans to do so.

How do I send in my Adherence Letter?

All Adherence Letters must be delivered by email to In the email, you must submit both your conformed and executed copies of the Adherence Letter. You must use the form of letter for the Big Bang Protocol available on the ISDA website. Click here for form of adherence letter.

The Adherence Letter(s) should be on your institution’s letterhead. 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.

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.
You must also submit an executed, or signed, copy of the Adherence Letter in addition to the conformed copy of the Adherence Letter. ISDA keeps the executed copy of the Adherence Letter for its files and does not share the executed copy with anyone else.

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.

We have more than one fund and therefore more than one DTCC account number.  Will we need to submit more than one Adherence Letter?

No.  You can list numerous DTCC numbers on one adherence letter.


What if I am an investment or asset manager, 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, you have the following options:

  1. If you have authority to adhere on behalf of all of your clients you may do so by indicating the following in the signature block:“Investment/Asset Manager, acting on behalf of the funds and accounts listed in the relevant Agreement (or other agreement which deems an Agreement to have been created) between it (as agent) and another Adhering Party [and acting on behalf of the funds and accounts listed in the exhibit to this Adherence Letter in relation to the relevant Agreement (or other agreement which deems an Agreement to have been created) between such fund or account and another Adhering Party]”.If you wish to adhere in this way, you must ensure that you have the authority to do so from all clients on whose behalf you enter into credit derivative transactions covered by the Protocol.
  2. If you do not have authority from all of your funds, you can adhere on behalf of those funds whose permission you have by indicating the following in the signature block “Investment/Asset Manager, acting on behalf of the funds and accounts identified in [the] attachment [1] 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) and another Adhering Party [and [acting on behalf of the funds and accounts identified in attachment 2  to this Adherence Letter] in relation to the relevant Agreement (or other agreement which deems an Agreement to have been created) between such fund or account and another Adhering Party]”.  The attachment to your Adherence Letter can either name the clients or funds, or identify them with a unique identifier which will be known and recognized by all other Adhering Parties with which the relevant funds or clients have entered into Protocol Covered Transactions.  The attachment to your letter will be posted on the ISDA website with your Adherence Letter.Any credit derivative transactions which you enter into on behalf of funds that are not listed in your adherence letter(s) will not be covered by the Protocol and you and the relevant counterparty will have to enter into a bilateral amendment agreement as discussed in 3 below if you wish to implement the changes.
  3. To the extent that you do not have authority from all of your funds and you are not able to disclose your clients whether by name or a unique identifier, you cannot adhere to the Protocol on behalf of any fund that you cannot identify. Your option in these circumstances is to enter into bilateral amendment agreements with each relevant counterparty listing the funds who’s whose Transaction(s) with that counterparty will be amended by incorporating the amendments made by the Protocol.
  4. To the extent that you add a fund to an umbrella master agreement after the Implementation Date of the Protocol (whether such a client was an existing client on or a client acquired after the Implementation Date) that client would not be covered by your adherence to the Protocol and any CDS transactions you enter into on behalf of that client would not be Protocol Covered Transactions.  Your option in these circumstances is to bilaterally agree that the Protocol should be incorporated into all CDS transactions that would otherwise be Protocol Covered Transactions (had the fund adhered to the protocol).  This could be done when you add the client to the umbrella master agreement.

In addition to the changes implemented by the Supplement and Protocol discussed in the first part of these FAQs, there are certain other CDS market changes in standard terms that are taking place.  These are not implemented by the hardwiring documents discussed above but the following section contains a number of frequently asked questions concerning these changes

100/500 Credit Derivative Initiatives

The derivatives industry has agreed to a new North American CDS contract which aims to further standardize a number of variables (the “Standard North American Corporate” Transaction).  This transaction is also referred to as a 100/500 contract. The proposal includes Investment Grade names trading on a 100 bps spread and quoted with a flat curve spread, High Yield names trading on a 500 bps spread and quoted as points up-front, a 60 day look back rolling Effective Date for Credit Events, a 90 day look back rolling Effective Date for Succession Events, standardized accruals, and auction hardwiring.

What transaction types are covered?

The 100/500 initiative will initially cover North American Corporate Transactions only.

What change will be made to the scheduled termination date?

The Scheduled Termination Date will always match a quarterly roll date.  The Quarterly roll dates will always be March 20, June 20, September 20 and December 20. For clarification, the Scheduled Termination Date is still an unadjusted date.  Accrual ends on and includes the unadjusted quarterly roll date even though the final payment is made on the adjusted roll date.

What change will be made to Restructuring?

The standard for Standard North American Corporate transactions will now be No Restructuring.  However, parties will be able to elect for Modified Restructuring to apply.

How will the coupon for 100/500 transactions be reflected?

Coupons will still be reflected as a percentage per annum, thus 1% or 5% and should be confirmed as the respective 100/500 coupon.

Is there a change to the Accrual Start date?

Rather than starting on the Effective Date, accrual will begin on and include the last Quarterly Date (March 20, June 20, September 20 or December 20) on or preceding the Trade Date plus one calendar day.  Similar to Indices, the Accrual Start date will be an adjusted date.  There are full coupons and no short or long stubs.  All settlements will be full coupons.

For 100/500 trades, what value should firms put in the effective date field?

It is suggested that firms continue to book and submit Trade Date + 1 as their effective dates to DTCC.  DTCC will ignore this value for accrual purposes.

Is there an envisioned change to Historic North American Corporate Transactions?

Historic North American Corporate Transactions will not be updated to 100/500 terms as part of this transition.  An historic North American Corporate trade also cannot change to an updated Standard North American Corporate trade upon Novation.

What are the changes to the Settlement Methodology?

100/500 trades will be subject to Auction Methodology, with Fallback Settlement Method of Physical Settlement.  The 2009 ISDA Credit Derivatives Determinations Committees and Auction Settlement Supplement to the 2003 Credit Derivatives Definitions (discussed above) applies to these trades, whether confirmed on paper or in DTCC, and will be incorporated into the DTCC Operating Procedures as well as the Matrix and long form template.

Are Municipal CDS transactions included?

The 100/500 initiative does not apply to Muni CDS.

When will 100/500 start trading from a market perspective?

April 8th is anticipated to be the first day of trading for single names on the new Standard North American Corporate terms.

Will tranche and all single name trades change to include a full first coupon like the index trades today?

A Full First Coupon will apply only to 100/500 trades and will continue to apply to Index trades.  There will be no changes to tranche or the current trading of other single name trades using short and long stubs based off of confirmed effective date

Will this apply to both Senior and Sub North American Corporate names?

Yes it will.  Continue to submit rank-appropriate Reference Obligations for your trades

Can North American Corporates still be traded on the old terms?

Yes, there may be some residual trading, but the 100/500 will be primary trading method for North American Corporate names.

If you are already trading a name with points upfront, would you continue to do so? 

Yes, but on the 100/500 rate.  It will just alter the upfront payment.

How do I know which names will trade with 100 and which will trade with 500?

Dealers have indicated that although Investment Grade names will generally trade 100 and High Yield 500, they will be able to quote any name on either Fixed Rate, it will just alter the upfront payment.

If firms have not signed up to the Big Bang Protocol, can they still trade 100/500 trades?

Yes, they can still trade 100/500 trades, but those trades will be subject to the Supplement - which is a standard inclusion in DTCC, the Matrix, and the longform confirm for 100/500.

Confirmation Questions

Can these transaction types still be confirmed electronically?

Yes.  DTCC will support these changes.

What types of confirmations can I use to confirm my transactions?

Matrix:  ISDA will publish an updated Matrix that includes a new "StandardNorthAmericanCorporate" Transaction Type.  This is the preferred means of confirming a 100/500 trade.

Master Confirmation Agreement (MCA):  the Transaction Type that a firm submits to DTCC will be called "ISDA2003StandardCreditNorthAmerican" for 100/500 confirmed under a MCA.  As this will be defined in the DTCC Operating Procedures, no changes are necessary to executed MCAs or the DTCC Standard MCA.  You will continue to confirm these with the MCA date you currently use to confirm North American Corporates.

Paper Confirmations: if firms are unable to confirm in DTCC, the trade will need to be confirmed on either a Matrix Confirmation or long form confirmation.  Standard North American Corporate cannot be confirmed under MCA Transaction Supplements on paper.   A standard long form template is under development to ensure that paper trades match the intended terms of the 100/500 trades.  These may be Backloaded or Novated onto DTCC at a future point.

Is there a revised long form paper confirmation template?

ISDA is working with the CIG on an industry agreed template which will be published in the coming weeks.

What are the updated FpML values for both the Senior North American Corporate Transaction Type for the Matrix and the Master Confirmation Agreement?

StandardNorthAmericanCorporate for Matrix transactions and ISDA2003StandardCreditNorthAmerican for MCAs

When DTCC rejects 100/500 trades due to incorrect information, will those trades make it into the system and be available for modification?

Yes.  Those trades will go into a rejected status.

Upon rollout of the 100/500 contract will I need to submit the ISIN to DTCC?

Yes, upon rollout you will continue to submit trades to DTCC the same as today with the ISIN or the 9 digit pair clip.  Eventually this will change. At some point in time the ISIN for all 100/500 NA Corps referencing Senior Unsecured Debt will be ZZSENIOROBL1.  Markit will in turn create 9 digit RED codes for each Ref Entity name pointing to the dummy reference ISIN of ZZSENIOROBL1. There are no plans to standardize ISIN on trades referencing Subordinated Debt.