ISDA Publishes EMIR Frontloading Additional Termination Event Amendment Agreement

On June 12, 2015, ISDA published its EMIR Frontloading Additional Termination Event Amendment Agreement and an accompanying explanatory memorandum. The amendment agreement allows parties to an ISDA Master Agreement to amend the agreement to incorporate a new additional termination event covering frontloading.

Frontloading refers to the requirement for certain derivative transactions to be cleared in accordance with the clearing obligation under EMIR where the transactions are entered into during a given period before the clearing obligation takes effect. According to ISDA, in such cases, if clearing is not possible by the time the clearing obligation takes effect, the only way the parties can avoid breach of the frontloading requirement (or stop a breach that has occurred from continuing) is to terminate the problem contract. The amendment agreement provides the required termination right, thereby reducing the risk of regulatory breach faced by market participants subject to frontloading.

Federal Reserve Board and FDIC Welcome ISDA Announcement

On October 11, the Board of Governors of the Federal Reserve System and the FDIC applauded the International Swaps and Derivatives Association (ISDA) for the agreement of a new resolution stay protocol.  The resolution stay amendments of the protocol are intended to facilitate an orderly resolution of a major global banking firm and reduce the potential negative impact of the resolution on financial stability by giving the bankruptcy court or resolution authority the ability to prevent early termination of financial contracts of the firm’s global subsidiaries.  Release.

FCA Chief Executive Speaks at ISDA Conference on Reform of the International Derivatives Market

The FCA has published a speech made at a conference held by ISDA in London by the Chief Executive of the FCA, Martin Wheatley, on reform of the international derivatives market.

The speech focused on the “final delivery stage” of reforms in this area.  Martin Wheatley commented that the details on which regulators are currently focusing “happen to be some of the most important facing the derivatives industry.”

The key issues under consideration were the extent to which financial regulators exert influence across international markets, the issue of the broader recognition of equivalence between international regimes, the collateralization of bilateral derivatives, EMIR implementation and benchmarking.  Speech.

FIA and ISDA Cleared Derivatives Addendum

 On August 29, the Futures Industry Association (FIA) and ISDA announced publication of the FIA-ISDA Cleared Derivatives Addendum, a template that can be used by U.S. futures commission merchants (FCMs) and their customers to document their relationship with respect to cleared OTC swaps.  The Addendum supplements a futures and options agreement between a U.S. FCM and its customer, includes party representations as to certain clearing-related matters, close-out methodologies for cleared OTC swaps, triggers for liquidation, valuation provisions for terminated trades, and provisions governing tax issues.  ISDA Release.  FIA Release.

ISDA Seeks Establishment of Commodity Derivatives Trade Repository

On March 25, ISDA issued a request for proposals to establish a Commodity OTC Derivatives Trade Repository that would: (i) meet all current and future regulations governing repositories and (ii) provide a structure to rapidly report and provide timely access to information to applicable regulators. Proposals from interested providers must be submitted by April 25. ISDA Release.

ISDA Reacts to LBIE Judgment

On December 21, ISDA announced that it sought and was granted permission to intervene in the Lehman Brothers International Europe case in order to ensure that the arguments reflecting the market’s interpretation of Section 2(a)(iii) of the ISDA Master Agreement were made before the court. The court agreed with ISDA that Section 2(a)(iii) is “suspensive” in effect. ISDA Release.

ISDA Asia Pacific Portfolio Reconciliation MoU

On January 3, ISDA published the Asia Pacific Portfolio Reconciliation Memorandum of Understanding outlining the process and frequency for reconciling portfolios of collateralized derivatives transactions used by participating firms in that region. ISDA Release.