ISDA adjusts swaps agreement for Dodd-Frank compliance
A new protocol
from the International Swaps and Derivatives Association (ISDA) will allow
market participants to bring agreements that underpin over-the-counter derivatives
contracts in line with the US Dodd-Frank Act.
ISDA, a trade
association representing users of OTC derivatives, has designed the new
protocol to allow simultaneous adjustment of multiple Master Agreements to
ensure compliance with Dodd-Frank’s external business conduct rules – which
come into force on 14 October – and other rules as they are finalised.
will be required to complete a series of standardised questionnaires for the amendments
to become effective.
To help market
participants adjust their existing Master Agreements, ISDA has partnered with
data analysis firm Markit to launch ISDA Amend, a service that automates the
information-gathering process and supports sharing of submitted data and
documents to permissioned counterparties.
rulemakings impose new obligations in a range of areas focused on enhancing customer
protection,” said Robert Pickel, CEO, ISDA. “The ISDA August 2012
Dodd-Frank Protocol provides an industry standard roadmap for updating swap
documentation to comply with these regulatory requirements. ISDA Amend helps
make the protocol process more efficient.”
multiple protocols may be developed as more of Dodd-Frank’s OTC derivatives
rules are finalised and that similar reviews for documentation changes in other
markets would be considered as legislation develops globally.
Act, which is due to come into force by the start of next year, includes rules
that will require a large proportion of the OTC derivatives market to be traded
on exchange-like platforms, cleared through central counterparties and reported
to data repositories. Contracts that cannot be standardised and remain
bilaterally traded – and therefore continue to be governed by the ISDA Master
Agreement – will be subject to higher capital charges.
approval last month by the Securities and Exchange Commission and Commodity
Futures Trading Commission of swap definitions and exemptions to clearing, a raft of new rules related to Dodd-Frank’s reporting, clearing, trading and record-keeping
obligations are expected to come into force in the coming months.