August 29, 2014

Webcast Available | 2014 ISDA Credit Derivatives Definitions and Protocol

The ISDA 2014 Credit Derivatives Definitions and Protocol Webcast is now available for streaming.

The ISDA 2014 Credit Derivatives Definitions and Protocol Webcast is now available for streaming.

It is 26 minutes in length and covers the following topics in depth:

  • Definitions: Key differences between the 2003 and 2014 Credit Derivatives Definitions, the most important of which are:
    • Governmental Intervention (GI) as a new type of credit event for financial CDS.
    • Asset Package Delivery following a GI credit event (for financial CDS), and a restructuring credit event (for sovereign CDS and financial CDS).
    • More delineation between senior and subordinated CDS contracts, especially in relation to succession events.
    • Introduction of Standard Reference Obligations (SROs), which will allow a greater standardization within the CDS market.
    • Updates to Substitute Reference Obligations, to rationalize rules for replacing reference obligations.
    • Updates to the Qualifying Guarantee definitions– a limited expansion of covered guarantees.
    • Updates to the Successor provisions (i.e. how CDS reference entities change as debt moves from one reference entity to another). This has the greatest impact on universal successors for corporate reference entities, to prevent a repeat of the Unitymedia fiasco.
    • Special rules for Currency Redenominations. ISDA have thought carefully about how currency redenominations impact which bonds are deliverable following a credit event. ISDA have also outlined provisions for a Eurozone exit.
    • Doc Clause changes. These are explained in the 2014 ISDA Credit Derivative Definitions FAQs blog post.
  • Protocol: Explanation of the Protocol– a multilateral mechanism for switching outstanding eligible Credit Derivatives contracts over to the 2014 definitions. This must be done within the adherence window (i.e. before September 12th). The purpose of the Protocol is as follows:
    • To switch outstanding eligible Credit Derivatives contracts from the 2003 Definitions to the 2014 definitions.
    • To provide transition rules for the adoption of SROs for existing trades.
    • To disapply the sovereign asset package delivery provisions for sovereign reference entities that are within the scope of the protocol.
    • An additional number of technical amendments for existing trades to preserve their status quo, but make them work with the 2014 definitions.

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