{"id":15851,"date":"2014-08-28T21:07:52","date_gmt":"2014-08-28T21:07:52","guid":{"rendered":"https:\/\/wordpress-693215-2610341.cloudwaysapps.com\/index.php\/2014\/08\/28\/faqs-isda-credit-derivatives-definitions-2014\/"},"modified":"2014-08-28T21:07:52","modified_gmt":"2014-08-28T21:07:52","slug":"faqs-isda-credit-derivatives-definitions-2014","status":"publish","type":"post","link":"https:\/\/theotcspace.com\/faqs-isda-credit-derivatives-definitions-2014\/","title":{"rendered":"FAQs | ISDA Credit Derivatives Definitions 2014"},"content":{"rendered":"<p>As the countdown continues towards 22nd September&mdash; here are some notes on the new FAQ on the ISDA Credit Derivatives Definitions.<\/p>\n<p><!--more--><\/p>\n<p>As the countdown continues towards 22nd September&mdash;&nbsp;the go-live date for the 2014 Credit Derivatives definitions&mdash;&nbsp;ISDA continues to publish and update explanatory&nbsp;materials surrounding the definitions. The latest <a href=\"http:\/\/www2.isda.org\/asset-classes\/credit-derivatives\/2014-isda-credit-derivatives-definitions\/\" target=\"_blank\" title=\"http:\/\/www2.isda.org\/asset-classes\/credit-derivatives\/2014-isda-credit-derivatives-definitions\/\" rel=\"noopener nofollow\">update to the list of FAQs<\/a> was published on August 21st.<\/p>\n<p>The document contains 34 FAQs divided into two sections; General Questions and Operational Questions.<\/p>\n<p>Rather than summarizing all 34 questions, I&#39;ve highlighted questions (or aspects of questions) that I find particularly interesting:<\/p>\n<ul>\n<li><strong>The 2014 Definitions Won&#39;t Apply to Everything<\/strong>. As per question (7), the 2014 definitions will not apply to credit derivatives on loan-only transactions, US municipals and asset backed securities. Furthermore, the 2014 definitions will not apply to <u>legacy<\/u> credit derivative positions on a particular subset of corporate, sovereign and financial reference obligations&nbsp;(which ISDA has listed by name) traded prior to 22nd September.<\/li>\n<li><strong>Expect More Documents and Changes<\/strong>. As per question (3),&nbsp;on 22nd September four additional documents will be published by ISDA or Markit. They will address revisions to the terms and conditions of various credit derivatives contracts.<\/li>\n<li><strong>Doc Clause Codes Change to Reflect Economic Differences<\/strong>. The FAQ document dedicates two detailed paragraphs (questions (27) and (28)) to discussing the changes in the &quot;doc clauses&quot;, or restructuring clauses, that are set to go into effect on 22nd September. The existing doc clause codes are to be appended with&nbsp;<em>14<\/em> (e.g. so that&nbsp;<em>XR<\/em>&nbsp;becomes <em>XR14<\/em>). &nbsp;The FAQ document does not explain the economic and operational differences between the old and new doc clauses, so I have summarized them below:\n<ul>\n<li><strong>Old Restructuring (CR):&nbsp;<\/strong>In the existing rules, parties to the CDS have the option to trigger an OR credit event by delivering a Credit Event Notice. In the 2014 definitions this optionality is removed, and an OR credit event is automatically triggered after being announced by the Determinations Committee.<\/li>\n<li><strong>Modified Restructuring (MR) and Modified Modified Restructuring (MMR):&nbsp;<\/strong>The <a href=\"http:\/\/www.markit.com\/cds\/announcements\/resource\/cds_small_bang_07202009_upd.pdf\" target=\"_blank\" title=\"http:\/\/www.markit.com\/cds\/announcements\/resource\/cds_small_bang_07202009_upd.pdf\" rel=\"noopener nofollow\">2009 CDS &quot;Small Bang&quot;<\/a> introduced a number of complexities that resulted in a cumbersome post-credit-event workflow. The 2014 definitions introduce a number of simplifications to the small bang protocol.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>A PDF copy of the August 21st FAQs for the 2014 Credit Derivatives Definitions and Standard Reference Obligations is attached at the bottom of this post.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>As the countdown continues towards 22nd September&mdash; here are some notes on the new FAQ on the ISDA Credit Derivatives Definitions.<\/p>\n","protected":false},"author":1,"featured_media":1631,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2894,52,2848,57],"tags":[3247,3870],"acf":[],"_links":{"self":[{"href":"https:\/\/theotcspace.com\/wp-json\/wp\/v2\/posts\/15851"}],"collection":[{"href":"https:\/\/theotcspace.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/theotcspace.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/theotcspace.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/theotcspace.com\/wp-json\/wp\/v2\/comments?post=15851"}],"version-history":[{"count":0,"href":"https:\/\/theotcspace.com\/wp-json\/wp\/v2\/posts\/15851\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/theotcspace.com\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/theotcspace.com\/wp-json\/wp\/v2\/media?parent=15851"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/theotcspace.com\/wp-json\/wp\/v2\/categories?post=15851"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/theotcspace.com\/wp-json\/wp\/v2\/tags?post=15851"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}