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banking and finance

banking and finance | 30 Apr 2021
BY Kelle Gagné

2006 ISDA Definition booklets – bound for the recycling bin?

Around 17 May 2021, the International Swaps and Derivatives Association (“ISDA”) is expected to replace our battled-scarred 2006 ISDA Definitions booklets by publishing the new 2021 ISDA Interest Rate Derivatives Definitions (the “New Definitions”). In ISDA’s own words, it is publishing the New Definitions to update some market practices, interest rate definitions, calculation agent provisions and fallbacks, as well as to simply do away with the 15-year old purple book and its approximate 70 updates that have been issued over the years to keep up to date.

Some important changes we can expect to see are:

  • a movement to a matrix of interest rates grouped by administrator, rather than publication source;
  • new provisions for unscheduled market closures;
  • standard dispute resolution provisions for calculation agent determinations of cash settlement and fallback provisions; and
  • the introduction of generic fallback provisions for index cessation events with no specific fallbacks already in place.

Furthermore, the New Definitions will only be published in electronic format, which will be updated in full when required.

ISDA has not yet determined whether a protocol will be introduced to allow market participants to convert their trades under the 2006 ISDA Definitions into trades under the New Definitions.

It is expected that the New Definitions will come into effect for clearing houses and other market infrastructures from the weekend of 2 October 2021, at which point ISDA will also cease to update the 2006 ISDA Definitions.

Kelle Gagné
Banking and Finance | Executive
+27 82 853 4312