ISDA has published a new interactive digital framework that market participants can use to help prepare for potential terminations of collateralized derivatives contracts.
Launch of the ISDA Close-out Framework is in response to the March 2023 failure of Signature Bank and SVB in the US, which highlighted the complexities of potentially terminating over-the-counter derivatives trading relationships following various post-crisis regulatory reforms. Specifically, in-scope entities are now required to post margin for non-cleared derivatives transactions, while various jurisdictions have introduced mandatory stays on termination rights and remedies as part of bank resolution regimes.
The ISDA Close-out Framework is intended to be used as a preparatory resource to help firms coordinate internal business functions and stakeholders and internal and external legal, operational, risk management, infrastructure and other relevant service providers to ensure they are adequately prepared for any potential future stress events.
The framework includes high-level analysis of the default mechanics and collateral enforcement provisions in ISDA documentation, along with additional commentary on bank resolution legislation in the US and Europe.
“Recent stress events have drummed home that terminating a portfolio of derivatives trades is now much more complex as a result of regulatory reforms. The introduction of mandatory margining and segregation requirements, alongside the implementation of bank resolution regimes, means firms need to be able to quickly respond to complex legal and operational issues that will require input from different teams across the organization. The ISDA Close-out Framework provides an essential interactive tool that firms can use to prepare ahead of any potential stress event,” said Katherine Tew Darras, ISDA’s General Counsel.
The ISDA Close-out Framework is available here: https://close-out.isda.org/#/.
Further information on the ISDA Close-out Framework is available here: https://assets.isda.org/media/5e46315f/06731822.pdf
For Press Queries, Please Contact:
Nick Sawyer, ISDA London, +44 20 3808 9740, nsawyer@isda.org
Joel Clark, ISDA London, +44 20 3808 9760, jclark@isda.org
Christopher Faimali, ISDA London, +44 20 3808 9736, cfaimali@isda.org
Nikki Lu, ISDA Hong Kong, +852 2200 5901, nlu@isda.org
Documents (1) for ISDA Publishes Framework to Prepare for Close Out of Derivatives Contracts
Latest
Response on Dividend Stripping
On October 14, ISDA, the Association for Financial Markets in Europe (AFME) and the International Securities Lending Association (ISLA) submitted a joint response to the Dutch Ministry of Finance on its proposed measures on dividend stripping. While supporting the policy...
ISDA Launches DRR Tracer Agent
ISDA has launched an artificial intelligence (AI) agent for its Digital Regulatory Reporting (DRR) solution that will bring greater transparency to users by tracing the rules and decisions that have guided the development of the DRR. The ISDA DRR Tracer...
US FX Derivatives Review
ISDA has expanded its SwapsInfo website to include data on US foreign exchange (FX) derivatives, extending the platform's coverage beyond interest rate and credit derivatives to a third over-the-counter derivatives asset class. The US FX Derivatives Review covers trading activity...
Response to FCA on Post-trade Transparency
On October 16, ISDA responded to the Financial Conduct Authority’s (FCA) consultation CP26/30. While the consultation is principally focused on cash equity market structure and transparency, ISDA responded to questions on the potential inclusion of equity swaps in the scope...