ISDA Resolution Stay Jurisdictional Modular Protocol

Swiss Jurisdictional Module

ISDA has prepared this list of frequently asked questions to assist in your consideration of the SWISS JURISDICTIONAL MODULE to the ISDA RESOLUTION STAY JURISDICTIONAL MODULAR PROTOCOL (the ISDA Jurisdictional Modular Protocol).

THESE FREQUENTLY ASKED QUESTIONS DO NOT PURPORT TO BE AND SHOULD NOT BE CONSIDERED A GUIDE TO OR AN EXPLANATION OF ALL RELEVANT ISSUES OR CONSIDERATIONS IN CONNECTION WITH THE SWISS JURISDICTIONAL MODULE. PARTIES SHOULD CONSULT WITH THEIR LEGAL ADVISERS AND ANY OTHER ADVISER THEY DEEM APPROPRIATE PRIOR TO USING OR ADHERING TO THE SWISS JURISDICTIONAL MODULE.  ALL TRANSLATIONS OF GERMAN WORDS OR PHRASES ARE UNOFFICIAL. ISDA ASSUMES NO RESPONSIBILITY FOR ANY USE TO WHICH ANY OF ITS DOCUMENTATION MAY BE PUT.

These FAQs address the following questions:

• What is the purpose of the Swiss Jurisdictional Module?
• How does adherence to the Swiss Jurisdictional Module and the ISDA Jurisdictional Modular Protocol work?
• How does the Swiss Jurisdictional Module relate to the Swiss Regulation?
• Why are certain terms in italics and others in quotation marks?
• What agreements are Covered Agreements under the Swiss Jurisdictional Module?
• What entities are Regulated Entities under the Swiss Jurisdictional Module?
• When does the Swiss Jurisdictional Module become effective?
• What are the compliance dates for the Swiss Regulation?
• How do I sign up to the Swiss Jurisdictional Module?

The ISDA Jurisdictional Modular Protocol is designed to facilitate market participants’ compliance with regulations regarding contractual stays in financial contracts governed by third-country law in different jurisdictions. As regulations are adopted in a jurisdiction, a “Jurisdictional Module” to the ISDA Jurisdictional Modular Protocol can be published that includes operational provisions based on the text of that regulation and aimed at enabling parties to comply with those requirements. A party can adhere to a particular Jurisdictional Module by submitting an Adherence Letter for such Jurisdictional Module. Each Jurisdictional Module is considered individually. For more information on the ISDA Jurisdictional Modular Protocol and adherence to the ISDA Jurisdictional Modular Protocol, please see the general FAQs for the ISDA Jurisdictional Modular Protocol.

The Swiss Jurisdictional Module was published as a Jurisdictional Module to the ISDA Jurisdictional Modular Protocol on October 31, 2017.

What is the purpose of the Swiss Jurisdictional Module?

The Swiss Jurisdictional Module was created to allow market participants to comply with Article 12 para. 2bis of the Banking Ordinance of the Swiss Federal Council of 30 April 2014, as supplemented by Chapter 5 Article 56 and 61a of the Ordinance of the Swiss Financial Market Supervisory Authority on the Insolvency of Banks and Securities Dealers as construed in accordance with Swiss law (Swiss Regulation) regarding contractual stays in certain financial contracts that are subject to foreign law or that explicitly identify a place of jurisdiction outside Switzerland.Adhering Parties will be able to adhere to the Swiss Jurisdictional Module and identify themselves as either “Regulated Entities” that are subject to the Swiss Regulation or “Module Adhering Parties” that are adhering for the purpose of satisfying the regulatory requirements applicable to their counterparties under the Swiss Regulation.

How does adherence to the Swiss Jurisdictional Module and the ISDA Jurisdictional Modular Protocol work?

Does a Module Adhering Party have to amend its Covered Agreements with all Regulated Entities?

No, a Module Adhering Party has the ability to choose the Regulated Entity or Regulated Entities it would like to amend its Covered Agreements with when it adheres to the Swiss Jurisdictional Module. Once a Module Adhering Party chooses to amend its agreements with a particular Regulated Entity, that Regulated Entity is defined as a “Regulated Entity Counterparty” with respect to that particular Module Adhering Party and to the Swiss Jurisdictional Module.

Module Adhering Parties have multiple options for how they can choose the Regulated Entity or Regulated Entities they would like to amend their Covered Agreements with.

How can a Module Adhering Party choose which Regulated Entities it will amend its Covered Agreements with?

A Module Adhering Party with respect to the Swiss Jurisdictional Module may choose the Regulated Entity or Regulated Entities it would like to amend its Covered Agreements with by choosing between the following three options in its Adherence Letter:

1. All Regulated Entities: Under this option, a Module Adhering Party identifies every Adhering Party that has identified itself as a “Regulated Entity” with respect to the Swiss Jurisdictional Module to be a Regulated Entity Counterparty with respect to it. That means that the Module Adhering Party is agreeing to amend all of the relevant Covered Agreements with all of the Regulated Entities that have adhered or will adhere in the future to the Swiss Jurisdictional Module.
2. All G-SIBs: Under this option, a Module Adhering Party identifies any current or future Regulated Entity with respect to the Swiss Jurisdictional Module that is part of a banking group that has been designated by the Financial Stability Board as a “global systemically important bank” (G-SIB), as of the date of the publication of the Swiss Jurisdictional Module, as a Regulated Entity Counterparty with respect to it. This election would include Regulated Entities within such G-SIB group that subsequently adhere to such Jurisdictional Module but not Regulated Entities that are members of banking groups that are subsequently identified as G-SIBs.
3. Entity-by-Entity: Under this option, the Module Adhering Party chooses to identify one or more Regulated Entities with respect to the Swiss Jurisdictional Module as Regulated Entity Counterparties with respect to it. The Module Adhering Party can notify each Regulated Entity that it identifies as a Regulated Entity Counterparty, either through ISDA Amend or by sending a bilateral “Module Adherence Notice” directly to such Regulated Entity. Note that a Module Adhering Party that chooses to identify one or more Regulated Entities as Regulated Entity Counterparties with respect to it may choose between Regulated Entities in the same banking group within the Swiss Jurisdictional Module.

Once I submit my Adherence Letter, is my adherence to the Swiss Jurisdictional Module complete or are there any other steps I have to take?

Depending on the elections you make as a Module Adhering Party, you may be required to send notices to Regulated Entity Counterparties after you submit your Adherence Letter to complete your adherence to the Swiss Jurisdictional Module.

Entity-by-Entity Designation

If you adhere as a Module Adhering Party and elect to identify Regulated Entity Counterparties on an “Entity-by-Entity” basis (i.e., option 3 above), you need to take steps to identify Regulated Entity Counterparties. You can do this either (1) through ISDA Amend or (2) by sending a bilateral “Module Adherence Notice” to each Regulated Entity Counterparty. Your contracts will not be amended until the date you notify a Regulated Entity that it is a Regulated Entity Counterparty with respect to you.

If you wish to use ISDA Amend to identify one or more specific Regulated Entities as Regulated Entity Counterparties with respect to you, you may do so by using the ISDA Amend website (http://www.markit.com/product/isda-amend). To use the ISDA Amend website, you will need to have an account with ISDA Amend, log in and complete the steps necessary to make Entity-by-Entity elections.

If you wish to identify one or more specific Regulated Entities as Regulated Entity Counterparties with respect to you by sending such Regulated Entity or Regulated Entities bilateral Module Adherence Notices, rather than through ISDA Amend, such notices must at a minimum (1) identify the Module Adhering Party and the Jurisdictional Module and (2) identify the Regulated Entity as a Regulated Entity Counterparty with respect to the Module Adhering Party. ISDA has published a sample Module Adherence Notice (http://assets.isda.org/media/f253b540-102/3eb0dc21.docx) that Module Adhering Parties can use to make Entity-by-Entity elections.

Adherence as an Agent on Behalf of Clients

If you are an agent adhering on behalf of “some but not all” clients, you must either identify the clients on whose behalf you are adhering in an annex to your Adherence Letter (which will be made public on the ISDA website) or send a list to each Regulated Entity Counterparty with respect to such clients identifying the clients on whose behalf you are adhering.

If you are an agent adhering on behalf of “all” clients that you represent, you may, but are not required to, identify the clients on whose behalf you are adhering, either in an annex to your Adherence Letter (which will be made public on the ISDA website) or by sending a list of the clients on whose behalf you are adhering to each Regulated Entity Counterparty with respect to such clients.

If you wish to use ISDA Amend to notify your Regulated Entity Counterparties of the clients on whose behalf you are adhering, you may do so by using the ISDA Amend website(http://www.markit.com/product/isda-amend).To use the ISDA Amend website, you will need to have an account with ISDA Amend, log in and complete the steps necessary to provide Regulated Entity Counterparties with the lists of clients on whose behalf you are adhering.

If you wish to bilaterally notify your Regulated Entity Counterparties of the clients on whose behalf you are adhering, ISDA has published a sample Underlying Funds Notice (http://assets.isda.org/media/f253b540-103/af6818e9.docx) that agents can use to notify their Regulated Entity Counterparties of the clients on whose behalf they are adhering.

How does the Swiss Jurisdictional Module relate to the Swiss Regulation?

The Swiss Jurisdictional Module is intended to facilitate compliance with the Swiss Regulation. The provisions of the Swiss Jurisdictional Module that amend Covered Agreements are based on the provisions of the Swiss Regulation. Note, however, that as discussed in Question 4 of the general FAQs for the ISDA Jurisdictional Modular Protocol, amendments in a Jurisdictional Module, including the Swiss Jurisdictional Module, are made to Covered Agreements on a “retrospective” and “prospective” basis, even if this is not required by the Swiss Regulation.

Parties should consult with their legal advisers and any other adviser they deem appropriate to understand the requirements of the Swiss Regulation.

Why are certain terms in italics and others in quotation marks?

Words and phrases in quotation marks have the meaning given in the Swiss Regulation to the bracketed and italicized German word or phrase immediately following such word or phrase. The Swiss Jurisdictional Module is interpreted in accordance with the Swiss Regulation.

What agreements are Covered Agreements under the Swiss Jurisdictional Module?

Swiss Regulated Agreements, as defined under the Swiss Jurisdictional Module, are Covered Agreements under the Swiss Jurisdictional Module.

A Swiss Regulated Agreement is, as such terms are defined in the Swiss Regulation:

(a)        a “contract for the purchase, sale, lending or repurchase agreements relating to certificated securities, uncertificated securities or intermediated securities and corresponding transactions involving indices containing these underlying assets, as well as options in relation to such underlying assets;” (Vertrag über den Kauf, den Verkauf, die Leihe oder Pensionsgeschäfte in Bezug auf Wertpapiere, Wertrechte oder Bucheffekten und entsprechende Geschäfte bezüglich diese beinhaltenden Indizes sowie Optionen in Bezug auf solche Basiswerte);

(b)        a “contract for the purchase and sale with future delivery, lending or repurchase agreements relating to commodities and corresponding transactions involving indices containing these underlying assets, as well as options in relation to such underlying assets;” (Vertrag über den Kauf und Verkauf mit künftiger Lieferung, die Leihe oder Pensionsgeschäfte in Bezug auf Waren und entsprechende Geschäfte bezüglich diese beinhaltenden Indizes, sowie Optionen in Bezug auf solche Basiswerte);

(c)        a “contract for the purchase, sale or transfer of commodities, services, rights or interest at a predetermined price and at a future date (futures contract);” (Vertrag in Bezug auf den Kauf, Verkauf oder Transfer von Waren, Dienstleistungen, Rechten oder Zinsen zu einem im Voraus bestimmten Preis und einem künftigen Datum (Terminkontrakte));

(d)       a “contract for swap transactions relating to interest, foreign exchange, currencies or commodities as well as to certificated securities, uncertificated securities, intermediated securities, the weather, emissions or inflation, and corresponding transactions involving indices containing these underlyings, including credit derivatives and interest rate options;” (Vertrag über Swap-Geschäfte bezüglich Zinsen, Devisen, Währungen, Waren sowie Wertpapieren, Wertrechten, Bucheffekten, Wetter, Emissionen oder Inflation und entsprechende Geschäfte bezüglich diese beinhaltender Indizes, einschliesslich Kreditderivate und Zinsoptionen);

(e)        an “interbank borrowing agreement;” (Kreditvereinbarung im Interbankenverhältnis);

(f)        “each other contract with the same effect as those listed under (a)-(e);” (alle anderen Verträge mit gleicher Wirkung wie diejenigen nach Buchstaben a-e);

and

(g)        a “contract in accordance with (a)-(f) in the form of a master agreement,” (Vertrag nach Buchstaben a-f in Form von Rahmenvereinbarungen)

in each case, that (i) is “subject to foreign law” (untersteht ausländischem Recht) or “explicitly identifies a place of jurisdiction outside Switzerland” (sieht einen ausländischen Gerichtsstand vor) and (ii) is not an Excluded Agreement.

An “Excluded Agreement” is, as such terms are defined in the Swiss Regulation:

with respect to a Regulated Entity that is a “foreign group entity” (ausländische Gruppengesellschaft),

(a)        a “contract” (Vertrag) entered into by such “foreign group entity” (ausländische Gruppengesellschaft) the “performance” (Erfüllung) of which is not “secured or guaranteed” (sichergestellt) by a “bank” (Bank) or “securities dealer” (Effektenhändler) “domiciled in Switzerland” (mit Sitz in der Schweiz); and

with respect to all Regulated Entities,

(b)        a “contract” (Vertrag) that does not provide for the “termination” (Beendigung) or “exercise of rights” (Ausübung von Rechten) pursuant to Article 30a para. 1 of the “Banking Act” (Bankengesetz) that are “directly or indirectly triggered” (direkt oder indirekt begründet) by “measures” (Massnahmen) taken by FINMA in accordance with the “eleventh section” (elfter Abschnitt) of the “Banking Act” (Bankengesetz);

(c)        a “contract” (Vertrag) that is “concluded” (abgeschlossen) or “cleared” (abgerechnet) “directly or indirectly through” (direkt oder indirekt über) a “financial market infrastructure” (Finanzmarktinfrastruktur) or “organized trading facility” (organisiertes Handelssystem); and

(d)       a “contract” (Vertrag) relating to the “placement of financial instruments in the market” (Platzierung von Finanzinstrumenten im Markt).

What entities are Regulated Entities under the Swiss Jurisdictional Module?

A Regulated Entity under the Swiss Jurisdictional Module is, as defined in the Swiss Regulation, any “bank” (Bank) within the meaning of Article 1 “Banking Act” (Bankengesetz) and any “group entity” (Gruppengesellschaft), other than any “group entity” (Gruppengesellschaft) that is not “active” (tätig) in the “financial services sector” (im Finanzbereich).

When does the Swiss Jurisdictional Module become effective?

The Swiss Jurisdictional Module becomes effective on the later of the applicable compliance date for a Module Adhering Party and a Regulated Entity Counterparty under the Swiss Regulation and the “Implementation Date” with respect to a Module Adhering Party and a Regulated Entity Counterparty.

Even if a party adheres to the Swiss Jurisdictional Module prior to the applicable compliance date under the Swiss Regulation, amendments will not be made by the Swiss Jurisdictional Module until required under the Swiss Regulation.

What are the compliance dates for the Swiss Regulation?

If one party to, or beneficiary of, a Covered Agreement is a Regulated Entity and the other party, or beneficiary, is either a “bank” (Bank) or “securities dealer” (Effektenhändler), or would be a “bank” (Bank) or “securities dealer” (Effektenhändler) if it was domiciled in Switzerland, the compliance date for the Swiss Regulation is April 1, 2018.

Otherwise, the compliance date for the Swiss Regulation is October 1, 2018.

How do I sign up to the Swiss Jurisdictional Module?

Please see the general ISDA Jurisdictional Modular Protocol FAQs for information on adherence to Jurisdictional Modules and the ISDA Jurisdictional Modular Protocol.