Pursuant to Title VII of the Dodd-Frank Wall Street Reform and Customer Protection Act (Dodd-Frank), the Commodity Futures Trading Commission (CFTC) has adopted a number of final regulations that require swap dealers (SDs) and major swap participants (MSPs) to amend their existing swap trading relationship documentation. To facilitate compliance with these requirements, the International Swaps and Derivatives Association, Inc. (ISDA) initiated a market-wide ISDA Dodd-Frank documentation initiative. The first element of this initiative, the ISDA August 2012 DF Protocol (August Protocol), focused largely on CFTC regulations requiring SDs and MSPs to abide by business conduct standards with respect to their counterparties.

In order to address regulations that the CFTC has adopted since ISDA’s publication of the August Protocol, in October 2012 ISDA published an initial draft of a second protocol (which it later revised in November 2012). Similar to the August Protocol, this second protocol (Protocol 2.0) is intended to facilitate SDs and MSPs compliance with regulations the CFTC has adopted pursuant to Dodd-Frank. On January 25, 2013, ISDA published a revised draft of the ISDA 2013 DF Protocol Supplement (Supplement) portion of Protocol 2.0. The Supplement contains the substantive provisions that will be incorporated into existing trade documentation to facilitate SDs’ and MSPs’ compliance with the following CFTC final rules:

• Confirmation, Portfolio Reconciliation, Portfolio Compression, and Swap Trading Relationship Documentation Requirements for Swap Dealers and Major Swap Participants1;

• End-User Exception to the Clearing Requirement for Swaps2; and

• Clearing Requirement Determination Under Section 2(h) of the Commodity Exchange Act (CEA)3.

The Supplement consists of four “Schedules”:

• Schedule 1 contains definitions;

• Schedule 2 contains general terms for agreements between the parties and certain specific narrower aspects of the trade documentation, swap portfolio reconciliation, and confirmation rules as well as an optional termination provision and provisions relating to the end-user exception to clearing;

• Schedule 3 pertains to the parties’ agreements on daily valuations of swaps for the purposes of internal risk management for SDs and MSPs as well as the dispute resolution process for any such risk valuations; and

• Schedule 4 pertains to how the parties will exchange portfolio data for the purposes of portfolio reconciliation.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sutherland Asbill & Brennan LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.