Stay now: industry associations finalise ISDA protocol
12 November 2015 Zurich
Image: Shutterstock
The revised International Swaps and Derivatives Association (ISDA) stay protocol that includes a new dedicated securities finance annex has received the backing of 21 systematically important banks.
Industry trade groups the Securities Industry and Financial Markets Association (SIFMA) and the International Capital Market Association (ICMA) jointly announced the publication of the Securities Financing Transaction (SFT) Annex, which forms part of the ISDA 2015 Universal Resolution Stay Protocol.
Statutory resolution regimes have been implemented in several jurisdictions, including the US and EU, where regulators will be able to issue a temporary stay on counterparties’ early termination rights in the event a bank enters into resolution.
But it was uncertain whether these stays would extend to contracts governed by foreign law, according to ICMA and SIFMA.
Financial institutions adhering to the new protocol agree to abide by certain overseas national resolution regimes, ensuring cross-border trades with counterparties in those jurisdictions are subject to the stays.
The SFT Annex, developed with the assistance of the International Securities Lending Association (ISLA), expands the parameters of the original 2014 stay protocol to include securities financing transactions documented under master agreements sponsored by SIFMA, ICMA and ISLA.
The SFT Annex will enable adhering parties that use SIFMA-, ICMA- and ISLA-sponsored securities finance master agreements to comply with forthcoming regulations requiring the recognition of bank resolution stays in cross-border contractual arrangements.
Specifically, the SFT Annex opts adhering parties into certain existing and forthcoming special resolution regimes that provide for temporary stays on early termination rights in the event a bank counterparty enters into resolution.
SIFMA president and CEO Kenneth Bentsen Jr commented: “Regulators have prioritised resolution stays in their efforts to promote financial stability. SIFMA is committed to providing our members’ expertise and insight to this proactive industry effort to develop workable protocols that support forthcoming regulatory requirements.”
A separate protocol is also being developed for other market participants, including the buy side, end-user firms and other banks, providing them with a tool to comply with forthcoming regulations requiring the inclusion of stays within financial contracts.
The additional protocol will be published next year for those firms that choose to use it.
Regulations requiring financial contracts to incorporate contractual stays are expected to be implemented in several jurisdictions from early next year.
Industry trade groups the Securities Industry and Financial Markets Association (SIFMA) and the International Capital Market Association (ICMA) jointly announced the publication of the Securities Financing Transaction (SFT) Annex, which forms part of the ISDA 2015 Universal Resolution Stay Protocol.
Statutory resolution regimes have been implemented in several jurisdictions, including the US and EU, where regulators will be able to issue a temporary stay on counterparties’ early termination rights in the event a bank enters into resolution.
But it was uncertain whether these stays would extend to contracts governed by foreign law, according to ICMA and SIFMA.
Financial institutions adhering to the new protocol agree to abide by certain overseas national resolution regimes, ensuring cross-border trades with counterparties in those jurisdictions are subject to the stays.
The SFT Annex, developed with the assistance of the International Securities Lending Association (ISLA), expands the parameters of the original 2014 stay protocol to include securities financing transactions documented under master agreements sponsored by SIFMA, ICMA and ISLA.
The SFT Annex will enable adhering parties that use SIFMA-, ICMA- and ISLA-sponsored securities finance master agreements to comply with forthcoming regulations requiring the recognition of bank resolution stays in cross-border contractual arrangements.
Specifically, the SFT Annex opts adhering parties into certain existing and forthcoming special resolution regimes that provide for temporary stays on early termination rights in the event a bank counterparty enters into resolution.
SIFMA president and CEO Kenneth Bentsen Jr commented: “Regulators have prioritised resolution stays in their efforts to promote financial stability. SIFMA is committed to providing our members’ expertise and insight to this proactive industry effort to develop workable protocols that support forthcoming regulatory requirements.”
A separate protocol is also being developed for other market participants, including the buy side, end-user firms and other banks, providing them with a tool to comply with forthcoming regulations requiring the inclusion of stays within financial contracts.
The additional protocol will be published next year for those firms that choose to use it.
Regulations requiring financial contracts to incorporate contractual stays are expected to be implemented in several jurisdictions from early next year.
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