Publication
Australian Arbitration Week 2024
Australian Arbitration Week took place between 13 – 18 October 2024 in Brisbane.
Global | Publication | October 2023
In response to member feedback, the International Swaps and Derivatives Association, Inc. (ISDA) launched the ISDA 2023 ISDA Equity Swap – 2021 Definitions Protocol (the Protocol) on 30th October 2023, allowing adhering parties to incorporate the 2021 ISDA Interest Rate Derivatives Definitions (the 2021 Definitions) to relevant existing equity swap documentation that currently reference the ISDA 2006 Definitions.
This briefing provides an overview of the Protocol.
Equity swaps entered into under an ISDA Master Agreement primarily rely on the 2002 ISDA Equity Derivatives Definitions as the basis for standardised equity related definitions and provisions. Additionally, parties commonly incorporate ISDA’s interest rate derivatives definitions to describe the interest rate cashflows in equity swaps. To date, the interest rate derivatives definitions referenced in equity swap documentation have been the 2006 ISDA Definitions (the 2006 Definitions).
Since the 2006 Definitions were published, there have been numerous changes in market structure, regulations, technology, and market practice. ISDA published numerous supplements over time to address those changes and developments, which led to the 2006 Definitions becoming unwieldy and difficult to use. Furthermore, at the end of 2021, ISDA stopped supporting the 2006 Definitions and, consequently, these are no longer being updated. As a result, the 2006 Definitions will continue to be more and more outdated as time goes by. The 2021 Definitions address the shortcomings of the 2006 Definitions and are being regularly updated. These have now largely superseded the 2006 Definitions. In light of the above, reasons to transition newly executed equity swaps onto the 2021 Definitions are now compelling.
The Protocol enables parties to certain equity swap documents (the Protocol Covered Documents) to amend the terms of each such document to incorporate the 2021 Definitions, in place of the 2006 Definitions, as set out in the attachment to the Protocol (the Attachment). In particular, the Attachment provides for the following amendments:
The Attachment further clarifies that:
The amendments described above only apply to Protocol Covered Documents, which include any equity swap master confirmation agreement (including the template equity swap transaction supplements contained therein) (each, an MCA) that:
Notwithstanding the foregoing, Protocol Covered Documents exclude:
Pre-adherence to the Protocol opened on 16th October 2023, until 29th October, for those sell-side institutions who committed to adhering during a pre-adherence window, with the aim encouraging broad industry adherence once the Protocol is officially launched. General adherence opened on 30th October. However, the Protocol will not take effect until 18th March 2024 (the Protocol Effective Date), giving parties time to implement changes, perform internal systems’ updates and get operationally ready before the Protocol Effective Date. Adherence to the Protocol will remain open after the Protocol Effective Date, in which case, it would take effect from the date on which the later of the two adhering parties adheres to the Protocol.
Publication
Australian Arbitration Week took place between 13 – 18 October 2024 in Brisbane.
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