INTERNATIONAL: ISDA publishes Additional Provisions relating to Credit Derivative Transactions

Thursday June 27 2013

The International Swaps and Derivatives Association, Inc. (ISDA) on 25 June 2013 announced the publication of Additional Provisions relating to Credit Derivative Transactions with a Restricted Delivery Party where Physical Settlement applies.

The Additional Provisions are for use where the settlement method is physical settlement (either as the fall-back settlement method or otherwise) and either party to the Credit Derivative Transaction is restricted from holding a Loan or there is a limit on the outstanding principal balance of a Bond which it may hold. This may be the case where, for example, the protection seller is a UCITS (Undertakings for Collective Investment in Transferable Securities) fund. The Additional Provisions provide for cash settlement rather than physical settlement to occur in these cases.

The Additional Provisions have been prepared for use with Credit Derivatives Transactions that incorporate the 2003 ISDA Credit Derivatives Definitions as supplemented by the 2009 ISDA Credit Derivatives Determinations Committees, Auction Supplement and Restructuring Supplement published on 14 July 2009.

The publication of the Additional Provisions is a separate initiative to the on-going and previously discussed project to update the Credit Derivatives Definitions.

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