The International Swaps and Derivatives Association (ISDA) has chosen Markit to help deliver a technology solution to enable counterparties to amend their OTC derivatives documentation in advance of Dodd-Frank requirements.
The regulation requires amendments to the documentation or imposes compliance requirements on market participants that must be satisfied by amending such documentation. The number of counterparty master agreements – in excess of 10,000 – means that broker dealers face significant levels of legal and administrative complexity and the potential for the duplication of efforts as firms attempt to comply with the new rules.
ISDA is leading an industry-wide initiative to produce a series of amendments to existing documentation and provide standardised counterparty questionnaires, facilitated by an ISDA protocol. Unlike with previous ISDA protocols where amendments were effected solely with delivery of an adherence letter, this protocol will include additional bilateral delivery requirements as each party that signs up must also deliver a completed questionnaire to each relevant counterparty for the amendments and compliance to be effective. As a result of these additional bilateral delivery requirements, ISDA sought to develop a technology-based solution to automate the information-gathering process and provide sharing of submitted data and documents to permissioned counterparties.
Markit’s selection as the service provider for this initiative was the culmination of a public request for proposals process.
ISDA and Markit expect to have an electronic questionnaire and reporting structure operational by 1 August in order to facilitate compliance with Dodd-Frank External Business Conduct rule October deadlines, with successive iterations available prior to other regulatory implementation deadlines.
ISDA and Markit expect the solution to be enhanced to facilitate compliance with regulatory requirements in other jurisdictions as they are finalised.
Reporting by Janet du Chenne, Global Custodian, an Asset International publication