Isda launches final stage of hard-wiring auction settlement

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NEW YORK - The International Swaps and Derivatives Association has embarked on the final stage of its 'hard-wiring' process for the incorporation of auction settlement terms into standardised credit default swap (CDS) documentation.

According to Isda, the launch of its auction settlement supplement and protocol removes the need for existing credit event protocols that require dealer and buy-side representatives to determine whether credit events have taken place and 'credit and succession event backstop dates' that institute a common standard effective date for CDS trades.

In combination with the changes in market practice that support standard coupons for CDSs, these developments will introduce greater certainty to transactional, operational and risk considerations for treatment of CDSs.

"This is a major milestone in the ongoing refinement of practices and processes for the efficient, liquid and transparent conduct of the CDS business," said Robert Pickel, Isda's executive director and chief executive officer. "Hard-wiring is central to the many improvements Isda and the industry are making to the CDS contract to further ensure that infrastructure and standards for transacting these important risk management instruments are straightforward, secure and widely implemented."

"Isda welcomes the commendation of these developments by the Senior Supervisors Group in its report, 'Observations on Management of Recent Credit Default Swap Credit Events'. Supervisory recognition that these efforts will reduce uncertainty and make credit event management more operationally efficient is extremely encouraging," said Pickel.

Isda released a webcast addressing its initiatives changes which is available here.

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