On February 19, 2013, ISDA released an initial draft of the ISDA Dodd-Frank Protocol 2.0 (Protocol 2.0), part of ISDA's Dodd-Frank documentation initiative which is intended to assist the over-the-counter (OTC) derivatives industry with implementing the regulatory requirements of Title VII of the Dodd-Frank Act. Protocol 2.0 is intended to aid in compliance with the CFTC's final internal business conduct (IBC) rules for swap dealers (SDs) and major swap participants (MSPs) (see Practice Notes, US Derivatives Regulation: Internal Business Conduct (IBC) Rules for Swap Dealers and MSPs ), which address:

Protocol 2.0 complements the already finalized ISDA August 2012 Dodd-Frank Protocol (August Protocol), which helps swap market participants comply with the CFTC's final external business conduct (EBC) rules (see Practice Note, US Derivatives Regulation: External Business Conduct (EBC) Rules for Swap Dealers and MSPs). Together, the August Protocol and Protocol 2.0 (collectively, the Protocol) allow swap trading participants to comply with many Dodd-Frank swaps rules. Parties may supplement existing ISDA Master Agreements by adhering to the Protocol and applying selected compliance provisions to their swap trading relationship documentation.

Note that market participants must submit a separate adherence letter for each protocol they wish to adhere to.

Protocol 2.0 consists of:

The Protocol 2.0 Agreement is a revised version of the final version of the August Protocol Agreement and includes clarified provisions relating to:

ISDA has posted a comparison of the Protocol 2.0 Agreement against the final version of the August Protocol Agreement on the ISDA Website.

The Protocol 2.0 Questionnaire has been updated to reflect the substantive focus of Protocol 2.0 on the final Dodd-Frank IBC rules. As a result, the Protocol 2.0 Questionnaire is substantially different from the August Protocol Questionnaire, which focused on the final EBC rules. For example, a major focus of the Protocol 2.0 Questionnaire is a party's eligibility for the commercial end-user exception, which is partially determinative of whether an OTC swap must be centrally cleared (see Practice Note, US Derivatives Regulation: The Commercial End-User Exception to the Mandatory Swap Clearing Requirement). In contrast, a major focus of the August Protocol Questionnaire was a party's status as an SD, MSP, financial entity or special entity, which dictates how an SD or MSP is to treat a swap counterparty under the final EBC rules.

The Protocol 2.0 Supplement contains substantive schedules that address different aspects of the IBC rules. Parties are required to adhere to Schedules 1 and 2 and may elect to adhere to Schedules 3 and 4 by opting to do so in their questionnaire. The Protocol 2.0 Supplement includes:

Because the August Protocol and Protocol 2.0 address different substantive requirements under Dodd-Frank, practitioners should keep all ISDA documentation current and continue to stay apprised of any ISDA Protocol developments.

For more information on IBC standards for SDs and MSPs, see Practice Notes, US Derivatives Regulation: Internal Business Conduct (IBC) Rules for Swap Dealers and MSPs and US Derivatives Regulation: Requirements for Swap Dealers and MSPs Checklist-Frank.

For more information on ISDA protocols and documentation, see Practice Note, ISDA Documents: Overview (US).