ISDA® Publishes Paper on History of CDS Determinations Committees | Practical Law

ISDA® Publishes Paper on History of CDS Determinations Committees | Practical Law

The International Swaps and Derivatives Association (ISDA) published a paper on the three-year history of the ISDA Credit Derivatives Determinations Committees.

ISDA® Publishes Paper on History of CDS Determinations Committees

Practical Law Legal Update 5-519-3816 (Approx. 3 pages)

ISDA® Publishes Paper on History of CDS Determinations Committees

by PLC Finance
Published on 10 May 2012 • USA (National/Federal)
The International Swaps and Derivatives Association (ISDA) published a paper on the three-year history of the ISDA Credit Derivatives Determinations Committees.
On May 1, 2012, the International Swaps and Derivatives Association (ISDA®) published a paper that reviews the history of the ISDA Credit Derivatives Determinations Committees (DCs). Since their formation, the DCs have considered more than 900 questions, about 96% of which were decided unanimously. In 63 of the 83 instances that the DCs were asked to consider whether a credit event had occurred, the DCs determined that a credit event had, in fact, occurred.
The five regional DCs were established in March 2009 to bring greater standardization to the credit derivatives market. Their role is to make binding determinations regarding key provisions of credit default swaps (CDS) contracts, including whether:
  • A credit event has occurred.
  • An auction should be held to determine the final price of a CDS settlement and, if so, which obligations should be delivered or valued in the auction.
  • A succession event has occurred.
All market participants who use ISDA documentation for their CDS transactions agree to abide by the findings of the DCs.
The paper also covers:
  • The current structure of the DCs, including:
    • establishment of the DCs;
    • composition of the DCs;
    • the DC voting standards and process; and
    • external review of DC decisions.
  • The development of the DCs, including:
    • the history of the voluntary auction protocols;
    • supervisory expectations for CDS standardization;
    • the push toward standardization; and
    • the provision of a forum to address market events.
For more information on the paper, see ISDA's press release.
To learn more about ISDA's role in the credit derivatives market, see Practice Notes, Credit Derivatives: Overview (US) and Understanding the Auction Settlement and Restructuring Supplement to the 2003 ISDA® Credit Derivatives Definitions.
"ISDA" is a registered trademark of the International Swaps and Derivatives Association, Inc. (ISDA). ISDA is not a sponsor of Practical Law and had no part in the development of this resource.