On May 6, 2013, ISDA® released its Derivatives/FX Business Conduct Allocation Protocol (PBBC protocol) designed to assist swap dealers (SDs) in allocating Dodd-Frank external business conduct (EBC) responsibilities in prime brokerage transactions between SDs that are prime brokers (PBs) and executing dealers (EDs) to comply with the conditions of CFTC No-action Letter No. 13-11, permitting allocation of EBC responsibilities in prime brokerage transactions between PBs and EDs. For detailed information on Letter 13-11, see Legal Update, CFTC Issues Prime Broker No-action Relief from Business Conduct Rules.

The PBBC protocol seeks to enable SDs that are parties to Covered Give-up Arrangements to amend the terms of their agreements to include an apportionment of certain responsibilities under the final Dodd-Frank EBC rules (also referred to as external business conduct standards or EBCS) between two registered SDs that are acting in the transaction as its PB and ED, as provided in Letter 13-11. The PBBC protocol is open to both ISDA members and non-members.

In order to adhere to the PBBC protocol, each adhering party must:

Once ISDA approves and accepts the signed letter, it will send a confirmation e-mail, post a conformed copy on its website, and keep the executed copy for its files.

The PBBC protocol is effective for adhering parties (the implementation date) on the later of:

ISDA does not state a closing date for adherence, but reserved the right to designate a closing date for the PBBC protocol by posting notice on the ISDA website 30 days in advance.

Under the PBBC protocol, the PB party agrees to identify in a notice to the ED each PB counterparty or, at the election of the prime broker, class of PB counterparties that includes a PB counterparty, with respect to which, in the PB's good faith determination, the application of the PB protocol is necessary or advisable in order to ensure the PB's compliance with CFTC Regulations §§ 23.400- 23.451 (the EBCS) and the conditions of Letter 13-11 (each PB counterparty or member of a class of PB counterparties is referred to as a "Covered PB counterparty").

The PB agrees to deliver the first such notice no later than May 10, 2013, or, in the event that the implementation date between the PB and ED is later than May 15, 2013, a date to be agreed upon by the PB and ED. The PB may designate additional PB counterparties as Covered PB counterparties or change the designation of any Covered PB counterparty, in subsequent notices to the ED.