Back at the end of September in Are you ready? we flagged that ISDA1 was going live with the new 2021 Interest Rate Derivatives Definitions on 4 October.
That happened, but most of the market stayed on 2006 Definitions at the time. Now on 27 November MarkitWire are changing their defaults for new trades to 2021 Definitions, and we think most market participants will follow suit. See MarkitWire's latest presentation from 4 November on their implementation.
NatWest Markets will start defaulting new trades to 2021 Definitions from Monday 29 November as well. However, we will continue to support 2006 Definitions for any counterparties that wish to remain on the old definitions. To stay on 2006 Definitions just contact us and confirm that’s your preference.
As a reminder here are the key points from Are you ready?:
- 2021 ISDA IRD Definitions went live on 4 October, ISDA is no longer amending older definitions now. See the full explanation of the changes on ISDA's hub page and their Key Changes paper.
- MarkitWire will change the defaults for new trades on their user interface to ISDA 2021 from 27 November
- Biggest overhaul by ISDA since 2006, consolidating all the interim supplements, and in a new online format called MyLibrary
- Changes only impact Interest Rate Derivatives... Currency Derivatives are unaffected.
- Need to be ready to process new benchmark rate naming standards in messages (e.g. "USD-SOFR-COMPOUND" becomes "USD-SOFR-OIS Compound")
- Most substantive changes are to the cash settlement provisions for e.g. swaptions and early terminations where 'Cash Price' was used in the past
- 2006 Definitions still permitted, and some counterparties may choose to continue to use them in the near term
- Potential for operational disruption from 27 Nov if counterparties affirm conflicting definitions and confirmations fail to match
Please get in touch through your usual sales contact if you wish to remain on 2006 Definitions or have any other questions about this change.
International Swaps and Derivatives Association