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Record numbers sign-up to ISDA credit derivatives protocol

25 November 2005  |  7994 views  |  0 global_4

The International Swaps and Derivatives Association (ISDA) says more than 1400 market participants have agreed to use its new electronic messaging protocol for contract transfers of credit and interest rate derivatives.

The protocol - which will initially apply to credit and interest rate derivatives - is designed to streamline the transfer of existing trades to third parties via the exchange of electronic assignment messages rather than written consent, as is currently the case.

ISDA says the number of firms signed up to use the protocol has jumped from 700 a month ago to almost 1500. Originally set to close 31 October, the industry body has extended the adherence period until 30 November. ISDA says the number of firms that have signed up to the terms of the protocol sets a new record for adherence to a voluntary initiative.

Earlier this year the Federal Reserve Bank of New York summoned 14 banks to a meeting to discuss concerns about risk management practices and back office problems in the credit derivatives markets. In particular, regulators are concerned by the high level of unsigned confirmations outstanding between counterparties with, in some cases, transactions remaining unconfirmed for months.

The new protocol stipulates a 6pm deadline for completing transfer of a contract. However last week 18 dealers agreed to adopt a two-hour guideline for responding to single trade requests using standard protocol templates and e-mailed to the appropriate address.

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