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    ISDA Announces Results of Consultation to Implement Swap Fallbacks

    July 23, 2021

    The International Swaps and Derivatives Association (ISDA) published an updated and enhanced version of its definitional booklet for interest rate derivatives, marking a big step in the shift to digital documentation. Along with this, ISDA launched a new digital documentation platform to improve the ability of firms to efficiently access and navigate ISDA documents. The platform called MyLibrary will initially include the new 2021 ISDA Interest Rate Derivatives Definitions and the 2002 ISDA Master Agreement. Other documentation will be available in digital form via the platform over time. In a separate development, ISDA announced the results of its consultation on the implementation of fallbacks for the sterling LIBOR ICE Swap Rate and the USD LIBOR ICE Swap Rate. The results indicate that a significant majority of respondents agree with the fallback provisions set out in the draft amendments attached to the consultation.

    The amendments in the consultation implement the fallbacks suggested by the Non-Linear Task Force of the Working Group on Sterling Risk-Free Reference Rates in the UK and a Subcommittee of the Alternative Reference Rates Committee in the US. Respondents to the consultation satisfied the criteria specified in the consultation for ISDA to publish a Supplement to the 2006 ISDA Definitions to incorporate the sterling LIBOR ICE Swap Rate fallback provisions and a Supplement to incorporate the US dollar LIBOR ICE Swap Rate fallback provisions as well as template language that counterparties could use to negotiate bilateral amendments for incorporation of the amended terms in legacy derivative contracts. A report analyzing the consultation results will be available in the coming weeks. ISDA will also begin finalizing the amendments to implement fallbacks for the sterling LIBOR ICE Swap Rate as soon as possible and will finalize the amendments to implement fallbacks for the USD LIBOR ICE Swap Rate when a SOFR swap rate is published in a form that can be referenced in financial instruments. On July 19, 2021, ISDA had launched its Understanding IBOR Benchmark Fallbacks microsite on its newly redesigned Benchmark Reform and Transition from LIBOR InfoHub. The microsite was developed in coordination with The Brattle Group and provides background information about key interbank offered rate fallbacks.

     

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    Keywords: International, Banking, Securities, Insurance, Benchmark Reforms, LIBOR Transition, ICE Swap Rate, Benchmark Fallbacks, LIBOR, Derivatives, Interest Rate Derivatives, ISDA Definitions, ISDA

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