ISDA and Markit Begin Onboarding for Compliance Tool

Robert Pickel
Robert Pickel, ISDA

ISDA Amend allows swap market participants to amend ISDA Master Agreements and bilaterally exchange information necessary to comply with rules applicable to over-the-counter (OTC) derivatives transactions.

The International Swaps and Derivatives Association (ISDA) and Markit announced that they are onboarding buy-side market participants to ISDA Amend, their joint technology-based solution that facilitates compliance with certain Dodd-Frank regulatory requirements.

The Markit-built solution provides a single online tool that allows swap market participants to simultaneously amend multiple ISDA Master Agreements and other agreements governing swaps, as well as bilaterally exchange information necessary to facilitate compliance with the External Business Conduct rules applicable to over-the-counter (OTC) derivatives transactions subject to the rules. ISDA Amend utilizes the technology platform provided by Markit Document Exchange (MDE), a service already used by swaps market participants to manage counterparty documents.

Compliance with Commodity Futures Trading Commission (CFTC) External Business Conduct Rules is required by October 14, 2012.

Market participants can start the amendment process by first adhering to the new ISDA August 2012 Dodd-Frank Protocol, which was launched on August 13. The Protocol consists of a series of amendments to existing documentation, as well as standardized questionnaires that enable counterparties to match and exchange know-your-customer (KYC) information securely.

After adhering to the Protocol, buy-side firms may then use ISDA Amend to complete a portion of the Protocol questionnaire focused on identifying and categorizing legal entities or funds. The remainder of the questionnaire is scheduled to become available in September.

"We believe ISDA Amend is an effective solution to automate the information-gathering process and provide sharing of submitted data and documents to permissioned counterparties," says ISDA CEO Robert Pickel.

A partial list of swaps dealers that have committed or confirmed their intention to use ISDA Amend includes: BofA Merrill Lynch, BNP Paribas, Barclays, Citi, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Nomura, RBS, Société Générale, State Street and UBS.

The Dodd-Frank Act and related regulatory rulemakings impact OTC derivatives documentation by either requiring amendments to such documentation or imposing compliance requirements on market participants that must be satisfied by amending such documentation. Major dealers may have in excess of 10,000 counterparties with whom they have signed Master Agreements, and many end-users may be counterparties with multiple dealers. This creates significant levels of legal and administrative complexity and the potential for duplication of efforts as firms attempt to comply with the new rules.

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