The International Swaps and Derivatives Association, the trade group for the over-the-counter derivatives market, has launched an all-encompassing equity derivatives protocol, called the Isda Equity MCA Protocol, that the organization says constitutes a "significant step in a program to enhance operational efficiency in the equity derivatives markets internationally".
The protocol, which is available publicly on Isda’s website (www.isda.org), is designed to let market participants agree to incorporate, by reference and on a multilateral basis with other adhering counterparties, the terms of any one or all of a set of Isda master confirmation agreements – the documentation used by dealers to complete transactions – that the organization has published in the past. It hopes the single protocol will help reduce outstanding confirmations. The past master confirmation agreements are: the 2007 Americas Master Variance Swap agreement, the 2007 Asia Excluding Japan (AEJ) Master Variance Swap agreement, the 2007 European Master Equity agreement (which covers options and equity finance share swaps referencing European underlyings), the revised 2007 European Variance Swap agreement, and the 2006 Japan Variance Swap agreement.
The new protocol also incorporates Isda’s recently published equity finance swap (EFS) annex to its 2007 European Master Equity confirmation agreement. Isda produced the EFS annex in collaboration with the Managed Funds Association with the aim of creating an industry standard set of terms.
Isda describes its new documentation as an "evergreen" protocol that will remain open on a permanent basis, and that will be accessible by Isda members and non-members alike. "As Isda’s Master Confirmation Agreements covered by the Isda Equity MCA Protocol are client-facing documents, these publications play a major role in reducing outstanding confirmations and thus meet the requirements of public policy makers," says Bob Pickel, Isda’s New York-based chief executive.
