Regulators edge towards opt-in fix for OTC stays issue
Counterparties will likely select a resolution regime in Isda documentation, but it remains unclear how buy-side firms will be persuaded to give up their termination rights
Regulators looking for a way to avoid mass close-out of over-the-counter derivatives contracts in the event of a big bank defaulting – a phenomenon that could undermine attempts to resolve the institution – are said to be edging towards the so-called opt-in approach, in which the counterparties to a trade would choose to follow resolution rules laid out in a particular jurisdiction. Those rules would postpone – or stay – the ability to close out the trade.
The issue was discussed at a closed
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