Isda novations protocol closes with almost 2,000 entities

A total of 1,953 trading entities had signed up to the International Swaps and Derivatives Association’s novation protocol by the time the adherence period closed on November 30. As the deadline approached, a late surge in adherents saw 380 entities added in the last two days alone.

Isda’s novations protocol, announced on September 13, was launched for interest rate and credit derivatives transactions in response to the increased regulatory concern over the growing backlog of unsigned novations trades in which exiting parties of a trade assign their positions to third parties.

The problem was particularly acute with credit default swaps, where the procedure to assign trades was regarded as cumbersome. According to dealers, the exiting parties – typically hedge funds – often took several weeks to notify the original party of the assignment.

The protocol sought to deal with procedural and timing issues for such assignment trades, whereby novations would have to be confirmed by the parties involved on the same day.

Robert Pickel, Isda’s chief executive, said getting so many adherents was a "major achievement" for Isda and the derivatives industry.