While the basic framework for the interaction of days, dates, and periods remains the same in the definitions for 2021, there are important additions and improvements in defining and determining days, dates, and time periods. If you would like to participate in the working group that creates the definition versions for 2021, please log in to your ISDA account and join the Interest Definitions Working Group. 1. Integration of IBOR fallbacks: In general, the 2021 definitions essentially contain the provisions of Supplement 70 to the 2006 definitions, which deals with the transition from IBOR-based derivatives to derivatives with new risk-free interest rates. In addition, the 2021 definitions include some floating rate options (ORFs) that were not included in the 2006 definitions and fallback solutions added to cover these RFOs. The 2021 definitions include a new trigger that has been adopted and extended by the comparable provision of the 2018 ISDA Benchmark Supplement, allowing the parties to switch to another interest rate if one of them or the calculation agent is not authorized, under the applicable law or regulation, use the underlying benchmark for the FRO in question. The increased use of matrices in the 2021 definitions will allow users to search for triggers and fallbacks in the event of temporary non-release, permanent interruption, and administrator/benchmark events for the various benchmarks, and will be updated as needed to reflect the addition of FRUs or changes in fallback mechanisms. Generic fallback solutions to address cases where no other standard market fallback has been identified have been included in the 2021 definitions and follow the content of the alternative continuation fallback mechanisms included in the 2018 ISDA Benchmarks Supplement. The objective of the 2021 definitions is to create the basic framework for documenting privately traded transactions on interest rates and currency derivatives. While the 2021 definitions have been designed for this purpose, ISDA recognizes that parties documenting other types of privately traded derivatives transactions may find it useful to include the 2021 definitions in the confirmations of such transactions. The 2021 definitions are the first ever published as a native digital definition brochure and are available through ISDA`s new electronic documentation platform, MyLibrary, via the links below. The digital format creates significant efficiencies in the way companies use and interact with definitions, reducing complexity and the risk of error.
Unlike the 2006 definitions, where regular changes have been made in the form of additions, whenever updates are required, ISDA publishes a revised digital version of all components of the 2021 definitions (for example. B, the general ledger or a modified matrix) in its entirety. Subscribers to the 2021 definitions can access a single Golden Source version of the definitions that were in effect at any time and at any time. There is no separate definition of business day in foreign currency, but equivalent provisions have been included in the definition of business day. An important aspect of the 2021 definitions is that they will be published in a purely digital format via ISDA`s new web user interface, MyLibrary. One of the problems with the 2006 definitions is that they have become cumbersome due to the large number of additions published since their original publication (over 80). Future changes will be made to the 2021 definitions as needed and will be made directly on the text and not as a complement. Each time a change or addition is made, a new digital version is published. In fact, version 2 of the definitions for 2021 was already released on September 30. The platform highlights changes between versions, so it will still be possible to get a consolidated view of how definitions for 2021 will evolve over time.
Definitions for 2021 will be accessible via the MyLibrary interface on the ISDA (General Ledger) website. When an update or addition is made, a new version of the general ledger is published, which automatically incorporates the changes into the existing provisions. On MyLibrary, users can enter their relevant date and easily access the version applicable on that date. 4. Calculation Agent: The definitions for 2021 make some adjustments to the calculation agent`s tasks and the standards he or she must follow. For example, the 2021 definitions explicitly state that the calculation agent is not a trustee of either party to a derivative transaction. Unlike the 2006 definitions, which require the computing agent to act “in a commercially reasonable manner,” the 2021 definitions provide that the computing agent must “use commercially reasonable procedures to achieve a commercially reasonable result.” The definitions for 2021 describe the tasks of the calculation agent by negative conclusion: if another party is not intended to perform a task, that task is the responsibility of the calculation agent. In contrast, the 2006 definitions require the calculation agent to perform certain tasks. Although definitions for 2006 will continue to be available after October 4, 2021, they will no longer be maintained and updated.
Market participants have therefore been encouraged by the International Swaps & Derivatives Association, Inc. (ISDA) to adopt the definitions for 2021 as soon as possible. 6. Matrices: As mentioned earlier, the definitions for 2021 reflect an increased use of matrices compared to the 2006 definitions. Some matrices are new (the variable rate matrix described in more detail above, as well as the currency/business day matrix), while others (. B for example, the settlement matrix, the market value matrix and the composition/average matrix) are more robust in the 2021 definitions than in their 2006 counterparts. The new matrices reflect the transition to a graphical representation of basic ISDA concepts as opposed to a narrative description. .