ISDA opened adherence to the 2018 U.S. Resolution Stay Protocol ("Protocol") for ISDA members and non-members. Participants will be required to pay a one-time fee of $500 to ISDA for each adherence to the Protocol, with certain group rates also available.
As previously covered, the Protocol is intended to facilitate compliance by market participants with stay regulations issued by the Federal Reserve Board, the FDIC and the Office of the Comptroller of the Currency. These regulations mandate that certain systemically important banks amend their qualified financial contracts ("QFCs") so as to impose contractual stays on the early termination rights of a QFC counterparty following a default by the bank or an affiliate of the bank. The first compliance date will be January 1, 2019.
ISDA also published FAQs to help market participants understand the "basic operation and applications" of the Protocol.
Commentary
Unlike most other ISDA protocols, the 2018 U.S. Resolution Stay Protocol extends beyond derivatives transactions. It is written to facilitate compliance with resolution stay requirements and thus captures all types of "qualified financial contracts." As such, market participants that are not accustomed to using ISDA protocols should closely review the mechanics of the Protocol in order to understand the process for adherence and what adherence means.
In addition, virtually all financial market participants will need to read and understand the substance of the Protocol, as adherence to it (or agreement on a substantially similar bilateral equivalent) will effectively be a requirement for many common financial market transactions going forward. The FAQs published by ISDA provide a very helpful starting point.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.