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ISDA published the ISDA 2018 Benchmarks Supplement Protocol (the "Protocol"), which provides market participants with a multilateral method for applying the terms of the ISDA Benchmarks Supplement (the "Benchmarks Supplement") to certain derivatives transactions, including certain interest rate, foreign exchange, equity and commodity derivatives transactions.
The Protocol permits adherents to the Protocol ("Protocol Participants") to incorporate the terms of the Benchmarks Supplement to transactions entered into either with all other counterparties that are Protocol Participants or on a "counterparty-by-counterparty" basis. Additionally, the Protocol offers Protocol Participants the flexibility to apply the terms of the Benchmarks Supplement to (i) only covered transactions entered into by the Protocol Participants on or after the date the Benchmarks Supplement becomes effective between such Protocol Participants (the "Implementation Date") or (ii) all covered transactions, including those entered into before the Implementation Date.
As previously covered, the Benchmarks Supplement was published in response to a regulatory focus on financial instruments that reference financial benchmarks, including interbank offered rates such as LIBOR. According to ISDA, the Benchmark Supplement will enable market participants to include certain "triggers and generic fallbacks" in transactions referencing benchmarks that may be discontinued or fall into disuse. Although some of the relevant definitions published by ISDA may also provide for the use of fallback arrangements following material changes to reference benchmarks, the Benchmarks Supplement does not.
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