ISDA highlighted the key changes made in the 2021 ISDA Interest Rate Derivatives Definitions. The booklet provides "the framework for documenting over-the-counter interest rate derivatives transactions."
ISDA stated that the updated and consolidated terms include:
- the Mark-to-Market Matrix and the Compounding/Averaging Matrix, which are substantively the same as those under the 2006 Definitions;
- the Floating Rate Matrix, which includes the Floating Rate Options that had been previously set out in the main book;
- the Currency/Business Day Matrix, which includes the definitions of currencies and their principal financial centers; and
- the Settlement Matrix, which has been expanded and consolidates provisions previously contained in several matrices under the 2006 Definitions.
In addition, ISDA noted other key changes, including: (i) calculation agent provisions; (ii) days, dates and periods; (iii) calculation of fixed and floating amounts; (iv) floating rate options; (v) overnight rate conventions; (vi) general fallbacks; (vii) exercise of swaptions/optional early terminations; (viii) cash settlement provisions; (ix) currency provisions; and (x) digital publication and implementation.
ISDA cautioned that the changes between the 2006 and 2021 Definitions, whether to key terms or provisions, may result in different economic outcomes, and it is not possible to provide "definitive guidance" as to the result.
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.
