The Protocol
On 16 September 2019, the International Swaps and Derivatives
Association (“ISDA”) launched a protocol to allow market participants to amend
their legacy credit derivatives transactions to incorporate the
Narrowly Tailored Credit Event Supplement to the 2014 ISDA Credit
Derivatives Definitions. ISDA has provided a webinar about the Protocol.
This arises from concerns over deliberate defaults by reference
entities with the intention of triggering credit derivatives
payouts via narrowly tailored credit events (“NTCEs”)
to maximise the resulting payout on credit derivatives. Some
commentators have been led to question the viability of credit
derivatives on single corporate entities as a financial
product.
