Introduction of 2021 ISDA definitions and digital library

ISDA recently announced their launch of an online library (ISDA MyLibrary) to house ISDA published documentation. This platform provides users with an interactive format offering search functions, comparability tools, and hyperlinks to defined terms and external resources, like educational materials. An annual subscription permits access to these documents digitally, including options to print and download entire documents and excerpts. The move away from paper and pdf form to a digital publication will allow future amendments to be automatically implemented into existing documents. The electronic format should make the content more user friendly and reduce operational mistakes as updates are published.

The first documents made available on ISDA’s platform are the ISDA 2002 Master Agreement and the 2021 ISDA Interest Rate Derivative Definitions. Prior to the publication of the 2021 Definitions, ISDA’s last wholesale change to the structure and content of its Definitions occurred with its 2006 Definitions. Under the 2006 Definition’s methodology, any revisions to those definitions were required to be made via Supplements over the last 15 years and include modifications necessary to align with the developing market and technology trends. This methodology required market participants to perform a somewhat cumbersome process of searching both the 2006 Definitions and any applicable Supplements to understand how the Definitions would apply to a particular transaction. While much of the content contained in the 2006 ISDA Definitions will remain the same, the updates include:

• changes to the methods used in determining cash settlement after early termination
• revisions to the Floating Rate Option naming convention
• the creation of a floating rate “matrix” outlining and consolidating rate functionality
• new Business Day calendars and conventions
• expanded payment and calculation provisions
• index cessation fallback provisions for interbank offer rates (IBORs)
• more robust procedures for Calculation Agent performance and dispute resolution

Parties executing derivatives transactions will be expected to trade using the updated definitional booklet as of the Effective Date, October 4, 2021, however nothing is in place which will restrict the use of prior iterations. Some legacy transactions, which do not automatically incorporate updates to the ISDA Definitions, may need to be amended bilaterally to incorporate these changes.