On March 22, 2013, isDA`s March 2013 Dodd-Frank Protocol (the “DF 2.0 Protocol”) was opened. The DF 2.0 Protocol is part of ISDA`s Dodd-Frank Documentation Initiative and is intended to assist industry in complying with certain final CFTC decisions imposed under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), in particular: The DF Supplement contains certain assurances, recognitions and agreements between the parties to ensure compliance with certain REGULATIONS OF THE CFTC relating to the Facilitate Swap Clearing. Portfolio reconciliation and documentation of swap trading relationships (as described below). Similar to the Supplement to the 2012 Protocol, supplement DF is divided into four annexes in which some of the provisions that the parties may agree on are optional and others are mandatory. The questionnaire allows a member party to choose which of these provisions it wishes to agree with each of its counterparties. If the parties choose to enter into a framework agreement under the ISDA 2013 DF Protocol, any future swaps (including foreign exchange swaps and forward foreign exchange contracts for this purpose) that is not to be cleared will be subject to such an agreement (unless the parties determine that it is governed by existing documentation). The Framework Agreement of the ISDA 2013 DF Protocol is supplemented by the March 2013 Protocol and, if the parties have compared questionnaires under the August 2012 Protocol, is automatically supplemented by the provisions of the August 2012 Protocol. Unlike previous ISDA protocols, where changes are made only with the delivery of a letter of consent by each party to the underlying document to be amended (i.e. a framework contract), this Protocol will contain additional bilateral procurement requirements to implement the amendments. Each Party submitting a letter of membership must also provide each counterparty concerned with a completed protocol questionnaire for the amendments to take effect. As a result of these additional bilateral procurement requirements, ISDA, in collaboration with Markit, has developed a technology solution (the “ISDA Amend by Markit Solution”) to automate the information gathering process and enable the exchange of data and documents submitted to approved counterparties. Some recent CFTC rules require that certain provisions be included in the documentation of swap trading relationships between swap dealers and large swap participants and end-users. The March 2013 Protocol provides for a documentation mechanism between the parties containing the necessary provisions, including the parties trading new swaps subject to an ISDA framework agreement or equivalent documentation.
As explained below, the presentation that an entity is a financial entity results in an entity automatically being considered as the inclusion of Annex 3 in the March 2013 Protocol. Participants in the August 2012 Minutes were also asked whether they were financial entities (as defined in section 2(h)(7)(C)(i)) of the CEAA, but were allowed to respond with “No response”. In the March 2013 minutes, a company must react to the fact that it is a financial institution to the best of its knowledge and conviction or not. The basic architecture consists of four documents: (I) a letter of accession, (II) the protocol agreement, (III) the protocol questionnaire and (IV) the DF supplement. Additional information on the content of each of these documents is discussed in more detail in the March 2013 ISDA Summary of the Dodd-Frank Protocol at: www2.isda.org/functional-areas/protocol-management/open-protocols/ The agreements covered by the Protocol are all written agreements between the parties governing the terms of a swap (including foreign exchange swaps and forward foreign exchange contracts) where at least one of the parties to a CFTC is to replace the entity. A party is a CFTC swap entity if, according to the questionnaire, it has identified itself as a swap dealer or a key participant in the swap, or as a person to be registered as such shortly. Since, as discussed above, risk assessment is required for a swap dealer or large swap participant and a financial institution, Annex 3 (Calculation of Risk Assessments and Dispute Resolution) is automatically included in the agreement between the parties when an end-user admits in the questionnaire that it is a financial entity. However, an end-user who does not admit that it is a financial company will only be deemed to have chosen to include Schedule 3 in its swap documentation if it chooses to include Schedule 3 (or does not answer the question). .