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ISDA overhaul is a cause for New Year cheer 

January 13, 2016

Dan Alderson, Global Capital

The International Swaps and Derivatives Association said on Monday that it will improve the rules governing members of its Credit Derivatives Determinations Committee, to strengthen the process for deciding whether credit events have occurred. 

The changes, which will come in from mid-February, mean that DC member firms will be explicitly required to have written procedures in place on the identity of their DC decision makers, record keeping and management of potential conflicts of interest.

That means making sure the individuals voting on credit events don’t work within core business areas such as credit trading, hedging, lending, investing, advisory or similar. For credit default swap traders and bond investors alike, this bid for impartiality should be a well received, if long overdue, renovation – particularly as the market moves into a phase of greater idiosyncratic risk and the likelihood of credit events rises.

Since the inception of the Determinations Committee, ISDA has faced long-running calls to be more transparent and – to be fair – it has made a number of tweaks over the years to strengthen its accountability.These have included updating its Credit Derivative Definitions and – after some initial resistance – the acceptance of big-name buy-side representatives to the banker-dominated panel. Read more

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