knowledge 12 July 2024 |

ISDA to Proceed with Development of Industry Notices Hub

In a recent press release (here), the International Swaps and Derivatives Association (“ISDA”) confirmed that it will proceed with the development of an industry-wide notices hub (“ISDA Notices Hub”), following strong support from buy- and sell-side institutions in the global derivatives market.  The ISDA Notices Hub will be an online platform that facilitates instantaneous delivery and receipt of critical termination-related notices under ISDA and other Master Agreements, which will be particularly helpful if more traditional means of delivery prove challenging.

As counsel to ISDA in respect of its e-contract opinion (and other opinions) for Ireland, McCann FitzGerald LLP is pleased to have participated in an exploratory exercise that confirmed, as a matter of Irish law, no legal impediments to the implementation of the ISDA Notices Hub in Ireland.

The ISDA Notices Hub is expected to launch in Q1 2025.

Background

Under the ISDA Master Agreement, termination-related notices must be delivered by certain prescribed methods, including physical delivery, using company address details listed in the agreement.  Delays can occur if a company has changed addresses and notice details have not been updated, or due to unforeseen geopolitical shocks, such as wars or pandemics, which might make delivery to a physical location difficult or impossible.

Even a small delay in the delivery of a termination notice could have a significant commercial impact.

Accordingly, in April 2024, ISDA launched an outreach initiative on its proposed Notices Hub, which would allow market participants to send and receive notices instantaneously via a secure online platform, with automatic alerts being sent to the receiving entity.  Firms would also be able to update their physical address details directly on the platform.

To be successful, such a platform would need to be widely adopted by derivative market participants.  Accordingly, ISDA previously said that it would only proceed with the development of the Notices Hub if it received positive feedback from industry through its outreach initiative.

Industry Response

According to ISDA, the outreach initiative indicated strong levels of support from derivative market participants.  Two-thirds of ISDA’s global primary dealer membership category stated their intent to adopt the platform in principle.  Of the firms that indicated they would use the ISDA Notices Hub in principle, 57% were from the buy-side, including asset managers, insurance companies and hedge funds.

Owing to industry support, ISDA has now confirmed that it will begin work on the development of the Notices Hub, with the aim of launching the platform in Q1 2025.  In advance of the launch of the platform, ISDA will draft relevant documentation and commission legal opinions in priority jurisdictions confirming the legal validity of delivering and receiving notices via a central online platform.

Key Features of the Notices Hub

The ISDA Notices Hub will be available through S&P Global Market Intelligence’s Counterparty Manager platform, which is already used by over 200,000 market participants worldwide.  The Notices Hub will be available for free to buy-side users.  Dealers will be charged based on their ISDA membership category, with discounted rates available for the first and second years, in order to encourage adoption.

Key features of the ISDA Notices Hub include:

  • Instant delivery: The ISDA Notices Hub will allow the instantaneous delivery and receipt of critical termination-related notices on a secure, confidential and robust online platform.
  • Resilience: The platform will function even when there are issues that would hamper traditional methods of delivering notices, including pandemics, hostile activities, stale notice addresses, or difficulties relying on emerging local infrastructure.
  • Evidence of delivery: The ISDA Notices Hub will time and date stamp delivered notices for use in legal proceedings, and provide auditable evidence that notices have not changed since their issuance.
  • Updating documentation: The ISDA Notices Hub will function as a repository for physical notice details of all counterparties using the service, which will be validated through periodic verification requests.  Parties will be able to amend the details of Master Agreements with a single entry on the platform, ensuring current contact information is available to users.
  • User experience: According to ISDA, its online platform is being designed with a range of users in mind.  Users will benefit from a simple onboarding process, intuitive platform design, and 24/7 customer support.
  • Integration with other products: According to ISDA, notices drafted on ISDA Create, ISDA’s automated contract management platform, will flow directly to the ISDA Notices Hub.

Next Steps

The ISDA Notices Hub is expected to launch in Q1 2025.

In its previous letter to industry (here), ISDA stressed that it seeks to encourage adoption “by design”.  To this end, once it is live, adoption of the ISDA Notices Hub will require no IT systems work on the part of firms, unless they wish to make use of its optional API functionality to drawn information directly into their internal systems.

In advance of the launch of the ISDA Notices Hub, market participants intending to adopt the platform may wish to review their internal procedures to ensure that they make optimal use of the platform.  In this regard, firms should ensure that personnel relevant to the delivery and receipt of notices have appropriate access to the ISDA Notices Hub and that they are provided with guidance on how to use it.

Also contributed to by David O’Keeffe Ioiart

This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.