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| Kimberly Summe |
ISDA plans to publish commodity confirmation templates to fit alongside its 2005 commodity definitions, which it expects to complete by June. The association will begin work on the templates in January and will solicit ideas from its members on the products it needs to include. Summe declined to speculate on the number of templates the association might produce, but said ISDA has already published three templates on weather and has created two working groups to look into coal and both wet and dry freight. "The number of traders that energy companies have trading physical products has mushroomed," the general counsel said. "My guess is firms spend a lot of time developing [confirms]," she said, noting the number of participants and products in the commodities world is booming and these templates will help firms be more efficient.
"It makes perfect sense [to develop confirmation templates] primarily because there really are no templates or uniform approaches to confirmation," said one lawyer at a major investment bank. "It would help in terms of operational risk," he added, speculating the templates will be useful for financially settled and physically settled deals covering popular products such as oil, electricity and natural gas. But, he added, the template may be of little use to parties who have not signed a master agreement because more issues would have to be addressed in the template.
On the power and gas front, ISDA published a U.K. power annex last week. In addition, it hopes to incorporate into its commodity definitions the European Federation of Energy Traders documentation concerning power. In so doing, the association aims to create a universal framework encompassing both physically and financially settled energy contracts.
