The International Swaps and Derivatives Association is working on master equity derivatives confirmations and novation definitions. It has already drafted the equity master agreement for U.S. underlyings and this will be published shortly. It is also planning to write similar documents for Canada and Japan. The document is designed to streamline the confirmation process and reduce the number of outstanding confirmations, explained Kimberly Summe, general counsel in New York.
The novation definitions will cover how to change the counterparty to a trade without unwinding the transaction. The ISDA master agreement requires all the counterparties to grant their consent before any switch--or novation--takes place. Summe said, however, this frequently does not happen so it is producing a best practice guide, a set of definitions and a user guide.
