The loan market will take another step to becoming more efficient this month with improved confirms and a shorter settlement time put in place for par loans. The updated version of the Loan Syndications and Trading Association's par and distressed trade confirmations became effective May 1.
"The new trade confirms represent a significant step forward for both par and distressed trading. We are moving into a new era for capturing trades," said Jane Summers, the LSTA's general counsel. She explained that a far greater number of terms are now standardized and cannot be reopened after the trade is done, which will reduce delays from protracted negotiation.
There are only four things that must be identified by the traders: the credit, the amount, the price and how interest is being handled. "If nothing else is discussed, the standard terms govern without exception and cannot be reopened. The confirm will bring certainty that done means done and a trade is a trade," Summers concluded.
Settlement time for par loans is also moving to T+7 from T+10. One source said the par market is ready to handle this, but to further reduce settlement time to T+3 in line with some other capital markets, electronic settlement would be required.