ISDA launches 'small bang' protocol, restructuring supplement

By Angela McDaniels

Tacoma, Wash., July 14 - The International Swaps and Derivatives Association, Inc. launched its "small bang" protocol and restructuring supplement on Tuesday, which allows for the incorporation of auction settlement terms following a restructuring credit event into standard credit default swap documentation.

The adherence period for the protocol will run until July 24. The market practice changes set out by the protocol will take effect on July 27.

The "big bang" protocol launched in April amended ISDA's CDS definitions to incorporate auction provisions for settling CDSs after a default.

"The 'small bang protocol' is an additional step towards achieving increased standardization, transparency and liquidity in the industry and facilitating central clearing of CDS," Robert Pickel, executive director and chief executive officer of ISDA, said in a news release.

The protocol is the latest in a series of changes made to the trading convention for CDS, according to the release. Other market practice changes, which took effect on June 22, include the adoption of fixed coupons, payable up front for European trades, and a move from monthly to quarterly roll dates in emerging market CDS transactions.

ISDA is based in New York and represents participants in the privately negotiated derivatives industry.

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