ISDA Derivatives Users Committee

The ISDA Derivatives Users Committee had its inaugural meeting in Spring 2006. The mission of the committee is to provide a forum for non-dealer firms, represented by the ISDA subscriber membership category that are active in privately negotiated derivatives as clients, investment managers or managed funds. It will also discuss OTC derivatives operations processing, documentation, risk management and market practices, providing a buy-side voice to ISDA initiatives in automation and straight through processing, and helping the further development of the OTC derivatives market through education and training.

The Derivatives Users Committee will be a means to provide input and stay updated on the work done in various other groups and to identify and deal with user-specific issues where appropriate. Projects identified at the first meeting and in subsequent meetings include the use and best practices around Master Confirmations and Settlement Matrix and Calculation Agent and Dispute Resolution Language.

In September, members of the Committee met to consider and discuss issues relating to settlement of credit default transactions.  ISDA is in the process of preparing a protocol designed to be used for determining the settlement mechanics for transactions related to reference entities comprised in the major credit indices in use across the market (such as the iTraxx and TRAC-X).  This initiative follows on the heels of a number of ad hoc protocols that have been designed and put into operation at relatively short notice following a series of corporate credit events (starting with Collins & Aikman in June 2005 and ending, most recently, with Dana in March 2006).  In particular, ISDA has hired external economic consultants to advise on the integrity of the auction methodology under which a fair and representative cash value can be obtained for those Deliverable Obligations that are the subject of a credit event.