of prime brokerage, ISDA and all other trading and counterparty documentation
AB Trading Advisors
AB Trading Advisors combines specialist legal expertise and efficient services to meet the needs of investment funds, family offices and proprietary trading vehicles across the globe. We are a niche firm working only with the buy side of the market, avoiding conflicts of interest that affect some larger, non-specialised firms.
The Short Read
It was announced in November 2021 that the implementation of controversial mandatory buy-in provisions under the Regulation on Central Securities Depositories (“CSDR”) has been postponed.
However, other aspects of the settlement discipline measures of CSDR (the “Settlement Discipline Regime”) will take effect as planned from 1 February 2022 – specifically, implementing new arrangements for confirming transactions and communicating allocations of securities, as well as the imposition of cash penalties in respect of settlement fails.
The Settlement Discipline Regime applies to transactions in certain financial instruments settling through a central securities depository based in the European Union (“EU”). The rules apply to all transacting parties – in other words, wherever located in the world.
The ISDA SBS Protocols
Parties are currently considering whether or not to adhere to the ISDA 2021 SBS Protocol (“SBS Full Protocol”) or the ISDA 2021 SBS Top-Up Protocol (“SBS Top-Up Protocol”, together, the “SBS Protocols”), in anticipation of relevant US Securities and Exchange Commission (SEC) rules governing security-based swaps coming into force on 1 November 2021.
The International Swaps and Derivatives Association (ISDA) developed the SBS Full Protocol and the SBS Top-Up Protocol in response to new SEC rules affecting security-based swaps and related products. These rules follow those previously introduced by the US Commodity Futures Trading Commission (CFTC) in relation to other types of swaps.
The Short Read
Pursuant to (1) the European Market Infrastructure Regulation (“EU EMIR”) and/or (2) EU EMIR in effect in the United Kingdom (“UK”) as UK-onshored EMIR (“UK EMIR”), counterparties may calculate their aggregate month-end average positions in OTC derivatives for the previous 12 months to determine whether the applicable clearing thresholds are exceeded.
Under EU EMIR, the calculation (if being performed) must be conducted every 12 months. For many, the anniversary since the last calculation date will be 17 June 2021.
Under UK EMIR, the first calculation and notification to the UK Financial Conduct Authority (“FCA”) must be made by 17 June 2021.