Investment funds (or investment managers on their behalf) may now adhere to the ISDA March 2013 DF Protocol Agreement (“Protocol 2.0”). Protocol 2.0, as with the ISDA August 2012 DF Protocol (the “August Protocol”), is an efficient means for swap dealers to comply with certain new Commodity Futures Trading Commission (“CFTC”) rules applicable to bilaterally negotiated swap transactions. Adherence to the Protocol 2.0 is in addition to, and not in lieu of, adhering to the August Protocol. Protocol 2.0 provides a mechanism for compliance with three separate CFTC rules.
One rule, in particular, regarding trading documentation and reconciling trade data (the “Documentation Rules”) is relevant to investment managers (and the funds they manage). The final rule was published in the Federal Register on Sept. 11, 2012, and will be effective on July 1, 2013. If an investment fund were to adhere to Protocol 2.0, it would incorporate additional terms into their existing swap documentation including, among others, valuation processes for collateral and risk management, dispute resolution provisions, portfolio reconciliation provisions, and statements regarding the dealer’s and investment fund’s status as a financial company or insured depository institution.
Click here to read more about the process adhere to Protocol 2.0.