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ISDA early Protocol on suspension of early termination rights

The ISDA Protocol on suspension of early termination rights is likely to be released in September, two months earlier than expected.

Only G-SIFIs trading with other G-SIFIs would be covered initially, reflecting the less than enthusiastic reaction of other market participants to give away their early termination rights for the sake of reducing systemic risk.

The risk management costs linked to adherence to such a protocol can be high: a 24-48 hours period of uncertainty if a G-SIFI enters into resolution. So high that some buy-side firms fear that voluntary adherence would amount to a breach of their fiduciary duties.

Given the difficulties inherent in the imposition of such a suspension through voluntary agreements on a market-wide basis, complementary regulatory measures are likely to be discussed during the G20 meeting in Brisbane in November.

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