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ISDA Publishes EMIR Frontloading Termination Event

On 12 June 2015 ISDA published its ISDA EMIR Frontloading Additional Termination Event Amendment Agreement.

The amendment agreement is another simple but useful addition to ISDA’s documentation suite.  As the name suggests, it allows counterparties to amend 1992 or 2002 ISDA Master Agreement schedules in order to include an Additional Termination Event which triggers in the event that a transaction which is required to be ‘frontloaded’ (i.e. cleared under Article 4(1)(b)(ii) of EMIR) is, in reality, not cleared by a deadline to be agreed between the parties.

“Loss” will apply as a payment measure to all such terminated transactions and counterparties are given the flexibility to define the exact characteristics of the replacement transaction used to calculate final tear-up values.

By way of reminder, frontloading will commence 2 months after the publication of the relevant RTS on the clearing obligation for Category 1 counterparties and 5 months after publication for Category 2 counterparties.

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