The International Swaps and Derivatives Association, Inc. (ISDA) announces market practice changes to the trading convention for North American LCDS transactions that take effect today, and the publication of the new Bullet LCDS standard terms documentation.
For single-name LCDS transactions, the trading convention will be similar to those that have been adopted for other standardized CDS contracts over the course of 2009, in which the industry successfully adopted fixed coupons for CDS contracts in North America, Europe, Asia, and Emerging Markets. The LCDS market practice changes are the result of coordinated efforts among market participants and serve to further promote standardization and liquidity in the market.
Changes include the following:
* Firms will trade North American LCDS with standard coupons of 250bp, 100bp and 500bp going forward;
* Firms will trade with full first coupon and T+3 upfront settlement going forward;
These LCDS market practice changes coincide with the launch of the new Bullet LCDS standard terms documentation, which ISDA has published on its website today. The new Bullet LCDS standard terms documentation allows parties to enter into LCDS transactions with a fixed "bullet" maturity that is not subject to acceleration in the case where the Reference Entity’s loans are repaid, and is available at www.isda.org.
