On May 18, 2021, ISDA® launched the ISDA 2021 Security-based Swaps (SBS) Protocol Agreement (2021 SBS protocol agreement), which is designed to help firms comply with SEC rules for security-based swap (SBS) issued under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act). The rules, which apply to certain SBS entities, including security-based swap dealers (SBSDs) and major security-based swap participants (MSBSPs), come into force later this year.

The ISDA 2021 SBS protocol agreement allows firms to amend the terms of their derivatives agreements (primarily ISDA Master Agreements) with other parties that adhere to the protocol agreement (adhering parties) to facilitate compliance with a variety of SEC SBS rules, including:

Unlike the ISDA 2021 SBS Top-Up Protocol (2021 SBS top-up protocol), published on March 15, 2021, use of the ISDA 2021 SBS protocol agreement does not rely on ISDA’s August 2012 and March 2013 Dodd-Frank protocols, which enabled firms to implement similar Dodd-Frank rules introduced by the CFTC for non-security-based swap transactions (see Practice Note, Practical Law Guide to the ISDA Dodd-Frank Protocols and ISDA Amend).

Under the ISDA 2021 SBS protocol agreement there is therefore no need for parties to have adhered to those earlier protocols or to have matched questionnaires with counterparties, as was required for the 2021 SBS top-up protocol (See Legal Update, ISDA Launches 2021 Security-Based Swaps (SBS) Top-Up Protocol in Anticipation of Upcoming SEC SBS Compliance Dates). Firms may also use the 2021 SBS protocol agreement if they intend to make different elections for SBS than they made for swaps under the 2012 and 2013 Dodd-Frank Act protocols. The ISDA 2021 SBS protocol agreement is open to both ISDA members non-members.

To complete the adherence process for the 2021 SBS protocol agreement, firms must exchange information and elections in the forms of questionnaires that are provided as part of the 2021 SBS protocol agreement. This 2021 SBS protocol agreement enables parties to, as applicable, with each counterparty:

This is achieved by incorporating in those agreements selected portions of the SDA SBS Protocol Supplement I (the SBS supplement I) and the SDA SBS Protocol Supplement II (the SBS supplement II; together with SBS supplement I, the SBS supplements).

ISDA is working with IHS Markit to make the questionnaires in the SBS supplements available on ISDA Amend to allow for the electronic exchange of information. ISDA Amend is available on the HIS Markit webpage at http://www.markit.com/en/products/distribution/document-exchange/registration.page.

Like the 2021 SBS top-up protocol, the 2021 SBS protocol agreement was created in anticipation of the upcoming October 6, 2021 compliance date for a framework of SEC SBS rules and the related registration deadlines for SBSDs and MSBSPs of November 1, 2021 and December 1, 2021, respectively (see Legal Update, SEC Adopts Final Cross-Border Security-Based Swap (SBS) Amendments and Guidance; SBS Registration and Compliance Requirements Triggered). For details on these rules see, US Derivatives Regulation: Security-Based Swaps (SBS) Toolkit: Requirements for Security-Based Swap Dealers and MSBSPs.

There is no cutoff date for adherence to the 2021 SBS protocol agreement.

For information on ISDA protocols generally, see Practice Note, ISDA Documents: Overview (US): ISDA Protocols.