CDS cash settlement .. continued
ISDA PUBLISHES 2006 DANA CDS INDEX PROTOCOL
isda.org
NEW YORK, Thursday, March 16, 2006 – The International Swaps and Derivatives Association (ISDA) today announced the publication of a ‘protocol’ solution, created to facilitate settlement of credit derivative trades involving Dana Corporation, a U.S. company that filed for bankruptcy on March 3, 2006. Dana is an auto parts supply company that is included in various credit derivative indices, including those published by Dow Jones CDX and TRAC-X.
The 2006 Dana CDS Index Protocol offers market participants an efficient way to settle trades on credit derivative indices that include Dana Corp. The Protocol enables institutions to amend their documentation for such index trades from physical to cash settlement and to participate in an auction, scheduled for March 31, 2006, which will determine the final price for certain Dana bonds. Markit and Creditex will administer the auction.
“The Protocol mechanism continues to provide a uniquely effective means of ensuring a smooth settlement process for derivative index trades where a credit event has occurred,” said Robert Pickel, Chief Executive Officer and Executive Director, ISDA. “All sides of the credit derivatives industry continue to work through ISDA to achieve a longer term solution, as set forth in its Net Physical Settlement Proposal.”
With the 2006 Dana CDS Index Protocol, ISDA enables parties to amend credit derivative index documents on a multilateral basis rather than through one-on-one negotiations between all counterparties. In addition to greater efficiency, time and cost savings, using the Protocol will provide enhanced legal certainty.
Single name trades will not be part of the auction process provided for by the Dana Protocol. Thus, single name trades on Dana Corporation remain subject to the physical settlement procedures in those trades’ governing documentation.
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The auction will determine settlement prices for the following list of bonds.
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