ISDA published a supplement (the "benchmarks supplement") that allows market participants to improve the "contractual robustness" of their interest rate, FX, equity and commodities transactions. The benchmarks supplement comes in response to a regulatory focus on financial instruments that reference financial benchmarks, such as interbank offered rates. The benchmarks supplement is available to be included in the documentation of such transactions, and would provide fallbacks if a benchmark ceased to be provided by its administrator or if such benchmark or administrator did not have the necessary regulatory approvals.
According to ISDA, the benchmark supplement will enable market participants to include certain "triggers and generic fallbacks" in transactions referencing benchmarks that may be discontinued or fall into disuse. The ISDA benchmarks supplement does not, however, introduce new fallback arrangements for material changes to a benchmark, though some of the relevant definitional booklets have provisions that may apply upon such "trigger events." ISDA continues to work with market participants to develop fallback provisions for benchmarks included in its definitional booklets.
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