On Thursday 12th November 2015, the International Swaps and Derivatives Association (ISDA) published the new Resolution Stay Universal Dealer Protocol that updates and extends the 2014 Resolution Stay Protocol to also cover Repo and Securities Lending Transactions.

A key concern for regulators globally is to address the issue of banks being "too big to fail". The Stay protocols have been created in response to regulatory directives which require counterparties to systemically important financial institutions (SIFIs) to forgo contractual early termination rights where the SIFI has entered into resolution proceedings or is in financial distress.

Whilst initially it was envisaged that the Universal Dealer protocol would only be open to the major banks that adhered to the 2014 Protocol, possibly in response to concerns from the regulators, ISDA have taken the decision to open it up to all other counterparties. However, given the broad nature of this protocol, it is only likely that other market participants will adhere if they have been specifically requested to do so by the regulators.

More suitable for the wider market’s needs, ISDA today also announced that another Stay Protocol to be launched soon. This will be a Jurisdictional Modular Protocol, and modules will be offered by ISDA as and when the specific legislative or regulatory requirements in different jurisdictions are known.

Protocols are increasingly being used to ensure compliance with regulatory requirements. The Resolution Stay Universal Dealer Protocol provides a multi-­‐ lateral amendment mechanism for all contracts that fall under it. Given that the scope of these contracts is broad and will cover securities lending and repo transactions, as well as derivatives, it is becoming crucial that institutions are able to effectively manage protocol data.

Over the past 17 years, protocols have become significantly more complex. They vary greatly in their application and organisations should be aware of how existing contract data is impacted by protocol adherence.  As for any new protocol, the 2015 Stay protocol will pose questions for organisations as to how protocol data is being managed. BRRD requires that the Stay Clauses are inserted into all “financial contracts”, but unless protocol data has been managed effectively, institutions will not be able to identify which “financial contracts” fall outside of the protocol’s scope and still require remediation.

The new stay protocol, like many other protocols, was created to facilitate compliance to impending regulatory deadlines whilst easing the burden of bilateral negotiation. It is paramount however that those adhering understand the implications of this convenience, storing and managing Protocol data effectively for the mitigation of future risk.