On July 28, 2017, ISDA published the ISDA 2017 OTC Equity Derivatives T+2 Settlement Cycle Protocol (Protocol) which will enable participants to adjust the settlement cycle of certain of their OTC equity derivatives transactions from three business days to two business days, in accordance with upcoming regulatory changes in the United States, Canada, Mexico and Peru. Adherence to the Protocol is now open and is not limited in time.1

Upcoming T+2 Settlement Cycle and Existing OTC Equity Derivatives Documentation

On Sept. 5, 2017, the standard settlement cycle for most securities transactions in shares that trade in the United States, Canada, Mexico and Peru (each a Covered Region) is moving from a three business day2 settlement cycle (T+3) to a two business day settlement cycle (T+2). Currently, most OTC equity derivatives agreements refer to Payment Dates and/or Settlement Dates as three business days following the date the underlying asset valuation occurs (a Valuation Date) (because as of the date of such agreements, the underlying asset was expected to have a T+3 settlement cycle for the term of the relevant transactions). The Protocol provides a mechanism for parties to amend the relevant documentation in order to change their T+3 settlement cycle to a T+2 settlement cycle where necessary3 (without changing any business day adjustment mechanism).

Limited Scope of the Protocol The Protocol will amend Master Confirmation Agreements (MCAs), individual Transaction Supplements of these MCAs and single Confirmations that have been entered into before Sept. 5, 2017, and which:

  • Incorporate by reference the 2002 ISDA Equity Derivatives Definitions;
  • Relate to a single share, a single index, a single basket of shares, a single basket of indices, or a single basket of shares and indices;4
  • Define a Payment Date or Settlement Date (as applicable) as three business days following a Valuation Date;5
  • Have at least one exchange that is located in a Covered Region;
  • In the case of single index or single basket (of shares, indices or both) transactions, which have no exchanges outside of the Covered Region for which the settlement cycle is greater than T+2;
  • Are not confirmed using MarkitWire or any other service under MarkitSERV;6 and
  • In the case of a Transaction Supplement of an MCA, the MCA should also be eligible to be amended by the Protocol.

It should be noted that OTC equity derivatives agreements entered into after Sept. 5, 2017, will not be amended by the Protocol. This is because these agreements are expected to be documented using a T+2 settlement cycle and if another mechanism is used (e.g., T+3), it is deemed to be the choice of the parties and the Protocol will not interfere.


Market participants with OTC equity derivatives transactions in the Covered Region may want to review their trading agreements and trade confirmations and determine if they should adhere to the Protocol before Sept. 5, 2017. Market participants may also need to determine if certain transactions that will not be amended by the Protocol (due to its limited scope) should be amended separately before that date.

Here is a link to the ISDA website where the Protocol documents are accessible. Adherence to the Protocol carries a one-time fee of $500 payable to ISDA.