Chatham believes that pre-cessation fallback provisions should be included in the Supplement to the 2006 ISDA Definitions and the related Protocol. Over the past several months, an increasing number of contracts referencing LIBOR include a pre-cessation fallback trigger, and the Alternative Reference Rates Committee has also recommended including a pre-cessation trigger in LIBOR fallback language in contracts for cash products. While we understand it is impossible for the Protocol to fit every market participant’s needs, Chatham believes that including pre-cessation fallback triggers will accommodate the needs of many market participants, which will allow for broader market adoption.
That said, Chatham supports ISDA’s efforts to publish templates for standard modifications to allow for market participants to bilaterally negotiate terms outside of the standard ISDA Definitions and related Protocol. Entities transacting with multiple counterparties will likely prefer the convenience and efficiency of a protocol, but Chatham expects many end users will instead prefer template language for bilateral incorporation. This may be operationally easier and potentially less costly for end users facing only one or a few counterparties and will also give end users the most flexibility to customize language to fit their particular needs.