Frequently Asked Questions, Answered
For the past two decades, equity master confirmation agreements (“MCAs”) have referenced the 2002 ISDA Equity Derivatives Definitions (“2002 Definitions”) to provide the framework for the terms set forth in those agreements. On October 26, 2026, ISDA’s new protocol will take effect, allowing parties who adhere to replace the 2002 Definitions references in their existing MCAs with references to the new Equity Definitions Versionable Edition (“Equity Definitions VE” or “VE”).
Adopting the Equity Definitions VE changes how your MCAs keep pace with ISDA’s updates. The 2002 Definitions operated as a static publication that could change only through bilateral supplements. The Equity Definitions VE are designed so that ISDA can publish successive versions of the definitions: Version 2.0, Version 3.0 and so on. Trades under an MCA with a Trade Date on or after the effective date of a certain version will automatically be subject to that new version, without any built-in mechanism for opting out of a particular version. The FAQs below address how the Protocol and new versions affect your MCAs and your trades.
Frequently Asked Questions
Q: Is adherence to the Protocol mandatory?
A: No. ISDA has stated that adherence is voluntary. The communications we have seen to date suggest that banks are approaching this Protocol as voluntary as well. Because the Equity Definitions VE were only recently published, it remains to be seen whether the adoption of these definitions will phase out use of the 2002 Definitions across the industry.
Q: Does my counterparty’s adherence to the Protocol change my MCA if I haven’t adhered?
A: No. A counterparty’s adherence alone doesn’t amend your MCA. Both you and your counterparty must either adhere to the Protocol or agree to a bilateral amendment of the MCA in order to transition your MCA onto the Equity Definitions VE.
Q: How will the Protocol affect the negotiated terms in my existing MCA?
A: The Protocol only changes the definitions referenced in your MCA. The Protocol does not amend any other term in your MCA.
ISDA will publish successive versions of the Equity Definitions VE to add or update definitions as the industry evolves. However, new versions of the VE may conflict with your MCA terms. Accordingly, the hierarchy clause in your MCA takes on added importance. Custom terms in your MCA that change the 2002 Definitions are preserved and applied to the equivalent VE provisions in new versions, whereas other conflicts between your MCA and new versions of the VE may need to be analyzed, in part, by reference to that hierarchy clause.
Q: Once I adhere to the Protocol, will all of my MCAs transition onto the Equity Definitions VE?
A: Your MCA with each of your counterparties will not transition onto the Equity Definitions VE until both you and your counterparty have adhered to the Protocol.
The Protocol only amends MCAs on the later of (being the “Transition Date”)
· October 26, 2026 (the “Protocol Effective Date”); and
· The date that you and your counterparty have both adhered to the Protocol (the “Implementation Date”),
Once you and your counterparty have both adhered to the Protocol, your MCA with that counterparty will transition onto the Equity Definitions VE on the relevant Transition Date.
Q: How will the Protocol affect trades entered into under my MCA before the time I adhere to the Protocol?
A: The Protocol does not affect any trades entered into before the Transition Date. Any trades under your MCA dated earlier than the Transition Date will continue to reference the 2002 Definitions, unless the parties mutually agree to update those trades.
Q: How will the Protocol affect trades entered into under my MCA on or after the time I adhere to the Protocol?
A: On the Transition Date, your MCA will be amended to reference the Equity Definitions VE in place of the 2002 Definitions.
Each trade entered into under your MCA on or after that Transition Date will use the version of the VE in effect on its Trade Date. For example, a trade entered while Version 2.0 is in effect is subject to Version 2.0.
Q: When a new version is published, does the new version affect the terms of trades entered into before the effective date of the new version?
A: No. Each trade stays on the version in effect on its Trade Date. Publication of a later version doesn’t change existing trades unless the parties mutually agree to update those trades. For example, a trade under Version 2.0 stays on Version 2.0. If ISDA publishes Version 3.0, then only trades executed on or after the effective date are subject to Version 3.0.
Q: When a new version is published, can I reject the new version for some or all trades entered into after the effective date of the new version?
A: ISDA has not indicated a way to reject a new version. Adherence is binding, and new versions apply as they are published.
A limited revocation window will be available during each October after the Protocol Effective Date. During this window, you may give ISDA notice to revoke your adherence. Revocation works per MCA, not trade-by-trade, and does not take effect until the following December 31. Once it takes effect, counterparties who adhere after December 31 can no longer move your existing MCAs onto the VE. Counterparties who adhere before then still can, and revocation does not revert any MCA already on the VE.
For example, if you send ISDA notice to revoke your adherence on October 1, 2027, your revocation will not actually be effective until December 31, 2027.
If any of your MCA counterparties adhere to the Protocol before December 31, 2027, your MCA will be transitioned onto the VE.
If any of your MCA counterparties adhere after December 31, 2027, your MCA will not be transitioned onto the VE because your revocation took effect.
Any of your MCAs that were transitioned onto the VE before December 31, 2027, will continue to reference the VE even after your revocation takes effect.
Q: When a new version is published, can I amend my MCA to change or override some or all of the changes implemented under the new version?
A: ISDA hasn’t addressed whether or how you can do this. The Equity Definitions VE are designed so new versions apply automatically, without parties amending their MCAs each time. The Protocol doesn’t expressly prevent parties from agreeing to terms that change or override terms implemented under one or more versions, but there may be reluctance to do so given the purpose of the Protocol and the Equity Definitions VE.
Q: Can I simply keep my MCA with reference to the 2002 Definitions and make bilateral amendments to conform to only those changes made pursuant to a new version of the Equity Definitions VE that I want to accept?
A: This is certainly one approach that could be taken, so long as your counterparties also agree to this approach, but it remains to be seen whether any counterparty will in fact accept this approach.
Q: How will I know when a new version of the Equity Definitions VE will be published?
A: ISDA hasn’t published a formal notice process or minimum notice period. New versions are published on ISDA’s MyLibrary platform, and ISDA has announced previous versions on its website. Quadrangle will monitor for new versions as such information becomes available.
