The International Swaps and Derivatives Association is responsible for a trio of recent developments with respect to the collateralization of derivative transactions using ISDA Credit Support Annexes.

The most important new development is the publication of a set of documentation templates (the "Sample Tri-party IA Provisions") that enable parties to modify a standard ISDA Credit Support Annex (ISDA-speak for Security Agreement) to allow for the segregation of "Independent Amounts" (ISDA-speak for initial margin) with an independent custodian. Such segregation will be required in many trading relationships relating to uncleared swaps once the new margin rules required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) come in effect next year. However, segregation has already become a common issue in master agreement negotiations, so this new standard wording will be a valuable resource for ISDA negotiators. These templates do not, however, eliminate the need to negotiate an agreement with the chosen custodian. The templates are accompanied by a memorandum that explains how they can be used...