One Platform, Three-Way Communication
Novation Consent streamlines assignment processing by allowing firms to consolidate consents. Furthermore, it leverages the Trade Information Warehouse’s power as a global repository of confirmed over-the-counter credit derivative transactions by retrieving trade data from the Warehouse and enabling users to submit assignments to automated matching and confirmation platforms such as Deriv/SERV’s Matching and Confirmation service.
As stipulated under the ISDA Novation Protocol, when a party to an OTC derivative transaction wishes to exit that contract by assigning its position to a third party, that party must notify the Remaining Party (RP) and the entering Transferee and seek permission for the assignment from the RP.
With Novation Consent, all three parties communicate electronically on a common platform using point-and-click technology or FpML™-compliant messaging. The Transferor initiates the process by creating a pending novation. If the contract to be novated resides in the Trade Information Warehouse, the Warehouse automatically searches its database and identifies a list of possible trades, and the Transferor selects the contract from the list. Alternatively, the Transferor can specify the trade reference identifier for the contract it is seeking to novate. Once the appropriate contract is identified, the Transferor specifies novation details, such as the names of the RP and Transferee, the novated contract amount, effective date, payment amount and payment date.
The Novation Consent platform then transmits the details electronically to the RP, which can accept or refuse the novation, and to the Transferee. The pending novation then moves to Approved or Refused status. If the novation is approved, the Transferor may request that the system auto-generate an assignment record to be submitted to the Trade Information Warehouse.
Separately, the RP and the Transferee submit their sides of the transaction to the Warehouse. All three sides are then matched and confirmed by Deriv/SERV.
Novation Consent can also be used for contracts that do not reside in the Warehouse. In those cases, the system does not auto-generate assignment records for the Warehouse. @