April 24, 2020
On April 15, 2020, the International Swaps and Derivatives Association (ISDA) released the preliminary results of its consultation on the implementation of pre-cessation fallback language for derivatives referencing LIBOR. Based on the feedback received, ISDA expects that both pre-cessation and permanent cessation fallbacks will be included as standard language in the amended 2006 ISDA Definitions for LIBOR and in a single protocol for including the updated definitions in legacy trades. These results should provide greater certainty to the industry as the LIBOR transition continues.
On February 25, 2020, ISDA consulted market participants on the question of whether the 2006 ISDA Definitions should be amended to incorporate fallbacks applicable to all covered derivatives upon permanent cessation of an interbank offered rate (IBOR) or a “non-representative” pre-cessation trigger, whichever occurs first. The consultation also asked respondents if ISDA should publish a Protocol to incorporate the amended definitions and fallback language into legacy contracts. Responses were due on April 1, 2020.
After reviewing those responses, ISDA announced the preliminary results of the consultation, which are outlined below.
ISDA received broad approval with respect to both proposals as they relate to LIBOR cessation. Specifically, a significant majority of respondents were in favor of including both the permanent and pre-cessation fallback triggers in both the amended 2006 ISDA Definitions for LIBOR and a protocol for legacy trades. Accordingly, while there will be further analysis, ISDA currently expects that pre-cessation fallbacks based on a “non-representativeness” determination and permanent cessation fallbacks will be applied to all new and legacy derivative contracts referencing LIBOR that incorporate the amended 2006 ISDA Definitions. The amended definitions relating to other IBORs will include only permanent cessation fallbacks.
ISDA will analyze these results further and will publish a final report thereafter. More information on these results and ISDA’s next steps should be available in the coming weeks.
 Preliminary Results of Pre-Cessation Fallback Consultation, April 15, 2020.
 Pre-Cessation Fallback Consultation, February 25, 2020.
 For a more detailed discussion of the pre-cessation fallback consultation, including ISDA’s treatment of pre-cessation fallback language, see our previous report: ISDA Issues Consultation on Pre-Cessation Fallback Provisions to Facilitate LIBOR Transitioning, March 10, 2020.
 The updated definitions for other interbank offered rates (IBORs) will include permanent cessation fallbacks only.