LSTA Accepting Feedback On LCDS Physical Settlement Rider

The Loan Syndications and Trading Association published an exposure draft of a physical settlement rider to the loan-only credit default swap confirm and is excepting comments on the exposure draft until June 16. Comments can be directed to Elliot Ganz, executive v.p. and general counsel. It also issued a market advisory endorsing the market standard indemnity contained within the physical settlement rider, along with a list of frequently asked questions.

The LSTA's Trade Practices and Forms Committee approved the physical settlement rider May 18. The LCDS confirm to be issued by the International Swaps and Derivatives Association is expected in early June (CIN, 5/22).

The physical settlement rider provides detailed rules and guidance for the standards of a physical settlement under an LCDS. It recognizes that physical deliveries of loans after a credit event will use closing procedures developed by the LSTA, which can be modified to ensure an efficient and quick settlement.

Separately, members of the dealer working group are expected to put out a press release in the coming weeks to discuss the history of LCDS and talk about the document the LSTA has approved and the document that is expected to be approved by ISDA.