What is the ISDA Determinations Committee and what does it do?

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AcadiFi · Accepted Answer

The ISDA Determinations Committee (DC) is a panel of 15 dealer and buy-side firms (10 dealers, 5 non-dealers) that makes binding decisions on whether a credit event has occurred, which obligations are deliverable, and whether to hold an auction. There are five regional DCs (Americas, EMEA, Asia ex-Japan, Japan, Australia-NZ). When a market participant submits a credit event request with supporting documentation (bankruptcy filing, missed coupon news, restructuring announcement), the DC reviews and votes. A supermajority (80%) binds all participants; lesser majorities trigger external review. Here's the typical flow.

```mermaid
flowchart TD
  A[Event Occurs] --> B[DC Request]
  B --> C{DC Vote}
  C -->|Yes| D[Auction Set]
  C -->|No| E[No Settlement]
  D --> F[Cash Payout]
```

The DC decides on the three main credit events: bankruptcy, failure to pay, and restructuring (where applicable). They also resolve succession events — when a reference entity splits or merges, which successor inherits CDS obligations. For Kestrel Petro Holdings' 2024 restructuring, the DC ruled it triggered CDS based on bondholder haircuts meeting the restructuring definition. Importantly, the DC's decisions are binding and not appealable in court (subject to narrow external review for procedural issues). FRM tests the DC's role, the voting thresholds, and how it interacts with the auction process. Understanding DC decisions is essential for anyone trading single-name CDS.

What is the ISDA Determinations Committee and what does it do?

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