ISDA Publishes Charter for CDDC Governance Committee

Key points

On 16 July 2025, ISDA published this Charter for the Credit Derivatives Governance Committee, fulfilling one of the mandates established by market consultation in 2024.

The Governance Committee is responsible for overseeing the operation of the Credit Derivatives Determinations Committees (DCs), reviewing market feedback, and amending the Determination Committee rules (DC Rules) as needed.

The Governance Committee is separate to and independent from the DCs. It will not be involved in the determinations process, but it will be able to influence the decision-making framework more generally by amending the DC Rules where appropriate.

Under the Charter:

• the Committee has the power to amend the DC Rules, including by implementing changes suggested by market participants;
• any changes to the DC Rules will be subject to public consultation and will not be allowed if they could affect live credit events;
• Committee meetings will be at least biannual and decisions will require a quorum of 80% of dealer members and 80% of non-dealer members;
• the Committee comprises senior representatives from up to ten dealer firms, five non-dealer firms, three CCPs or index providers, and two infrastructure firms, taken from a list of member firms (the initial list is provided at Annex 1);
• Committee representatives must not also be their firm's representative on a DC; and
• representatives must disclose any conflicts of interest and recuse themselves where appropriate.

The establishment of an independent governance body is intended to address long-standing market concerns about conflicts of interest arising from employees of major market participants being involved in the credit derivatives determinations process.

Amendments to DC Rules

On the date of the Committee's first meeting, the DC Rules will be amended to allow the Governance Committee to make further amendments in the future.

The amending text is extracted at Annex 2. At present, the DC Rules can only be amended by the DCs themselves.

Further initiatives

The Governance Committee is the first step in implementing the initiatives with which ISDA is mandated to move forward based on the results of its 2024 consultation. Other initiatives include:

• reducing the target number of dealers to eight and non-dealers to four;
• allowing non-dealers to become members of individual DCs instead of needing to join all the DCs;
• allowing market participants to submit statements of case in connection with a DC consideration; and
• requiring the DCs to make public their rationale for any material decisions.

Certain other initiatives were proposed in ISDA's 2024 consultation, but did not receive market approval. These included:

• appointing independent auditors to audit members' compliance procedures;
• changing the thresholds of outstanding credit derivatives transactions for non-dealers to become DC members; and
• introducing a transaction-based fee structure to fund the DCs.

Commentary

We expect that the Governance Committee will bring a high-level market focus and provide broader direction to the heretofore highly technical DC determinations process.

Future implementation of additional initiatives will further address market concerns and improve the robustness and functioning of the DCs.

Annex 1

Initial Governance Committee Membership

Annex 2

Amendments to the 2023 ISDA Credit Derivatives Determinations Committees Rules

Effective from the date on which the Governance Committee first meets:

Section 1.1 is amended by adding a new Section 1.1(b) (Governance Committee) as follows (and re-numbering existing Section 1.1(b) (The Secretary), Section 1.1(c) (Effectiveness of Notices), Section 1.1(d) (Coverage) and Section 1.1(e) (SRO Administrator) as necessary):

(b) Governance Committee. The Credit Derivatives Governance Committee (the "Governance Committee"), established pursuant to the Charter for the Credit Derivatives Governance Committee published by DC Administration Services, Inc. in its capacity as DC Secretary on behalf of ISDA, on or around September 2025 (as amended, modified or supplemented from time to time, the "Charter"), will have the power to amend, modify or supplement the Rules in accordance with Section 5.2(e) (Amendments to the Rules) and the Charter.

Section 5.2(e) (Amendments to the Rules) is deleted in its entirety and replaced with the following:

(e) Amendments to the Rules. An amendment to the Rules (including the Schedules attached hereto) may be proposed to the Governance Committee pursuant to the Charter. All amendments to the Rules will be the responsibility of the Governance Committee, which will consider the proposed amendment in accordance with the Charter (including any public comment periods specified therein).

An amendment to the Rules will become effective upon the approval of the Governance Committee in accordance with the Charter and publication of such amendment by the DC Secretary on its Website. The effectiveness of each amendment to the Rules will be subject to any terms and conditions specified by the Governance Committee. In each case, either the relevant amendment or a revised version of the Rules will be published by the DC Secretary on its Website.