ISDA and EMTA Publish 2026 FX Definitions for Derivatives

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Refreshing the FX Definitions

ISDA Chief Executive Officer Scott O'Malia offers informal comments on important OTC derivatives issues in derivatiViews, reflecting ISDA's long-held commitment to making the market safer and more efficient.

A lot has changed in the FX derivatives market since 1998, when the last set of standard definitions for FX transactions were published. Trading volumes have grown substantially, and average daily turnover has risen by six times. Market practices have evolved and regulations have been updated. Market events have occurred that may not have been anticipated by those who drafted the 1998 definitions. And technological development has happened at an astonishing pace. Given the size and importance of the FX derivatives market, we can’t just stick with the status quo. We need a modern set of definitions that reflect the changes that have occurred, can keep pace with future developments, and support the safe and efficient trading of FX derivatives in the 21st century. The new 2026 FX Definitions meet those objectives.

The 2026 FX Definitions, published jointly by ISDA and EMTA, keep the many parts of the 1998 definitions that worked well, but revise certain aspects where market participants needed updates.

Importantly, the updated definitions consolidate the significant ISDA and EMTA documentation published since 1998 into an integrated document and eliminate the need for separate master confirmation agreements (MCAs). This will make it fundamentally easier and more efficient to use the definitions – rather than trawl through the main definitional booklet plus any additional provisions, supplements and recommended market practices that may be relevant, firms will be able to find everything in a single document and won’t have to maintain thousands of bilateral MCAs. What’s more, the definitions have been published in digital form on the ISDA MyLibrary platform, making it easier to navigate and search for key provisions online, but also allowing a revised version of the definitions to be published in full each time a future update is required, with users able to compare changes against previous versions.

Other important changes have been made. The 2026 FX Definitions include revisions to disruption events and fallbacks for deliverable transactions and incorporate the EMTA template terms and market practices for non-deliverable FX transactions. They also contain provisions for calendar adjustment events and align the calculation agent standards with those in the 2021 ISDA Interest Rate Derivatives Definitions.

Of course, while this isn’t a complete overhaul of the definitions, we realize these changes can’t be implemented at the flick of a switch. That’s why we’re targeting November 2027 for implementation, giving firms a long runway to make the necessary changes to their systems and processes.

In the meantime, ISDA will continue to support the market as these important changes are made. As part of that, we’ve published an implementation roadmap, along with a brochure highlighting the key areas where updates have been made. Other supporting materials will be published in the FX Definitions Update InfoHub in the coming months.

FX derivatives are a critical tool, used by banks, corporations, pension funds, asset managers, government agencies and others to hedge the risks associated with shifts in currency markets. We therefore need to ensure the definitions governing trading and settlement are fit for purpose and reflect the realities of the market. The 2026 FX Definitions achieve this, enabling firms to transact FX derivatives transactions safely and efficiently, now and in the future.

Tags:

Derivatives, Emerging Markets Traders Association (EMTA), FX Definitions, FX Derivatives, MyLibrary

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