Clifford Chance

The New Normal: Welcome to Delayed Compensation 2.0

16 September 2016

After announcing a delay of the July 18 go-live date for the new par/near par delayed compensation regime, the LSTA has now issued an updated version, which went into effect on September 1.  This announcement came after discussions with several market participants, vendors, and settlement platform representatives.

The primary reason for the delay was due to the issue of Buyer "lead time", which is the LSTA term meaning the time between the date the Agent is ready to close and the date the Buyer can make the funds available.  While the July 18 version necessitated having trade documentation executed by T+6, the LSTA Liquidity Committee realized that a T+7 settlement date was virtually impossible.  Therefore and moving forward, the requirement is instead to now have all trade documentation executed by T+5.  Recognizing the inherent challenge of this requirement, the LSTA has made the decision to implement this new scheme in two consecutive phases.

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