Pursuant to the Dodd Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”), prior to entering a swap transaction (“Transaction”), The Bank of New York Mellon (“BNY” or “we”) as a swap dealer must provide you with several disclosures.
General Disclosures and Product Specific Disclosures
The International Swaps and Derivatives Association (“ISDA”) has created standard industry product specific risk disclosures to capture the general risks of Transactions on the reference assets listed below.
- General Disclosure Statement for Transactions
- Commodity Derivatives Disclosure Annex
- Credit Derivatives Disclosure Annex
- Equity Derivatives Disclosure Annex
- Foreign Exchange Disclosure Annex
- Interest Rates Swaps Disclosure Annex
- IBOR Alternative Reference Rates Disclosure
- Asset-Backed Security Derivative Disclosure Annex
The links connect you to the latest published documents. However, from time to time ISDA may update these documents, therefore please also refer to the ISDA Disclosure Website to ensure that you are familiar with the latest versions.
Material Characteristics and Economic Terms
The agreed upon terms of any Transaction that we enter with you will be set forth in the confirmation or other agreement evidencing the Transaction, including the terms incorporated by reference therein. With respect to the material terms and characteristics of any Transaction entered or to be entered into between BNY and you, you should also refer to the applicable transaction level and relationship level documentation, including, without limitation, any term sheet, confirmation, master agreement, or master confirmation agreement.
If you believe that a material term of the Transaction has not been provided to you, please contact your usual BNY sales representative, who will provide this information to you upon request. Relevant documentation provided by BNY may incorporate by reference certain other documents and definitions, including those published by ISDA which can be made available upon request, and are also available on ISDA’s website.
It is your responsibility to notify your usual BNY sales contact if you have any additional questions regarding any Transaction that have not been otherwise addressed by the information and documents that have been provided to you prior to your entry into the Transaction. By entering a Transaction, you will be deemed to acknowledge that you have received prior to entry into such Transaction and in a manner acceptable to you, disclosures, notifications and other information sufficient for you to evaluate the material characteristics of the Transaction, including the material economic terms of the Transaction, operational terms and the rights and obligations of the parties during the term of the Transaction.
Scenario Analysis and Pre-trade mid-market marks
Please note that you do not have the right to receive scenario analysis or a pre-trade mid-market mark. We may, nevertheless, provide you with scenario analysis or a pre-trade mid-market mark at our discretion. Contact your BNY sales representative with specific questions or concerns.
Daily marks
Cleared Transactions
For cleared swaps originally executed by you with us, you have the right to receive the daily mark from the relevant derivatives clearing organisation upon request.
Uncleared Transactions
For uncleared swaps executed by you with us, we will provide you with a daily mark. The methodology of calculation and manner of disclosure of the mark is as follows:
Methodology of calculation
The daily mark of swaps (other than swaps with equities as the underlier) is the mark of the swap determined as of the close of business on the prior business day in New York or London, as the case may be, or such other time as we may have agreed in writing with you.
The mark generally represents an estimated price for the swap as of the valuation time, assuming your position in the swap were to be terminated early, replaced or novated. The daily mark is determined by discounting cash flows, option rights or other economic terms of the swaps using a combination of one or more of relevant prices, rates and inputs in the market, trader information, proprietary models and such other information we deem relevant.
For swaps with equities as the underlier, the daily mark is the mark as of the close of business on the prior business day, or such other time as we may have agreed with you based on market quotations for the underlying reference assets and other internal mathematical models and/or a combination thereof. The value for the Total Return Swap (“TRS”) product is based on a model provided by a third party vendor (“MUREX”). The model provided by MUREX is validated by BNY’s Model Valuation team. TRS are swap (or security-based swap) contracts where one counterparty pays/receives the total return of an asset to/from another counterparty, versus receiving/paying a “financing” rate. The market data sources utilized in the valuation are sourced from Bloomberg and Reuters. The vendor model and market data sources utilized in the valuation of a swap or security-based swap transaction are for our internal books and records and do not necessarily generate the value that would be arrived at by choosing another model or method of valuation.
Manner of disclosure
BNY will be providing daily marks to you in respect to your swap or security-based swap open positions on the BNY Markets Portal or via email, which are made available either to you or via your investment manager. If you or your investment manager are not getting daily marks, please reach out to bnydoddfrank@bny.com
Disclosures on daily marks
You should note the following additional information on the daily marks that we provide to you.
For information only
All marks represent an estimate and are provided for reference and information purposes only. Any mark provided does not represent:
(i) the actual terms at which new transactions could be entered,
(ii) a price at which BNY would necessarily agree to replace, terminate, liquidate, or unwind the transaction,
(iii) the value of the transaction that will be marked on the books of BNY, or
(iv) the calculation or estimate of an amount that would be payable following the designation or occurrence of an event of default under any master agreement.
Additionally, calls for margin may be based on considerations other than a mark provided by BNY. BNY may, from time to time, make a market in or otherwise buy and sell instruments identical or economically related to the valued instruments and the price at which BNY engages in such activity for a given investment may not be identical to the marks provided. The provision of the mark for a swap transaction is not intended to imply that an actual trading market exists for that swap or that it is appropriate to assume (for accounting or other purposes) that such a trading market exists.
We will use assumptions in determining the daily marks based on the current market conditions and our expectations for future conditions as applicable. BNY reserves the right to alter its methodologies of preparing the daily marks from time to time.
Seek other quotations
We make no representations or warranties to you that the prices at which we offer, or value swaps are the best prices available for any swap in the marketplace. You may wish to seek representative quotations from other participants in the relevant market to compare prices or to determine the intrinsic or current market value of a particular swap. You should not regard any mark that we provide to be an offer to purchase, sell, enter into, replace or terminate the relevant swap at that value or price.
No liability for use
We make no representations or warranties that any marks provided are suitable for your accounting or investment purposes, complying with any financial or tax reporting obligation, determining net asset value, computing any tax liability or any other purpose, matters which you should discuss with your own financial, legal, tax, accounting and other professional advisors and we disclaim any liability for any such use or reliance thereon, whether losses or damages are direct, indirect, incidental or consequential, even if we are advised of their possibility.
Material Conflicts of Interest
You should be aware there may be certain inherent material conflicts of interest that may arise between you and BNY and BNY’s affiliates with respect to foreign exchange, swaps, and other transactions that you may enter into with BNY. These conflicts of interest particularly may arise when BNY has an economic or other incentive to persuade you to act in a manner favourable to BNY. For example, certain business lines or BNY affiliates, such as the wealth management division of BNY Mellon, National Association, may refer swaps incidental to their lines of business for execution with BNY. Additionally, while it may be possible to trade certain products on an exchange or swap execution facility, if it is not required by CFTC regulations to trade such swaps on such facilities, then BNY may have an incentive to persuade you to execute your transaction directly with BNY on a bilateral basis. You should also be aware that BNY or its affiliates may have ownership interests in certain exchanges, swap execution facilities, or other various industry service providers and may accordingly have an incentive to refer you to such organizations. Finally, you should be aware that BNY, where permitted by law, may take opposite sides of your transactions for hedging or other reasons, and that such positions may ultimately have an adverse effect on your position.
Other Dodd Frank Disclosures
Copyright Notice
In no event may any copyright or trademark notice from the International Swaps and Derivatives Association, Inc. ("ISDA") be removed on these disclosures. This instrument's use should be undertaken only after securing appropriate legal advice on its provisions and ISDA makes no warranty or assurance, express or implied, concerning this instrument's suitability for use in any particular transaction and bears no responsibility or liability whatsoever, whether in tort or in contract, in respect of any use of this instrument.