International Swaps and Derivatives Association is the body corporate to make over the counter (OTC) derivatives market CDSDEFAULT-1-1safe and efficient.

It has 815 members from 58 countries including global, international and regional banks, asset managers, energy and commodities firms, government and supranational entities, insurers and diversified financial institutions, corporations, law firms, exchanges, clearinghouse and other service providers.

The Key areas of ISDA are
* Reducing counterparty risk
* Increasing the Transparency
* Improve the OTC operational infrastructure.

The details are provided on the ISDA Brochure

ISDA came under criticism in 2012 on its decision that based on evidence the Greek bailout would not prompt payments on the (CDS) credit default swaps.

CDS is a credit derivative transaction in which two parties enter into an agreement, whereby one party (known as the Protection Buyer) pays the other party (the Protection Seller) periodic payments for the specified life of the agreement. The Protection Seller makes no payment unless a credit event relating to a predetermined reference asset occurs. If such an event occurs, it triggers the protection seller’s settlement obligation, which can be either cash or physical. Before trading, institutional investors and dealers enter into an ISDA Master Agreement.

So ISDA claims that Greece has not defaulted despite refusing to make good on their obligations in full or on time, raises a doubt or mockery of its own rules is a question in itself. To safeguard its image ISDA came out strongly as has given the remarks: “An important part of the credit event process – and an important element in each story – are the ISDA Determinations Committees (DCs). The DCs are 15-member panels of representatives from banks and investment firms. A supermajority (12 of 15) of each DC’s members is required to make a determination.” For detail you can visit the media section of ISDA

To summarize ISDA has already gave the statement that makes a wit : In sum, we think the credit event/DC process is fair, transparent and well-tested. There’s simply no evidence to the contrary.

This is why insurance companies have their own state regulators. The CDS purveyors have achieved financial nirvana. They get to sell unregulated “insurance” where a body that they control gets to decide whether or not they need to pay-out. No wonder that the major providers are TBTF (Too Big to Fail) US and European banks. As far as I am aware of, the only major pay-outs that have occurred were when the purveyor (AIG) had the money provided by the US government.
The only thing that would have surprised me is if the ISDA decided that something would warrant a pay-out.