Normally, the bankruptcy of a party to a derivative contract gives the counterparty the right to terminate the contract or exercise certain rights with regard to collateral.  In an effort to reduce systemic risk upon failure of a systemically-important bank or other financial institution, the Financial Stability Board (FSB), in conjunction with the International Swaps and Derivatives Association, Inc. (ISDA), recently announced that 18 major banks have agreed to adopt a protocol that amends the ISDA Master Agreement to suspend early termination rights for two days upon the insolvency of a counterparty.  In theory, this two-day window will allow the distressed counterparty to deal with its derivatives book in an orderly fashion.  Many of those 18 banks (or subsidiaries) serve as prime brokers for private funds; the protocol could put those funds at a disadvantage if their prime broker were to fail.  See “Prime Brokerage Arrangements from the Hedge Fund Manager Perspective: Financing Structures; Trends in Services; Counterparty Risk; and Negotiating Agreements,” Hedge Fund Law Report, Vol. 6, No. 2 (Jan. 10, 2013).  Not surprisingly, hedge funds and other interested trade organizations are pushing back, arguing that the protocol falls short on both substantive and procedural grounds.  In a letter to the FSB, a consortium of buy-side and other trade organizations have argued that the protocol will not work in practice and that it constitutes an improper end run on the legislative process.  This article summarizes the new protocol, the rationale behind its adoption, the buy-side pushback, and insights from Anne E. Beaumont, a partner in Friedman Kaplan Seiler & Adelman LLP.