Greece triggered the payment on default insurance contracts by using legislation that forces losses on all private creditors, the International Swaps and Derivatives Association said on Friday.
The decision by the EMEA Determinations Committee to declare a so-called credit event was unanimous, ISDA said in a statement.
Markets showed little reaction to the widely expected decision. The euro edged lower against the U.S. dollar while U.S. Treasury prices saw losses pared after the ISDA announcement.
The ISDA said the use of collective action clauses (CACs) to amend the terms of Greek law governed bonds issued by The Hellenic Republic such that the right of all holders of the Affected Bonds to receive payments has been reduced.
The credit event ruling means a maximum of $3.16 billion (2.01 billion pounds) of net outstanding Greek credit default swap contracts could be paid out, though the actual amount is likely to be lower because bondholders are not losing all of their original investment.
ISDA said the auction will be held to determining the actual payout amounts on March 19.
Greece said it would use the newly passed legislation that included the CACs to force private creditors into a bond swap.
This follows creditors' voluntary tendering of 85.8 percent of the $232.22 billion in bonds regulated by Greek law. The use of CACs should boost participation to an estimated 95.7 percent.
(Reporting By Daniel Bases; Additional reporting by William James in London; editing by Chizu Nomiyama and Gary Crosse)