ISDA®                    

INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION

NEWS RELEASE

For Immediate Release Wednesday, June 1, 2005

For More Information Contact: Louise Marshall, (212) 901-6000; lmarshall@isda.org

 

ISDA 2005 Operations Benchmarking Survey:

Automation of Credit Derivatives Processing Improves

 

NEW YORK, Wednesday, June 1, 2005 – The International Swaps and Derivatives Association (ISDA) today published the ISDA 2005 Operations Benchmarking Survey and FpML Use Survey. The Survey demonstrates important advances in the operational processing of credit derivatives, notably an increase in automation of confirmations, and a reduction in confirmation backlogs. The Survey also reports growing use of Financial Products Markup Language (FpML) in the communication of trade data.

 

Automated generation of credit derivatives confirmation has increased to an average of 40 percent from 24 percent last year, the Survey found, while the number of credit derivatives confirmation backlogs dropped significantly. Furthermore, 68 percent of respondents that have not yet automated credit derivatives confirmation generation plan to do so in the next year. The backlog of credit derivatives confirmations reduced from an average of 17.8 business days reported in the 2004 Survey to 11.6 in the 2005 Survey.

 

 “Through ISDA, the industry has made a significant commitment to tightening up its post-trade processing performance and is reaping the benefits of these efforts most notably in credit derivatives,” said Robert Pickel, Chief Executive Officer and Executive Director, ISDA. “These results are particularly encouraging in light of the increased volumes in credit derivatives trading. ISDA is mindful of the goals set forth in its Strategic Plan for operations and the need to continue improvements in processing of all privately negotiated derivative instruments.”

 

According to the Survey, the average weekly number of credit derivatives trades rose from 283 last year to 644 and average monthly settlements more than doubled from 2,042 to 4,960. Error rates in front-office processing of credit derivatives, whether as a result of error or change in trade details, reduced from an average 18 percent of transactions to 9 percent in the 2005 Survey. For trades that needed to be rebooked, there was a reduction across all sizes of firms, the percentage for large firms reducing from an average 26 percent to 15 percent.

 

Generation of automated interest rate swaps confirmations was reported at 62 percent versus 58 percent the previous year, while for vanilla equity derivatives this figure increased to 41 from 14 percent. The backlog of vanilla interest rate swaps confirmations rose slightly from 8.9 to 10.1 days across all sizes of firms, but decreased slightly in large firms from 10.8 to 10.6 days. For vanilla equity derivatives, a similar small increase was seen from 12.5 to 13.3 days.

 

 

 

For the first time these results are complemented by a separate Survey on the use of FpML in the automation of trade processing. Results show that just under half of responding financial institutions currently use FpML in their OTC derivatives processing, particularly the larger firms, of which 75 percent currently use the standard. Of large firms using FpML, an average 57 percent of trades and 66 percent of interest rate swaps are in FpML format. Plans to adopt FpML are highest for interest rate and credit derivatives and FX spot, forwards and swaps trade data.

 

About ISDA

ISDA is the global trade association representing leading participants in the privately negotiated derivatives industry. ISDA was chartered in 1985, and today has more than 625 member institutions from 47 countries on six continents. These members include most of the world's major institutions that deal in privately negotiated derivatives, as well as many of the businesses, governmental entities and other end users that rely on over-the-counter derivatives to manage efficiently the financial market risks inherent in their core economic activities. Information about ISDA and its activities is available on the Association's web site: www.isda.org.

 

About FpML

FpML is the business information exchange standard for electronic dealing and processing of financial derivatives instruments. It establishes the industry protocol for sharing information on, and dealing in, financial swaps, derivatives and structured products over the Internet. It is based on XML (Extensible Markup Language), the standard meta-language for describing data shared between applications. Information about the FpML standard, the specifications and the different working groups can be found on the FpML web site: www.fpml.org.

 

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