ISDA®                

INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION

NEWS RELEASE

 

For Immediate Release Wednesday, July 25, 2001

For More Information, Please Contact:

Stacy Carey, ISDA New York, (212) 332-1200; Fax (212) 332-1212; scarey@isda.org

 

ISDA Publishes 2001 Operations Benchmarking Survey

 

NEW YORK, Wednesday July 25, 2001 – The International Swaps and Derivatives Association today released the ‘ISDA 2001 Operations Benchmarking Survey: Over-the-counter (OTC) Derivatives Operations Issues’.  This annual Survey, the most authoritative report on operations practices and standards for OTC derivatives, was first published by ISDA in 2000.

 

“This year’s Survey demonstrates increasing global interest in improving efficiencies and managing risks by optimizing derivatives operations,” said Robert Pickel, ISDA’s Executive Director and CEO.  “In an environment of ever growing volumes and product-sophistication, the 2001 Survey provides a snapshot of how OTC derivatives market participants process transactions across the full range of OTC derivative products.”

 

The Survey is designed to identify and track trends in the industry and to provide individual firms with a benchmark against which to measure the promptness and accuracy of their processing of trades, confirmation procedures and settlement. Like last year, individual respondents have received a feedback report, comparing their data with that of the rest of the respondent population.

 

Highlights of the survey follow this release.  The entire survey can be accessed in the What’s New section on ISDA’s web site: www.isda.org. 

 

In ensuring the integrity and relevance of the Survey, ISDA was greatly assisted by an Advisory Group made up of representatives of the following member firms: Bank of America, Barclays Capital, Credit Suisse First Boston International, Deutsche Bank, Merrill Lynch, JP Morgan Chase and UBS Warburg. In addition, Lombard Risk Consultants acted as independent advisor and facilitator.

 

ISDA 2001 Operations Benchmarking Survey

 

·        Core benchmarking data include: the time it takes to produce, dispatch and match trade confirmations and the methods used to achieve this; the incidence, source and causes of errors; the prioritization of outstanding confirmations; and the handling of payments and settlements. A further section analyses in detail levels of automation for various functions (with a comparison across product-types). The Survey also provides contextual information on trading volumes, staffing, customer numbers, organizational structure and trends in market practice.

 

Highlights

·        The Survey, which experienced a 50% response rate increase, is based on responses from 61 firms around the world.  The results confirm that longer established, higher-volume products are the most straightforward to process and most likely to be automated.  

 

·        The percentage of respondents who have automated at least 90% of the transfer of data from front office to operations are as follows:  FRA’s – 78%; ‘vanilla’[1] interest rate and currency swaps - 66%; ‘non-vanilla’ swaps - 52%.  Around 60% of the respondents have automated the trade-detail-transfer function for credit and equity derivatives to some extent.  The survey suggests that levels of automation are set to grow in the coming year.

 

·        For FRAs and vanilla swaps, trades are available for processing the same day and nearly nine-tenths of trades reach the back office by 5pm on trade date.

 

·        There are three types of data that firms most commonly have to add at that stage: counterparty details, basic trade details and Standard Settlement Instruction (SSI) data.

 

·        Firms aim to dispatch all FRA confirmations within two days of trade, and 98% of vanilla swap confirmations within five days, though they currently miss this target for 4% of FRA confirmations and 8% of vanilla swap confirmations.

 

·        The main reasons for delays are that the product is non-standard or else the back office is awaiting data or approval from traders or marketers.

 

·        Weighting responses by trading volumes, 34% of FRA confirmations are matched by a commercial auto-matching system, as against 9% of vanilla swaps.

 

·        Across all respondents, an average 7 days’ worth of FRA confirmations have been sent but not finalised; for vanilla swaps, the number is 10 days and, for non-vanilla swaps, 12. Firms distinguish between outstanding confirmations, depending on whether there is any proof of counterparty acceptance of the trade. In either case, the majority of confirmations have been finalised within 30 days.

 

®ISDA is a registered trademark of the International Swaps & Derivatives Association, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



[1] For the purposes of this survey, vanilla is defined as ‘capable of being matched by a commercially available auto-matching system’.