ISDA®
INTERNATIONAL
SWAPS AND DERIVATIVES ASSOCIATION, INC.
NEWS RELEASE
For Immediate Release, Thursday, September 24, 2009
For More Information, Please Contact:
Cesaltine Gregorio, ISDA New
York, +1 212-901-6019, cgregorio@isda.org
Deirdre Leahy, ISDA New York,
+1 212-901-6021, dleahy@isda.org
Donna Chan, ISDA Hong Kong, +852 2200 5906, dchan@isda.org
ISDA Highlights Derivatives Industry
Progress;
Remains Committed to Further Improvements
“The privately negotiated derivatives industry clearly recognizes its responsibility to help strengthen the global financial markets, as evidenced by the scope and scale of our collective efforts to identify and reduce the sources of risk in our business,” said Eraj Shirvani, ISDA Chairman and Head of Fixed Income EMEA at Credit Suisse. “This in fact is why ISDA was founded and it is a mission to which we remain deeply committed. Since the credit crisis began, no other area of the financial markets has worked as strenuously or effectively to enhance financial stability as the privately negotiated derivatives business.”
“Today there is a broad consensus
for a comprehensive plan to modernize and protect the integrity of the
financial system,” said Robert Pickel, Executive Director and Chief Executive Officer, ISDA. “ISDA
supports the key concepts underlying reform efforts, including appropriate
regulation for all systemically important financial institutions, stronger
counterparty risk management, increased transparency, and a more resilient and
efficient infrastructure.” The industry’s ongoing initiatives are a key focus
of ISDA’s 2009 Regional Conference in
"ISDA will continue to lead and participate in these initiatives in a constructive way," Mr Pickel continued. "The Association and the industry will not wait for legislation or additional regulation to demonstrate their commitment to these principles."
·
Stronger and more diverse counterparty risk
management, including increased use of clearinghouses: More than $2 trillion of credit default swaps contracts
have been cleared in North America and
·
Improved transparency: ISDA is working to enhance market transparency in several
important ways. The Association appointed buy-side participants to join with the
dealer community on the ISDA Board and on many industry initiatives, such as
the Credit Derivatives Determinations Committee.
In addition, ISDA is working to
increase the flow of information on the derivatives business to the regulatory
community as well as to the general public. More information on exposures and
activity is available through DTCC’s trade information warehouse. ISDA has made
available to all participants a CDS standard model that improves consistency
and reduces operational differences regarding the calculation of CDS prices.
And the ISDA CDS MarketplaceSM
website brings together information, data and statistics on the CDS business. ISDA and
industry participants have also developed a request for proposals from vendors
interested in helping to construct a trade information warehouse for interest
rate swaps, similar to that which currently exists for credit default swaps.
· A resilient operational infrastructure: In April, ISDA successfully launched the Big Bang Protocol, which incorporated auction settlement terms into standard CDS documentation. It also incorporated Determinations Committee resolutions into the terms of standard CDS contracts. The Committees are comprised of dealer and buy-side representatives to determine whether credit events have taken place and what obligations can be delivered. The Big Bang Protocol is important as more than 40 credit events have been processed globally since October 2008.
ISDA also increased operational efficiency through industry-wide compression or 'tear-up' efforts that helped to significantly reduce the notional amount of CDS outstanding. The industry continues to improve in other key areas, such as electronic processing, collateralized portfolio reconciliation and reduction in outstanding confirmations. Electronic matching rates of eligible confirmation events increased from 69 percent in 2007 to 85 percent in 2008 for equity derivatives, 70 percent to 78 percent for interest rate derivatives and 96 percent to 98 percent in CDS. The level of aged confirmations continues to steadily decline, with equity derivatives at 1.3 business days’ worth of outstanding confirmations in 2008, compared with 2.4 days for 2007; interest rate derivatives at 1.3 days vs. 0.7 days and CDS at 0.3 days compared to 0.1 days.
Looking forward, ISDA will remain proactive in identifying and reducing the sources of risk in the industry. ISDA remains committed to working on a broad number of fronts – risk management, operations, trading practices, legal, technology – to further strengthen the robust and resilient infrastructure it has developed since its inception.
About ISDA
ISDA, which represents participants in the privately negotiated derivatives industry, is among the world’s largest global financial trade associations as measured by number of member firms. ISDA was chartered in 1985, and today has over 830 member institutions from 58 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.
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Swaps and Derivatives Association, Inc.