ISDA 2010 Preliminary Margin Survey Results: Collateralization of CDS Exposures at 97 Percent
April 23, 2010
SAN FRANCISCO, Friday, April 23, 2010—The International Swaps and Derivatives Association, Inc. (ISDA) today released preliminary results from its 2010 ISDA Margin Survey at its 25th Annual General Meeting in San Francisco.
Among large dealers, 78 percent of all transactions are now executed with the support of a collateral agreement. In respect of credit derivatives, 97 percent of trades are subject to collateral agreements.
“The need for effective and efficient risk management will continue to drive demand for OTC derivatives,” said Conrad Voldstad, ISDA Chief Executive Officer. “Collateralization remains among the most widely used methods to mitigate counterparty credit risk and, as ISDA’s 2010 Margin Survey demonstrates, market participants have increased their reliance on collateralization steadily over the years.”
The 2010 Survey reports that collateral agreements in place now number almost 172,000, of which 83 percent provide that either party may be required to deliver collateral (a two-way obligation), up from 75 percent last year. Among firms that responded in both the 2009 and 2010 surveys, the number of collateral agreements grew by 14 percent.
ISDA continues to develop a strategic vision for the derivatives industry to make derivative processing more scalable, transparent and resilient in all asset classes.
The process of reconciling collateralized portfolios shows steady advances in adoption. About 90 percent of all survey respondents indicated that they periodically perform portfolio reconciliations, with the major dealers doing so on a daily basis.
Throughout 2009, ISDA and the industry remained focused on driving significant improvements in key areas, such as strengthening counterparty risk management, including greater use of clearinghouses; improving transparency; and building a stronger and more resilient operational infrastructure. Significant progress in each of these areas has been made and continues to be made as the industry works proactively and cooperatively with regulators and policy makers globally.
Of the 89 firms responding to the 2010 ISDA Margin Survey, 70 are banks or broker-dealers, and the remaining are institutional investors, government agencies and other end users.
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 820 member institutions from 57 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.
ISDA is a registered trademark of the International Swaps & Derivatives Association, Inc.