Legal Guidelines for Smart Derivatives Contracts: Collateral

ISDA has published the third in a series of legal guidelines for smart derivatives contracts, intended to explain the core principles of ISDA collateral documentation and raise awareness among technology developers, collateral operations, risk managers and other key stakeholders of important legal and regulatory issues that must be considered when a technology solution is applied to the collateral management process.

The third paper provides guidelines to help the development and application of technology in the automation of collateral management. It describes:

  • Current challenges that exist in the collateral management process and how they can be resolved through greater automation;
  • The importance of increased standardization in creating the foundation for automated technology solutions;
  • ISDA’s strategy for developing and delivering greater standardization and digitization of ISDA collateral documentation; and
  • Existing legal standards as set out in ISDA’s collateral documentation and key points for technology developers to consider as they develop and implement new technology solutions within this legal and regulatory framework.

While the intention of this paper is not to specify or recommend any particular approach, or to address any particular technological application or project, these guidelines do suggest steps that should be taken to ensure the design and implementation of new technology solutions are consistent with existing legal and regulatory standards. It also highlights areas where further industry collaboration will be required to identify and resolve existing areas of legal and regulatory uncertainty.

Click on the PDF below to read the paper.

The first paper – Legal Guidelines for Smart Derivatives Contracts: Introduction – is available here.

The second paper – Legal Guidelines for Smart Derivatives Contracts: The ISDA Master Agreementis available here.

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