Standardise to Digitise – IQ January 2020

For more than 30 years, ISDA has been developing standards for the derivatives market. It’s been a pivotal part of ISDA’s mission to foster safe and efficient markets, and has driven much of the work in legal documentation and market infrastructure.

Back in the early days of the derivatives market, the publication of the ISDA Master Agreement gave firms a common template they could use to negotiate derivatives trading relationships, removing the chaos of having to agree terms when each party had its own preferred agreement with its own unique clauses and definitions.

That effort – to push for standardisation where there is no benefit to customisation – remains as important as ever today. As firms turn to new technologies to increase efficiencies, it is vital the right foundations are in place to support wide-scale automation and digitisation.

This issue of IQ examines the issues that are driving the adoption of technology, and explores the various initiatives to establish standards that will help facilitate full-scale automation across the industry. An important part of that is the launch of the Common Domain Model (CDM) last year. The CDM establishes a common digital representation of derivatives events and processes, eliminating the need to continually reconcile trade information with counterparties and enabling interoperability across platforms.

ISDA is also working to ensure legal standards keep pace with the 21st century. This includes the development of a taxonomy and clause library related to the ISDA Master Agreement and certain other documents – a project that will increase standardisation and make it easier to capture key legal data and share that information consistently across the institution. This is just one step in ISDA’s ultimate ambition to digitise its documents and definitions.

In ISDA Create, ISDA and Linklaters have developed a tool that will allow that documentation to be negotiated and executed online. The platform is up and running for initial margin, and other documents will be added over time.

Technology has the potential to significantly improve efficiencies in the derivatives market, but it won’t happen without the development and adoption of standards.

Click on the attached PDF to read the full issue of IQ.

Documents (1) for Standardise to Digitise – IQ January 2020

ISDA Omnibus Canadian Representation Letter

On September 2, ISDA published the Omnibus Canadian Representation Letter, which combines previously published representation letters drafted to assist firms in compliance with Canadian trade reporting, business conduct, regulatory margin and clearing classification rules. The Omnibus Canadian Letter is designed...

Joint Response on Cross-margining

On August 31, ISDA and FIA submitted a letter to the US Commodity Futures and Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) on the agencies’ joint request for comment on the implementation of portfolio margining and cross-margining...

Response to SEC on FICC Guaranty Fund

On September 1, ISDA and FIA submitted a joint response to the US Securities and Exchange Commission (SEC), supporting the Fixed Income Clearing Corporation’s (FICC) proposal to establish a dedicated guaranty fund at its government securities division (GSD). FICC had...