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
Latest
ISDA Letter to FASB on Agenda Consultation
On June 30, ISDA submitted a comment letter to the Financial Accounting Standards Board (FASB) in response to the proposal File Reference No. 2025-ITC100, Agenda Consultation. In the letter, ISDA believes the highest priority should be given to expanding the hedge...
Joint Paper on UK EMIR Reform
On July 1, ISDA and UK Finance published a paper, which recommended a set of reforms for the UK European Market Infrastructure Regulation (UK EMIR), carefully considering each EU EMIR 3.0 reform and asking whether we would wish to adopt...
Response to FCA on UK EMIR Reporting
On June 30, ISDA submitted a response to chapter 5 of the UK Financial Conduct Authority’s (FCA) quarterly consultation CP25/16 on trade repository reporting requirements under the UK European Market Infrastructure Regulation (UK EMIR). Chapter 5 proposes ‘Amendments to the...
CDS Trading Activity in EU, UK and US Markets
This report analyzes credit derivatives trading activity reported in Europe. The analysis shows European credit derivatives transactions based on the location of reporting venues (EU versus UK) and product type. The report also compares European-reported credit derivatives trading activity to...