Seismic Shift – IQ May 2020

The coronavirus pandemic has forced firms to switch their focus to critical priorities like maintaining their operations, managing volatility and servicing customers, all in an environment of social distancing and home working. These exceptional circumstances have posed unique questions and issues, which the industry and ISDA have been responding to.

Recognising that financial institutions are now entirely focused on business continuity and managing risk, regulators have been quick to extend upcoming deadlines and provide temporary relief on existing obligations. Various measures have also been introduced to allow banks to eat into capital and liquidity buffers so they can continue to support the economy. These steps have been important and have enabled firms to better allocate scarce resources, but challenges remain in a variety of areas. ISDA has been busy identifying these problematic issues and proposing solutions to regulators.

Some of the issues have been operational in nature. For example, the closure of offices globally in response to the coronavirus outbreak has highlighted potential difficulties in signing and delivering paper documents and notices, and has prompted greater interest in digital documentation, e-signatures and the enforceability of electronic contracts in various jurisdictions. And, in an environment where some national authorities opted to close certain markets and infrastructures in response to severe volatility, there has also been a need for industry guidance to provide clarification and help ensure the orderly valuation and settlement of derivatives positions.

This edition of IQ examines some of the issues raised by the coronavirus crisis, and looks at the measures taken by ISDA and the industry to help ensure markets continue to function efficiently. We also look at the regulatory response, and consider what might come next.

It’s not all about coronavirus, though. Progress continues to be made on efforts to adopt alternative risk-free rates ahead of the end of 2021, when the UK Financial Conduct Authority has said it will no longer compel or persuade banks to make LIBOR submissions. Last month, ISDA published preliminary results from its latest consultation on fallbacks, which indicate strong support for including both pre-cessation and permanent cessation fallbacks as standard language in the 2006 ISDA Definitions and in a single protocol. In this issue of IQ, we ask a range of market participants for their views on benchmark reform, including the importance of robust fallbacks.

Click on the attached PDF to read the full issue.

Documents (1) for Seismic Shift – IQ May 2020

Joint Letter on Simplification of EU Taxonomy

On October 6, ISDA, the Association for Financial Markets in Europe (AFME), the European Fund and Asset Management Association (EFAMA), the European Association of Co-operative Banks (EACB) and the European Banking Federation (EBF) published a policy statement in support of...

Paper on Removal of SI Regime

On October 10, ISDA, the Association for Financial Markets in Europe (AFME) and the International Capital Market Association (ICMA) published a paper on the practical implications of the recent discontinuation of the systematic internalizer (SI) regime for derivatives, bonds and...

Episode 52: Innovative Thinking

The pace of change in derivatives markets shows no sign of letting up, with rapid evolution across trading, regulation and technology. Industry veteran Don Wilson, founder of trading firm DRW, talks to The Swap about some of the biggest trends....