Over the years, parts of the derivatives markets have embraced technology more readily than others. In the front office, trading systems have long been used to bring greater automation, while some post-trade processes have benefited from straight-through processing. However, other areas have lagged behind, maintaining their reliance on manual, paper-based practices. The legal documentation and definitions that form the foundation of this market are a case in point.

That was changing before the pandemic, but the switch to remote working has acted as a catalyst to further standardization and digitization. Without access to the usual operating environment, firms had to quickly adapt how they manage their trading documentation without compromising on legal enforceability. Electronic signatures quickly became the norm in jurisdictions where it is permitted, and the case for digital documentation became more widely accepted.

Several recent developments have pushed the market further along this path, including the launch of ISDA’s first ever digital definitions – an enhancement that will bring significant efficiencies to derivatives users (see pages 12-15).

Further positive change lies ahead as the derivatives market leverages advanced technologies such as artificial intelligence and distributed ledger. In this issue, market participants, technology providers and industry observers share their expectations for the future (see pages 16-21).

More immediately, a digital strategy is being pursued to deliver major improvements to derivatives reporting rules, which have proved fiendishly difficult to implement in a consistent and accurate way. As regulators revisit reporting requirements, ISDA is using the Common Domain Model to develop a digital regulatory reporting initiative that will enable more effective implementation of these revisions (see pages 22-23).

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Documents (1) for Digital Target – IQ July 2021