A lot has changed since ISDA last held an in-person Annual General Meeting (AGM). Back in 2019, when we gathered in Hong Kong, a major talking point was the challenges posed by LIBOR transition. Benchmarks will still be a focus at the 2022 AGM in Madrid on May 10-12, but the conversation will be a very different one. With 30 LIBOR settings having already been retired, market participants now have a playbook they can deploy when ditching the remaining five US dollar settings. Challenges remain, but they don’t seem quite as overwhelming as they perhaps did in 2019.

Other big focus areas on the AGM agenda in 2022 – crypto derivatives and environmental, social and governance (ESG) issues – weren’t even touched upon in 2019. Both are now increasingly attracting the attention of derivatives market participants, prompting ISDA to do what it has done in other markets for the past 37 years: develop standards.

In this issue of IQ, we look at the fast-growing crypto derivatives market and explore ISDA’s work to develop contractual standards that reflect the unique aspects of this asset class. The intention is to create a clear, unambiguous contractual framework to support crypto derivatives, which will help ensure greater efficiency, deeper liquidity and reduced risk. Having an appropriate capital framework is equally important, and ISDA submitted a response last year to the Basel Committee on Banking Supervision’s initial proposals for the prudential treatment of crypto assets. A new consultation is expected soon, and ISDA will work with the industry to provide feedback on the revised proposals too.

We also explore developments in the small but growing sustainability-linked derivatives (SLD) market. By incorporating an ESG component into otherwise conventional derivatives, SLDs are intended to incentivise firms to achieve pre-agreed sustainability objectives. However, continued growth of the product will depend entirely on the perceived credibility of the key performance indicators (KPIs) used to determine whether a firm has met its goals. In response, ISDA has published a set of KPI guidelines to contribute to best practices, ensure the integrity of the product and enhance liquidity. This is on top of separate ISDA initiatives to develop standard documentation for emissions and other environmental derivatives.

LIBOR transition, crypto derivatives and ESG are just three topics on the agenda for the 2022 AGM – there are plenty of others. We really hope you will join us for what we think will be a fascinating couple of days in Madrid.

Click on the PDF below to read IQ in full.

Register for the ISDA AGM here.

Documents (1) for Firm Foundations – IQ April 2022