The Future of Derivatives Markets: A Roadmap for Innovation

The ISDA Future Leaders in Derivatives (IFLD) are excited about the promise of innovative new technology and its potential to transform financial markets. This paper encourages current leaders to embrace transformational change and supports them in adopting an ambitious strategy for defining a digital future for financial markets, fostering an environment for technological innovation, and building a safer, more robust global financial system.

The purpose of this paper is to provide a roadmap for participants in the derivatives industry who are working to implement new technology solutions and applications aimed at optimizing and digitizing financial markets over the next decade. The recommendations set out in this paper are intended to empower current and future leaders to take proactive steps in developing tangible use cases, resolving challenges associated with these use cases and delivering on the promise of innovative and transformational new technology.

The paper considers the maturity of the relevant technologies and proposes metrics for determining which solutions should be prioritized. Based on these metrics, it identifies two compelling use cases:

  1. the use of DLT to simplify, standardize and automate the regulatory reporting process; and
  2. the implementation of digital assets within collateral management systems to lower settlement times and reduce risk.

The paper elaborates on the current state of trade reporting and collateral management and identifies relevant issues and pain points that could be resolved using a particular technology solution. It then sets out a roadmap to explain how the benefits of technology can be achieved.

While the intention is not to specify or recommend any particular approach, or to address any specific technological application or project, it does suggest steps that should be taken to design implementation programs, and also highlights areas where further industry collaboration will be required to identify and resolve existing areas of uncertainty.

Documents (1) for The Future of Derivatives Markets: A Roadmap for Innovation

Expanding the Universe of Eligible VM

ISDA conducted a series of interviews with buy- and sell-side firms to understand the drivers of a growing use of non-cash assets as variation margin (VM) for non-cleared over-the-counter (OTC) derivatives and the barriers that remain to expanding the use...

ISDA Response on Hedge Accounting Guidance

On August 14, ISDA responded to an exposure draft from the Financial Accounting Standards Board (FASB). ISDA broadly supports the FASB’s proposed targeted improvements to hedge accounting, including allowing interest rate hedging of held-to-maturity (HTM) debt securities, recognizing all Secured...

Joint Response to EBA Consultation

On August 12, ISDA and the Association for Financial Markets in Europe (AFME) responded to the European Banking Authority’s discussion paper on certain taxonomy key performance indicators (KPIs) and other aspects of the Disclosures Delegated Act  under Article 8 of...

Response to JSCC on Clearing Fund Consolidation

On August 12, ISDA responded to the Japan Securities Clearing Corporation’s (JSCC) consultation on its proposal to consolidate clearing fund consumption, calculation and deposit segmentation across six clearing qualifications under the Financial Instruments and Exchange Act. ISDA members broadly support...