SWAPS AND DERIVATIVES ASSOCIATION, INC.
For Immediate Release, Monday, March
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ISDA Announces Further Industry Commitments
to Increase Robustness of OTC Derivatives Markets
“ISDA and the industry recognize the
need for further enhancements to the infrastructure and framework of the OTC
derivative markets,” said Eraj Shirvani, Chairman of ISDA and Managing Director, Head of
Fixed Income EMEA, Credit Suisse.
“The commitments that the industry is making today build upon solid
foundations already laid and further underscore our focus on transforming and
strengthening OTC derivatives markets. They reflect the strong partnership of
the major dealers, significant buy-side institutions and global supervisors,
with a goal of reducing systemic risk by improving market transparency,
standardization and risk management practices.”
In the letter, the
industry highlights further commitments regarding central clearing, transparency,
standardization, operational efficiency targets, and collateral:
Central Clearing: The
industry commits to broaden
the set of OTC derivatives eligible for clearing, taking into account risk,
liquidity, default management and other factors. The industry also commits to elevated targets
for clearing dealer-to-dealer swaps and to work with clearinghouses to accelerate
the growth of clearing for transactions between dealers and buy-side market
Transparency: ISDA and the industry have been working
towards the creation of global data repositories. Repositories have been launched
already for credit and interest rate products and the industry is in the
process of building a repository for equity derivatives. Such repositories will
give regulators insight into trading activities of all market participants. The
industry will also perform work to assess adequacy of price transparency in
Standardization & Operational Efficiency: The industry affirms its continuing commitment to achieve further product,
processing and legal standardization in each asset class with a goal of
securing operational efficiency, mitigating operational risk and increasing the
netting and clearing potential for appropriate products.
Bilateral Collateral Arrangements: The industry has set
new goals in the areas of portfolio
reconciliations and dispute resolution, and has updated a roadmap for improving
In addition to containing
further industry commitments, the letter also serves to update the global
supervisory community on the progress that has been made since the group’s June
progress has been made and continues to be made as the industry works
proactively and cooperatively with regulators and policy makers globally,” said Stephen O’Connor, ISDA Board Member,
Chair of the ISDA Industry Governance Committee, and Managing Director, Morgan
Stanley. “While work remains to be done,
actions taken to date have fundamentally changed the OTC derivatives markets
for the better. Many of the measures, and central clearing in particular, serve
to significantly reduce systemic risks.”
since the June letter include:
implementation of a revised and formal ISDA Governance framework, with
increased participation of the buy side in the strategic agenda, policy
formation and decision-making process.
progress on product standardization for credit derivatives, including, the
completion of the 2009 ISDA Credit Derivatives Determinations Committees,
Auction Settlement and Restructuring CDS Protocols.
or exceeding clearing targets set in respect of dealer-to-dealer new and
historic trade volume for clearing-eligible interest rate and credit derivative
products. More than 90 percent of new dealer-to-dealer volume of clearing-eligible
Interest Rate Derivative products is now cleared through central counterparty
clearing facilities (CCPs). In addition,
more than 90 percent of total dealer-to-dealer volume of clearing-eligible Credit
Derivative products is now cleared through CCPs.
successful launch of CDS clearing in Europe, the recent launch of Single-Name
Clearing in Europe and
progress in the implementation of data repositories, with the achievement of universal
data repository coverage for Credit Derivative products and the launch of the
Interest Rate Derivative Data Repository.
The launch of the Equity Derivative Data Repository is scheduled for mid-2010.
of proposals for improvements to the OTC collateral process.
improvement in industry infrastructure, as measured by further reduction, and
in some cases elimination, of unsigned transaction confirmation backlogs, and
continued improvement in operating performance metrics.
ISDA, which represents participants
in the privately negotiated derivatives industry, is among the world’s largest
global financial trade associations as measured by number of member firms. ISDA
was chartered in 1985, and today has over 810 member institutions from 57
countries on six continents. These members include most of the world’s major
institutions that deal in privately negotiated derivatives, as well as many of
the businesses, governmental entities and other end users that rely on
over-the-counter derivatives to manage efficiently the financial market risks
inherent in their core economic activities. Information about ISDA and
its activities is available on the Association's web site: www.isda.org.
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Derivatives Association, Inc.