ISDA calls for streamlined derivatives processing

ISDA’s research finds standardised derivatives processing could be achieved through use of data.

The International Swaps and Derivatives Association (ISDA) has called for increased standardisation and automation of derivatives trade processes in a new whitepaper.

ISDA’s latest whitepaper entitled ‘The Future of Derivatives Processing and Market Infrastructure’ responds to demand from market participants to streamline various requirements.

The paper notes that greater standardisation of derivatives processing can be achieved through data, documents and processing.

It initially proposes that a consensus on data can be achieved with a multi-use derivatives product identifier that could remove systemic inefficiencies and increase transparency.

Harmony across existing ISDA documentation can be addressed with standardised and digitised documentation after various transacting parties are customising a “plethora” of standard documents published for industry use.

ISDA also believes that that collaboration with global regulators can create a standard processing model to address the ‘significant’ complexities of business processes required for the same function.

“The derivatives industry has become reliant on legacy infrastructures and processes that have been layered on top of each other over time,” said ISDA’s chief executive Scott O’Malia. 

“The result is a derivatives infrastructure that is duplicative and based on incompatible operating standards, and this isn’t sustainable.”

The paper also prioritises the use of technology for development of the “future- state derivatives ecosystem” and identifies cloud services and distributed ledger as technologies that the industry should focus on to assess how they can be applied to address issued faced by market participants.