The International Swaps and Derivatives Association, Inc. (ISDA) today issued the following statement from chief executive officer Robert Pickel in respect to the European Commission Communication on Derivatives Markets.
ISDA looks forward to discussing the ideas in the Communication with the European Commission and other European Union and national regulators. The Association also strongly supports a number of the Commission’s goals, including increased transparency. ISDA supports the development of options for users of OTC derivatives to undertake their business in the most prudent and efficient manner and to the highest standards of commercial conduct. We welcome the development of clearing and settlement arrangements, which would provide the benefits of choice and flexibility to participants within the sound industry framework developed by ISDA over the past 25 years; a framework that benefits from the significant counterparty credit risk mitigants of legally enforceable netting and collateral arrangements.
The industry and ISDA have worked closely to introduce economic and contractual standardization, including hardwiring of auction terms into CDS contracts and other market practice changes which further facilitate central clearing. In the case of CDS, the industry has also worked to increase regulatory and market transparency, including transaction reporting.
ISDA welcomes the Commission’s Communication as the Association has a strong interest in the central clearing of CDS as one part of a strong and healthy market. At the same time, ISDA values recognition by regulators of the continuing need for bilateral customised transactions which by their nature are not suited for clearing.
ISDA believes that those exposed to credit risk should have the option to choose the type of transaction that best suit their business and risk management needs, as works so well for customers in the equity, interest rate, commodity and FX sectors. Removing that flexibility, such as by forcing bilateral participants to trade on an exchange or otherwise limiting the availability of customized risk management solutions, would be a step backwards.