The International Swaps and Derivatives Association, Inc. (ISDA) today announced the publication of its “Feasibility Study: Extending Collateralized Portfolio Reconciliations”. This publication is intended to enhance understanding of the achievability for wider adoption of portfolio reconciliation discipline across the industry,
“While portfolio reconciliation is clearly a subject of interest in the privately negotiated derivatives industry, actual take-up across the broader community is still relatively nascent,” said Julian Day, head of Trading Infrastructure, ISDA. “The level of engagement on this topic has been encouraging and productive. To this end, buy-side and sell-side firms will work collaboratively and with vendors to identify solutions to support a wider rollout of portfolio reconciliation during 2010.”
The Study discusses the considerations that exist for expansion of a frequent reconciliation for collateral portfolios beyond the group of 15 major dealers that regularly report progress and commitments relating to industry infrastructure projects (‘Fed 15’). The Study has been undertaken by representatives of dealer and buy-side firms under the guidance of the ISDA Collateral Committee.
In July 2008, ISDA and derivatives industry participants made the first of a series of commitments to regulators regarding collateral management, including portfolio reconciliation. These commitments led to significant improvements in market practice towards the goals set by the Counterparty Risk Management Group III (CRMPGIII). Amongst these improvements was the adoption by June 30, 2009 of a daily portfolio reconciliation standard between the Fed 15 dealer firms.
Daily reconciliation between Fed 15 dealers covers an estimated 60% of the global privately negotiated derivatives industry, across all asset classes.
While this is a significant accomplishment in less than a year from the first formal industry commitment, participants are committed to addressing expansion to a broader constituency.
The Feasibility Study is available on the ISDA website: www.isda.org.
