The International Swaps and Derivatives Association, Inc. (ISDA) today jointly submitted a letter with market participants and industry associations to the Federal Reserve Bank of New York.
ISDA, through the ISDA Board Oversight Committee (IBOC), the Operations Management Group (OMG), the Managed Funds Association (MFA) and the Asset Management Group of the Securities Industry and Financial Markets Association (SIFMA), submitted the letter to William Dudley, president of the NY Fed, in an effort to significantly reduce systemic risk and increase transparency.
To reflect the importance of both buy-side and sell-side market participants and to ensure comprehensive input from senior management, business, legal and operational groups, ISDA through IBOC is creating a more inclusive industry governance structure for the derivatives post-trade space, comprising an array of business-led Steering Committees and more tactical implementation groups.
“As our letter demonstrates, ISDA and the industry remain committed to increasing operational efficiency and reducing the sources of risk in the privately negotiated derivatives business,” said Robert Pickel, executive director and chief executive officer, ISDA. “We have made substantial progress in a short period of time and intend to maintain this strong positive momentum as we move forward.”
The ISDA initiatives outlined in this letter include commitments regarding credit, equity and interest rate derivatives, as well as collateral management:
Credit:
Continue to strengthen Credit Event settlement across the industry
Auction hardwiring completed on April 8, 2009 to allow for auction-based settlement of CDS; more than 40 Credit Events processed globally since October 2008
Central counterparties (CCPs) were launched in 2009 for CDS markets; $600 billion in US credit products have been cleared to date
Equity:
· Implement centralized reporting of OTC equity derivatives trades by July 31, 2010.
· Match 95 percent of electronically eligible transactions between OMG members by T+4 by September 30, 2009
Rates:
· Expand the number of interest rate products eligible to be centrally cleared, including OIS in 2009 and CCS in 2010
· Implement a centralized reporting infrastructure for standardized products by year-end
Collateral:
Identify and pursue further advances in collateral management, including portfolio-reconciliation best practices
Market-wide proposal for margin dispute resolution to be completed and agreed on by September 2009
ISDA continues to work closely with the Managed Funds Association (MFA) and the Asset Management Group of the Securities Industry and Financial Markets Association (SIFMA) on outreach to buy-side participants toward greater coordination with the sell-side community in respect of the commitments being made to regulators.
The group last met with the regulatory community at the Federal Reserve Bank of New York on April 1 and submitted a previous letter on October 31, 2008.
