On March 1st, ISDA and twenty-five (25) market participants submitted to the Federal Reserve Bank of New York, as well as to other global supervisors, a letter (the “Industry Letter”) detailing the steps the industry has taken to improve the framework for OTC derivatives transactions and making additional commitments. The Industry Letter is the sixth in a series of letters addressing how the industry will work to, among other things, strengthen the robustness of OTC derivatives markets infrastructure and improve transparency.
The Industry Letter notes the significant progress the industry has made in connection with its previous commitments. This progress includes the successful completion of the auction settlement process and “external review” process for numerous credit events; increased market participation in interest rate swap clearance services; the successful launch of CDS clearing in Europe; the extension of clearing services to buy-side parties; the further implementation of global data repositories for credit derivative and interest rate derivative products; and proposals for improvements to OTC collateral practices.
ISDA noted that these accomplishments had fundamentally changed the OTC derivatives markets for the better and that many of the measures had served to significantly reduce systemic risks. And yet, ISDA and the signatory market participants acknowledged that much work lay ahead and re-affirmed their commitment to pursue improvements along certain over-arching themes: central clearing; transparency; standardization and operational efficiency; and bilateral collateral arrangements.