Investment Operations

ISLA, ISDA Agree to Collaborate on Digital Initiatives

The International Securities Lending Association (ISLA) and the International Swaps and Derivatives Association (ISDA) have agreed to collaborate on two key initiatives to deliver digital solutions to their respective memberships.

Under the terms of the agreement, the associations will increase their engagement and cooperation at all levels to expand electronic contract opinions and to apply the Common Domain Model (CDM) to help facilitate greater automation in the derivatives and securities lending markets. Other areas of collaboration may be added over time.

Expansion of e-contact opinions: ISDA said its e-contract opinions will be updated to cover securities financing transactions (SFTs) as well as derivatives, and will be made available to members of both associations. The expansion is in response to the increasing number of derivatives, securities financing and repo transactions that are being executed and confirmed electronically. According to industry watchers, the coronavirus pandemic has further heightened interest in e-contracts, with the closure of offices and the introduction of remote working highlighting challenges and inefficiencies associated with the physical delivery of signed paper documents and notices.

The e-contract opinions assess the enforceability of electronically executed and confirmed contracts under the laws of various jurisdictions. According to the two trade groups, 37 jurisdictions are currently covered, with a further 10 commissioned this year.

CDM: As part of the agreement, ISLA said it will also work to model and code specific SFT components for inclusion in the CDM, creating greater alignment between derivatives and securities lending markets. ISLA will join ISDA’s CDM Governance Executive Committee, which oversees strategy for the adoption of the CDM, as well as the Architecture and Review Committee, which is responsible for developing technical guidance and reviewing proposed changes to the model.

“As markets progressively coalesce and our members look to derive trading and post-trade efficiencies across previously separate products, it is important that their associations respond to these important changes,” said Andrew Dyson, Chief Executive Officer, ISLA. “By collaborating with ISDA, we aim to deliver a CDM framework that will help our collective member firms realize the very real benefits that will be derived from a cross-industry approach,” he said.

The CDM establishes a single, common digital representation of events and processes that occur during the life-cycle of a trade, and is aimed at enhancing consistency and facilitating interoperability across firms and platforms. More information is available here.

“Our member firms are increasingly looking to automate legal and operational processes in order to cut costs and improve efficiency, said Scott O’Malia, ISDA’s Chief Executive. “By working together to develop cost-effective and scalable mutualized solutions, we will be able to provide real and lasting value to our memberships,” O’Malia added.