ISLA releases clause library and taxonomy to streamline contract negotiation
20 September 2021 UK
Image: AdobeStock/anar
The International Securities Lending Association (ISLA) has announced the launch of the ISLA clause library and taxonomy, which has been developed in association with technology partners D2 Legal Technology.
This launch follows a year of working group meetings which discussed how members configure and build on the standard provisions of the master securities lending agreement when negotiating loan transactions.
In preparing the clause library and taxonomy, amendments or additions to this standard proforma were categorised on the basis of their business outcome (rather than by wording used) and a model clause wording was defined for each business outcome.
The working group did this for each of the 2000 Global Master Securities Lending Agreements (GMSLA), the 2010 GMSLA and the 2018 Security Interest over Collateral GMSLA.
This is an important development in steps to modernise the management of securities lending contracts. Documentation and legal teams have been constrained by manual processes that have not changed substantially in decades.
The result is that securities lending operations are not governed by carefully negotiated terms of contract and firms rely on outmoded procedures to report key information to financial authorities, as required for example under the Securities Financing Transactions Regulation (SFTR).
The ISLA clause library and taxonomy builds on GMSLA preprint forms to improve efficiency and reduce time in drafting, negotiating and executing master trading agreements.
While the GMSLA is the standard master agreement for governing securities lending transactions, each market participant has tended to use its own interpretation of this agreement, so similar business outcomes can be represented in different ways across the industry. Progress on the digital journey requires the reaction and widespread adoption of trusted standards, say ISLA and D2LT.
ISLA’s expectation is that the clause library and taxonomy will be a “living document” that will evolve with the market as members adopt new clauses, variants or variables.
Andy Dyson, ISLA CEO, says: “Respondents to our recent legal survey overwhelmingly supported the idea of developing an integrated clause library that would support standardisation across the industry and pave the way for broader digitalisation and the creation of smart contracts.
“The release of the ISLA Clause Library & Taxonomy is the first step along that path that will progressively align business, operational and legal outcomes in a combined cross-market common domain model framework”.
“The clause library and taxonomy … was one of the action points from the ISLA Legal survey and it is great to see it come to fruition,” says Jamie Pullen, former chair of the ISLA Legal Steering Working Group.
ISLA Clause Library & Taxonomy working group meetings will reconvene in 2022 subject to the agenda laid down by the ISLA Digital Steering Group.
This launch follows a year of working group meetings which discussed how members configure and build on the standard provisions of the master securities lending agreement when negotiating loan transactions.
In preparing the clause library and taxonomy, amendments or additions to this standard proforma were categorised on the basis of their business outcome (rather than by wording used) and a model clause wording was defined for each business outcome.
The working group did this for each of the 2000 Global Master Securities Lending Agreements (GMSLA), the 2010 GMSLA and the 2018 Security Interest over Collateral GMSLA.
This is an important development in steps to modernise the management of securities lending contracts. Documentation and legal teams have been constrained by manual processes that have not changed substantially in decades.
The result is that securities lending operations are not governed by carefully negotiated terms of contract and firms rely on outmoded procedures to report key information to financial authorities, as required for example under the Securities Financing Transactions Regulation (SFTR).
The ISLA clause library and taxonomy builds on GMSLA preprint forms to improve efficiency and reduce time in drafting, negotiating and executing master trading agreements.
While the GMSLA is the standard master agreement for governing securities lending transactions, each market participant has tended to use its own interpretation of this agreement, so similar business outcomes can be represented in different ways across the industry. Progress on the digital journey requires the reaction and widespread adoption of trusted standards, say ISLA and D2LT.
ISLA’s expectation is that the clause library and taxonomy will be a “living document” that will evolve with the market as members adopt new clauses, variants or variables.
Andy Dyson, ISLA CEO, says: “Respondents to our recent legal survey overwhelmingly supported the idea of developing an integrated clause library that would support standardisation across the industry and pave the way for broader digitalisation and the creation of smart contracts.
“The release of the ISLA Clause Library & Taxonomy is the first step along that path that will progressively align business, operational and legal outcomes in a combined cross-market common domain model framework”.
“The clause library and taxonomy … was one of the action points from the ISLA Legal survey and it is great to see it come to fruition,” says Jamie Pullen, former chair of the ISLA Legal Steering Working Group.
ISLA Clause Library & Taxonomy working group meetings will reconvene in 2022 subject to the agenda laid down by the ISLA Digital Steering Group.
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