ISDA enables firms to document derivatives and SFTs under single legal agreement
01 March 2022 US
Image: AdobeStock/MQ-Illustrations
The International Swaps and Derivatives Association (ISDA) has released new securities finance transaction (SFT) definitions and provisions designed to enable firms to document their derivatives and securities financing trades through a single ISDA master agreement.
The release of the 2022 ISDA Securities Financing Transactions Definitions and SFT Schedule Provisions give practical substance to the recommendations of an ISDA whitepaper, published in October 2020, which identifies opportunities for greater alignment between SFT and derivatives markets.
ISDA will commission updated netting opinions to cover SFTs, with the first of these expected to be available during 2022.
The Association predicts that creating common legal standards, terms and documentation will also help drive new technology innovations by applying terms consistently and at scale across derivatives and SFT markets.
The new SFT documentation was compiled by an ISDA working group with representation from both buy and sell side. Linklaters, the law firm, has worked with ISDA in drafting the definitional booklet and provisions.
Katherine Tew Darras, general counsel at ISDA, says: “The new SFT definitions and related provisions capture the unique features of SFT transactions and allow firms to customise their relationship for SFTs, while also enabling derivatives, repos and stock loans to be captured by a single close-out netting arrangement under an ISDA Master Agreement.
“Our next priorities are to amend our netting opinions to cover SFTs, after which firms will be able to enter into new SFT and derivatives transactions with the confidence of enforceable close-out netting.”
ISDA’s chief executive Scott O’Malia comments: “At a time when financial institutions are looking at ways to increase efficiency and cut costs, having a single legal agreement for derivatives and SFTs not only reduces duplication but establishes the foundation for greater automation and interoperability across the two markets.
“Once we amend our netting opinions to cover SFTs, we believe there will be a strong rationale for market participants to enter into SFT transactions under the ISDA Master Agreement,” he adds.
The release of the 2022 ISDA Securities Financing Transactions Definitions and SFT Schedule Provisions give practical substance to the recommendations of an ISDA whitepaper, published in October 2020, which identifies opportunities for greater alignment between SFT and derivatives markets.
ISDA will commission updated netting opinions to cover SFTs, with the first of these expected to be available during 2022.
The Association predicts that creating common legal standards, terms and documentation will also help drive new technology innovations by applying terms consistently and at scale across derivatives and SFT markets.
The new SFT documentation was compiled by an ISDA working group with representation from both buy and sell side. Linklaters, the law firm, has worked with ISDA in drafting the definitional booklet and provisions.
Katherine Tew Darras, general counsel at ISDA, says: “The new SFT definitions and related provisions capture the unique features of SFT transactions and allow firms to customise their relationship for SFTs, while also enabling derivatives, repos and stock loans to be captured by a single close-out netting arrangement under an ISDA Master Agreement.
“Our next priorities are to amend our netting opinions to cover SFTs, after which firms will be able to enter into new SFT and derivatives transactions with the confidence of enforceable close-out netting.”
ISDA’s chief executive Scott O’Malia comments: “At a time when financial institutions are looking at ways to increase efficiency and cut costs, having a single legal agreement for derivatives and SFTs not only reduces duplication but establishes the foundation for greater automation and interoperability across the two markets.
“Once we amend our netting opinions to cover SFTs, we believe there will be a strong rationale for market participants to enter into SFT transactions under the ISDA Master Agreement,” he adds.
← Previous derivatives article
Deutsche Börse offers CME Group derivatives market data via its A7 platform
Deutsche Börse offers CME Group derivatives market data via its A7 platform
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
