ISDA selects Linklaters to conduct derivatives committees assessment
14 December 2023 US
Image: Coloures-Pic/stock.adobe.com
The International Swaps and Derivatives Association (ISDA) has launched a review of the Credit Derivatives Determinations Committees (DCs) in which Linklaters will conduct an independent assessment.
The review, which will analyse the structure and governance of the DCs, will see Linklaters recommend changes to maintain the integrity of the committees in changing economic and market conditions.
An independent assessment aims to identify current market views on potential changes that could be made to improve the governance and structure of the DCs.
Once completed, ISDA will publish the report and open a market-wide consultation to determine which of the potential changes, if any, have broad support from market participants and other stakeholders.
ISDA will then work with members to develop specific implementing changes that will be recommended to the DCs for action.
The review will begin in December 2023, with the consultation expected later in 2024.
The DCs — industry committees comprising up to 10 sell-side and five buy-side voting firms — were introduced as a centralised decision-making body to enable a standardised auction settlement process and to ensure central clearing could be implemented for credit default swaps.
ISDA chief executive Scott O’Malia says: “The DCs have now been in operation for nearly 15 years with the same fundamental structure put in place in 2009, but the number of firms willing to serve on the DCs has declined steadily in recent years.
“While there is no minimum number of DC members, and the DCs function effectively and can continue to do so, we think now is the appropriate time to consider whether potential changes could be made to maintain a robust, centralised and transparent mechanism for the determination and settlement of credit events, which is vital for the central clearing of credit default swaps.”
The review, which will analyse the structure and governance of the DCs, will see Linklaters recommend changes to maintain the integrity of the committees in changing economic and market conditions.
An independent assessment aims to identify current market views on potential changes that could be made to improve the governance and structure of the DCs.
Once completed, ISDA will publish the report and open a market-wide consultation to determine which of the potential changes, if any, have broad support from market participants and other stakeholders.
ISDA will then work with members to develop specific implementing changes that will be recommended to the DCs for action.
The review will begin in December 2023, with the consultation expected later in 2024.
The DCs — industry committees comprising up to 10 sell-side and five buy-side voting firms — were introduced as a centralised decision-making body to enable a standardised auction settlement process and to ensure central clearing could be implemented for credit default swaps.
ISDA chief executive Scott O’Malia says: “The DCs have now been in operation for nearly 15 years with the same fundamental structure put in place in 2009, but the number of firms willing to serve on the DCs has declined steadily in recent years.
“While there is no minimum number of DC members, and the DCs function effectively and can continue to do so, we think now is the appropriate time to consider whether potential changes could be made to maintain a robust, centralised and transparent mechanism for the determination and settlement of credit events, which is vital for the central clearing of credit default swaps.”
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