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A Digital Future for Financial Markets

Ciarán McGonagle
Assistant General Counsel, ISDA

Financial institutions are increasingly looking to Many of these issues and challenges are common
technology to increase efficiencies and reduce costs, but across the derivatives and securities lending markets,
scalable and interoperable automation is only achievable particularly following the introduction of the
if the right foundations are in place first. ISDA, ISLA and Securities Financing Transactions Regulation. It is for
several other associations last month sent a letter to this reason that ISDA and ISLA have recently agreed
regulators committing to develop those foundations¹. to collaborate on the expansion of electronic contract
opinions and application of the Common Domain
The benefits of increased automation for market Model (CDM) to help facilitate greater automation
participants are clear. Digitization will promote the in the derivatives and securities lending markets.
consistent creation, processing and aggregation of Both markets and sets of products stand to benefit
global financial data, bolstering regulatory oversight from greater digitization of documentation, the
and compliance. Through the removal of redundancy implementation of common, interoperable industry
and unnecessary complexity, increased digitization standard models for financial transactions and
will increase efficiency and strengthen the operational processes, and the distribution of these standards
resilience of market participants and financial markets through mutualized solutions and platforms.
infrastructure, reducing systemic risk and creating a
safer and more robust global financial system. Our members expect trade associations to play an
important role in the development and promulgation
None of this is possible without industry led of these new standards. The results of a 2020 ISDA
development of essential data standards, and the survey indicate that over 95% of ISDA members
distribution of these standards in digital formats to allow support our strategy to enable innovation and
direct deployment within enhanced, automated and automation in the financial markets, by developing
intelligent processes, systems and technology. standards, data models and digital formats for our
documentation and content. In particular, a majority
ISDA and ISLA share many of the same members. In of members highlighted increased digitization of
a 2019 survey conducted by ISDA, members pointed new and existing ISDA documents as providing an
to the continued use of bespoke legal documentation, important foundation for facilitating adoption of
inconsistent data representations, and a lack of digitized these documents and associated standards, providing
documentation and processes as among the main greater connectivity between documentation,
obstacles to reaching their desired future state for post- systems and processes, and ensuring interoperability
trade processing. among different providers and solutions. Bespoke,
paper-based documentation creates an obvious
impediment to delivering our vision of a digital future.
¹[Link to letter] Trading, operations, legal, compliance and technology

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