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functions within our member firms increasingly expect   different obligations and events expressed within it.   these standards and the underlying documentation.   duplicative distribution of digital offerings will inevitably
        us to make industry documentation available in   Using thousands of agreements and clause samples, we   Firms and infrastructure providers typically use their   result in incompatible platforms and solutions. This
        different formats to allow for easier integration within   identified, defined and categorized the most commonly   own unique set of representations for transaction events   will increase inefficiency and cost to the market. We
        their systems.                            negotiated clauses within the ISDA Master Agreement    and processes. As a result, market infrastructure is   will therefore ensure that our standards and their
                                                  and various credit support documents. Having           inefficient and expensive.                digitized representations are made available in a way
        ISDA’s flagship digital offering is the 2020 ISDA   established this framework, we created standard-                                       that promotes competition, encourages innovation and
        Definitions, a revised and updated definitions booklet   form drafting options that are capable of achieving   ISDA and ISLA both support the development of   facilitates the development of mutualized technology
        for use with interest rate derivatives. Alongside   the vast majority of the most commonly negotiated   common, interoperable industry standard models   solutions within our markets.
        necessary updates and adjustments to take account   outcomes within standard-form ISDA documentation.   for financial transactions and processes. The CDM
        of market evolution and global benchmark reform   This standard-form wording is now available for use by   establishes a common, digital representation of   Over the past 30 years, ISDA and ISLA have a proven
        efforts, a key driver for this project is making the   members in their negotiations². The Clause Library will   derivatives trade events and actions that will increase   track record of addressing our members’ problems
        standardized interest rate definitions more user and   also be integrated within ISDA Create, ISDA’s digital   automation and efficiency in the derivatives market.   with common, standardized solutions, such as the ISDA
        technology friendly.                      negotiation and execution platform, when the ISDA      This model can be easily expanded to cover additional   Master Agreement and the Global Master Securities
                                                  Master Agreement is added later this year. That will   products and contracts as a means of encouraging further   Lending Agreement. Our two trade associations are
        The 2020 ISDA Definitions will be produced in   allow for more structured legal agreement data to be   standardization across the financial markets. Indeed, ISLA   perfectly placed and ready to lead and support our
        a digital format, allowing for the production and   captured as part of the negotiation process.  is currently working to model and code specific securities   members in developing enhanced, digital standards
        maintenance of a consolidated and up-to-date view                                                financing transaction (SFT) components for inclusion   and in delivering our vision of a digital future for our
        of the definitions. This will avoid the need for users to   Importantly, we developed the ISDA Clause Library by   in the CDM, creating greater alignment between   markets. In doing so, we will foster an environment for
        compile paper or pdf copies of the main definitional   reference to substance and outcome, rather than form.   derivatives and securities lending markets.   technological innovation and reduce costs for market
        booklet and up to 70 amending supplements in order   Put simply, we focused on what a contractual provision                                participants. By removing complexity and strengthening
        to understand the terms that apply to their trades   intends to achieve, rather than the precise formulation   Refinement and expansion of these models will facilitate   the operational resilience of market participants, our
        (as is the case with the current 2006 Definitions).   of words used to achieve it. There is a clear opportunity   greater connectivity between contractual terms and the   initiatives will also contribute toward the reduction of
        ISDA will deliver the 2020 Definitions later this year   to expand this initiative to cover additional forms   processes designed to implement important business   systemic risk. All of this is consistent with ISDA’s mission
        through an online platform, increasing accessibility   of documentation across different types of financial   and operational functions deriving from contracts,   to build safer, more efficient markets.
        and incorporating various built-in functionalities and   transaction. For example, a cross-default clause within   including netting and collateral enforceability, liquidity,
        capabilities, such as hyperlinking and version control to   one contract may achieve the same effective outcome   and counterparty credit risk management. All of this will
        provide a more user-friendly experience.  as an equivalent clause located within a different type   help move the industry towards more efficient, cost-
                                                  of contract. There is no good reason to treat these    effective and scalable payment, settlement, collateral
        Expanding ISDA’s digital offering across our suite of   clauses differently, irrespective of drafting nuance or   management and regulatory processes, providing
        actively negotiated documentation requires enhanced   the document in which the clause is located. A common,   a robust foundation for further straight-through
        standardization of those documents. Firms will always   industry-wide taxonomy for financial contracts would   processing and automation of financial transactions.
        need to negotiate and customize documentation to   be a powerful tool in dismantling institutional siloes and
        address specific commercial, compliance, legal and   enhancing risk management and regulatory compliance   Of course, not everything within a contract can be
        operational risks. However, excessive customization   across different products and functional areas.  digitized and automated. However, the vast majority
        can increase complexity and on-boarding times, while                                             of derivatives transactions and SFTs rely heavily upon
        providing little or no commercial or legal benefit. A lack   Standardization and digitization of documentation is   repetitive operational processes, such as valuations,
        of standardization therefore gives rise to operational   only half the battle. There is also a lack of common data   calculations, payments and settlements. These terms
        inefficiency, increases risk through unnecessary   and process standards, and little alignment between   are readily capable of being automated effectively and
        complexity and creates impediments to digitization.                                              efficiently within a standardized, digital model.

        In response, ISDA has developed the ISDA Clause   ² The ISDA Clause Library currently covers the ISDA Master Agreement.   Critical to the success of these efforts will be the extent   Ciarán McGonagle
        Library. This tool effectively deconstructs the standard   The Clause Library will be expanded to cover various ISDA credit support   to which market participants can easily access and   Assistant General Counsel, ISDA
                                                  documents by the fourth quarter of 2020.
        legal document and assigns meaning to the various   More information is available here           benefit from these new standards. Fragmented and


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