 | |
| Company type | Global Financial Trade Association |
|---|---|
| Founded | 1985 |
| Headquarters | New York with offices in London, Hong Kong, Tokyo, Washington, D.C., Brussels, Singapore |
| Website | www.isda.org |
Since its founding in 1985, the International Swaps and Derivatives Association, Inc. (ISDA) has worked to make over-the-counter derivatives (OTC) markets safe and efficient.
ISDA’s work in developing the ISDA Master Agreement and a wide range of related documentation materials, and in ensuring the enforceability of their netting and collateral provisions, has helped to reduce credit and legal risk. The Association promotes sound risk management practices and processes, and engages with policymakers and legislators around the world to advance the understanding and treatment of derivatives as a risk management tool.
Today, ISDA has over 800 members from 60 countries. These members include a broad range of OTC derivatives market participants including corporations, investment managers, government and supranational entities, insurance companies, energy and commodities firms, and international and regional banks. In addition to market participants, members also include key components of the derivatives market infrastructure including exchanges, clearinghouses and repositories, as well as law firms, accounting firms and other service providers.
ISDA’s works in three key areas – reducing counterparty credit risk, increasing transparency, and improving the industry’s operational infrastructure. The Association's primary goals are to build robust, stable financial markets and a strong financial regulatory framework.[1]
Mission and Strategy
editMission Statement
editOn October 19, 2011, ISDA announced that its board of directors updated its mission statement to reflect the Association’s evolving mandate in the rapidly changing global derivatives markets. The new mission statement is: ISDA fosters safe and efficient derivatives markets to facilitate effective risk management for all users of derivative products.[2] As part of the Board’s strategic review, ISDA also updated its strategy statement that articulates how the Association works to achieve its mission
Strategy Statement
editISDA achieves its mission by representing all market participants globally, promoting high standards of commercial conduct and leading industry action on derivatives issues. This includes being:
The Source for Robust and Trusted Documentation
• Providing standardized documentation globally to ensure legal certainty and maximum risk reduction through netting and collateralization
The Architect of a Secure and Efficient Infrastructure
• Promoting infrastructure that supports an orderly and reliable marketplace as well as transparency to regulators
An Advocate for Effective Risk Management and Clearing
• Enhancing counterparty and market risk practices and advancing the effective use of central clearing facilities and trade repositories
The Voice for the Global Derivatives Marketplace
• Representing the derivatives industry through public policy, ISDA governance, ISDA services, education and communication
ISDA’s mission and strategy statement, as well as additional information related to the Association and OTC derivatives, is discussed in the 2012 ISDA-Industry Overview presentation.[3]
Membership
editBoth ISDA’s mission and strategy address all users and market participants in the OTC derivatives markets. The Association's more than 800 member institutions from 60 countries are classified into three categories according to the guidelines contained in the Association's by-laws. These categories are primary[4] (dealer firms), associate[5] (service providers) and subscriber[6] (end-users).
Primary Members:
editAccording to the Association's by-laws, every investment, merchant or commercial bank or other corporation, partnership or other business organization that, directly or through an affiliate, as part of its business (whether for its own account or as agent), deals in derivatives shall be eligible for election to membership in the Association as a Primary Member, provided that no person or entity participates in derivatives transactions solely for the purpose of risk hedging or asset or liability management.
Associate Members:
editISDA's Associate Membership category is designed for service providers (for example, brokers, law firms, accounting firms, consulting firms, exchanges and software providers) who are active in the privately negotiated derivatives business.
Subscriber Members:
editISDA's Subscriber Membership category is designed for corporations, financial institutions and government entities and others who use privately negotiated derivatives to better manage financial risks.
In 2012, 42% of ISDA members are end-users of derivatives, the highest percentage of any membership category. Dealers account for almost a quarter of the membership, and the remaining 34% are service providers, such as law firms and technology vendors. In regards to market segment, 29% percent of ISDA’s members are banks, 25% are law firms, 10% are asset managers, 9% are energy/commodity firms, 10% are government entities, 5% are diversified financials, and the remaining 12% of ISDA’s membership includes brokerage, technology and other companies.
ISDA is governed by its Board of Directors, which consists of 26 members with both buy- and sell-side representation. The ISDA Board is elected annually by its members.
ISDA Master Agreement and Documentation
editISDA develops and maintains a wide range of standard derivatives documentation, which includes including the ISDA Master Agreement, Definitional Books and Confirmations.
The ISDA Master Agreement established international contractual standards governing privately negotiated derivatives transactions that reduce legal uncertainty and allow for reduction of credit risk through netting of contractual obligations. The netting provisions of the ISDA Master Agreement are important in reducing the credit risk arising from the business.
The scope of the ISDA opinions[7] address the enforceability of the termination, bilateral close-out netting and multibranch netting provisions of the 1992 and 2002 Master Agreements. The opinions are updated annually to comply with requests from various central banks. In addition, ISDA also solicits legal opinions on the enforceability of the ISDA Credit Support Documents in various jurisdictions. As of August of 2012, ISDA has 57 netting opinions[8] and 48 collateral opinions[9].
ISDA Events
editEducation has been a part of ISDA’s mission since the Association’s inception. ISDA’s educational objective is to advance international public understanding of OTC derivatives activity. The courses, seminars, and symposia are designed to reach members and non-members, the press and other market participants. In all, ISDA held over 130 conferences, seminars, training courses and symposia throughout 2012. ISDA’s educational efforts have been accredited by the New York State of the Continuing Legal Education Board, by the Solicitors Regulation Authority of England and Wales and by the National Association of State Boards of Accountancy (NASBA).
ISDA also offers Regional Updates in the fall of each year in London, New York, Singapore, Hong Kong, Tokyo and Sydney variously. These one-day conferences are intended to inform members, regulators and the press of ISDA’s work in these regions.
The Annual General Meeting (AGM) is ISDA’s annual event attracting hundreds of market participants eager to learn and share information about the industry and about ISDA’s work. ISDA’s AGM features leading speakers from the industry, government and academia.
ISDA’s conference schedule is available on the ISDA website.[10]
References
editExternal links
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Category:Derivatives (finance)
Category:Self-regulatory organizations