ISDA has published the fourth and fifth installments in a series of legal guidelines for smart derivatives contracts. These guidelines are intended to support technology developers, lawyers, and other key stakeholders in the development of smart derivatives contracts and other technology solutions in the interest rate derivatives and the equity derivatives markets. In January, ISDA had also published, in collaboration with Clifford Chance, R3, and the Singapore Academy of Law, a joint white paper on the private international law aspects of smart derivatives contracts utilizing distributed ledger technology or DLT.
The guidelines on smart contracts for interest rate derivatives provide high-level background on the interest rate derivatives market and outline the strategy of ISDA for developing and delivering greater standardization and digitization of legal documentation used to trade interest rate derivatives. These guidelines also identify opportunities for the potential application of smart contract technology to the interest rate derivatives and highlight important issues for technology developers to consider when designing technology-enabled solutions for trading and processing the interest rate derivatives and associated processes. While the intention of this paper is not to specify or recommend any particular approach or to address any particular technological application or project, these guidelines do suggest steps that should be taken to ensure the design and implementation of new technology solutions are consistent with existing legal and regulatory standards. These guidelines also highlight areas where further industry collaboration will be required to identify existing areas of legal and regulatory uncertainty and to develop solutions.
The guidelines on smart contracts for equity derivatives market provide an overview of equity derivatives transactions and the different product types. They explain how equity derivatives transactions are documented under both the 2002 and 2011 ISDA Equity Definitions and explore how smart derivatives contracts might be constructed and delivered within the framework created by the 2011 ISDA Equity Definitions. While the intention of this paper is not to specify or recommend any particular technological application or project, it does provide recommendations on steps that the industry should now take to further standardize and digitize equity derivatives documentation with a view to achieving greater automation of the equity derivatives market. This paper also provides information on how members can contribute to this work.
- Guidelines for Interest Rate Derivatives
- Guidelines for Equities Contracts
- Whitepaper on Contracts Utilizing DLT (PDF)
- ISDA Papers on Smart Contracts and DLT
Keywords: International, Banking, Insurance, Securities, Interest Rate Derivatives, Equity Derivatives, Smart Contracts, OTC Derivatives, Blockchain, Fintech, Artificial Intelligence, Automation, ISDA
Previous ArticleFIN-FSA Announces Timeline for Workbooks Under EBA DPM 188.8.131.52
APRA updated the lists of the Direct to APRA (D2A) validation and derivation rules for authorized deposit-taking institutions, insurers, and superannuation entities.
EC adopted a package that includes the digital finance and retail payments strategies and the legislative proposals for regulatory frameworks on crypto-assets and digital operational resilience.
ECB published an opinion (CON/2020/22) on proposals for regulations amending the securitization framework of EU, in response to the COVID-19 pandemic.
FCA is consulting on its approach to the authorization and supervision of international firms operating in UK.
MAS published amendments to Notice 637 on the risk-based capital adequacy requirements for reporting banks incorporated in Singapore.
FCA announced that it will move firms to RegData from Gabriel in the coming months in stages, based on the reporting requirements of firms.
ISDA issued a letter to regulators to flag that it now expects the supplement to the 2006 ISDA Definitions and the Interbank Offered Rate (IBOR) Fallbacks Protocol to be effective around mid- to late-January 2021.
APRA has concluded its review of the comprehensive plans of authorized deposit-taking institutions for the assessment and management of loans with repayment deferrals.
ESAs (EBA, EIOPA, and ESMA) published the first joint report that assesses risks in the financial sector since the outbreak of the COVID-19 pandemic.
BoE and HM Treasury confirmed that the COVID Corporate Financing Facility (CCFF) will close for new purchases of commercial paper, with effect from March 23, 2021.