ISDA plans centralised swaps clearing principles: ISDA has published a set of principles it believes should help centralised swaps clearing. The key principles reflect:

  • that the trading liquidity of a derivatives contract (and consequently the regulatory obligations to which the contract is subject) should be determined by reference to specific objective criteria, and based on concrete, transparent and objective standards which make it clear to participants when a bilateral swap should move to become a cleared one;
  • that derivatives contracts subject to the trading obligation should be tradable trade on a number of different types of centralised venues, so contracts can be traded across jurisdictions without costly duplicative compliance obligations and regulatory arbitrage; and
  • that trading venues must offer flexible execution mechanisms that take into account the trading liquidity and unique characteristics of a particular category of swap. 

ISDA notes the US Swap Execution Facility (SEF) rules will need to change to comply with these principles. (Source: ISDA Plans Centralised Swaps Clearing Process)