On April 23rd, ISDA released preliminary results from its 2010 ISDA Margin Survey (the "Margin Survey"). Eighty-nine (89) firms responded to the Margin Survey, seventy (70) of which were banks or broker-dealers. The results of the Margin Survey demonstrated that the use of collateralization as a mitigant for counterparty credit risk continued to expand.
According to the Margin Survey, seventy-eight percent (78%) of all OTC derivatives transactions now entered into among large dealers are subject to collateral agreements. Such arrangements are especially common for credit derivatives, with ninety-seven percent (97%) of such transactions being subject to collateral agreements.
The Margin Survey reported that there are now almost 172,000 collateral agreements in place, eighty-three percent (83%) of which are bilateral arrangements under which either party may be required to deliver collateral; last year's margin survey reported that only seventy-five percent (75%) of collateral agreements provided for bilateral arrangements.
ISDA pointed out in connection with the publication of these preliminary results that the association and the industry in general had made significant improvements in the area of collateralization. In particular, it noted that approximately ninety percent (90%) of Margin Survey respondents indicated that they periodically perform "portfolio reconciliations" (the major dealers were doing so on a daily basis) and that extensive progress had been made, in cooperation with global regulators, to strengthen the operational infrastructure of market participants.