Yesterday, the International Swaps and Derivatives Association (ISDA) and industry market participants, including dealers and buy-side institutions, submitted a letter to the Federal Reserve Bank of New York (FRBNY) outlining new commitments to bring further transparency and standardization to the over-the-counter (OTC) derivates market, apply collateral management best practices and further utilize central clearing in the credit and interest rate derivatives markets.

The major commitments made by market participants include:

  • Increasing market transparency through the use of global data repositories, and providing information to regulators regarding the effect of greater price transparency on financial stability;
  • Expanding central clearing in the credit and interest rate derivatives markets by increasing the range of products cleared and expanding access to market participants;
  • In coordination with regulatory supervisors, evaluating the levels of standardization in credit, equity and interest rate derivative products and processing, and identifying the areas which would benefit from additional standardization; and
  • Enhancing bilateral collateralization arrangements by implementing industry best practices to reduce counterparty credit risk.

The commitments are in accordance with goals described at the meeting hosted by the FRBNY in January 2010, at which industry market participants discussed progress made in improving the infrastructure of the OTC derivatives market.