Singapore/Hong Kong, 15 December 2020 – ISDA (International Swaps and Derivatives Association) has won the award for Outstanding Project in Benchmark Reform Initiative, and was highly commended in the Initial Margin Compliance category, in the 3rd Regulation Asia Awards for Excellence 2020 in an online ceremony on 15 December 2020.
The transition away from LIBOR and other IBORs (interbank offered rates) is considered one of the biggest challenges financial institutions have faced in recent memory. ISDA has been working to implement robust contractual fallbacks for derivatives referencing key IBORs as well as pre-cessation fallbacks for LIBOR through a series of consultations over the past two years, seeking to establish a global consensus on the methodology that will apply.
The consultations and broad industry engagement have culminated in the publishing of a supplement to amend ISDA’s standard definitions for interest rate derivatives, and a protocol that will enable derivatives market participants to incorporate the fallbacks in legacy contracts, both of which will become effective from 25 January 2021. The supplement and protocol are expected to be widely adopted by market participants across the globe.
“The implementation of fallbacks for derivatives will help to mitigate systemic risk that could arise following the cessation of LIBOR or another key IBOR,” said one judge on the awards panel. “Most impressive is the level of engagement ISDA is having with industry through its webinars, guides, documentation and other market education work, along with its extensive outreach with regulators and working groups globally.”
In its submission, ISDA said it “will continue to support broader industry efforts to raise awareness of the [LIBOR transition] issue and tackle any challenges that may emerge”, reflecting its commitment to ensuring a smooth transition in the derivatives markets by the end of 2021.
The judges believe this commitment has been further demonstrated through the expansion of ISDA Create – a bilateral online document creation, negotiation and execution platform – to include interest rate reform documentation. A separate centralised platform, ISDA Amend, will also be used to facilitate transition efforts, allowing agents to provide counterparties with information to complete adherence to the new fallbacks protocol.
Both ISDA Create and ISDA Amend were originally designed to help market participants perform the legal and contractual work required for compliance with the Initial Margin rules. Indeed, ISDA was highly commended in the Initial Margin Compliance category for these two platforms, as well as for the development of ISDA SIMM (Standard Initial Margin Model), the first industry standard for calculating initial margin.
First launched in 2016, ISDA SIMM will be crucially important for firms that come into scope in September 2021 (Phase 5) and September 2022 (Phase 6), helping them to lower initial margin amounts and achieve netting diversification benefits. In addition, ISDA provides a solution, the Collateral Management Transformation Toolkit, to help firms digitalise their collateral management processes and achieve greater efficiency.
About the Regulation Asia Awards for Excellence 2020
The Regulation Asia Awards for Excellence recognises financial institutions, technology companies, legal and consulting firms, exchanges and other players that have helped meet the challenges of the ever-changing and increasingly complex regulatory landscape in Asia Pacific. Each year, submissions are diligently evaluated and award winners selected by a panel of industry experts serving as judges.
The full list of award winners is available here.
About Regulation Asia
Regulation Asia is the leading source for actionable regulatory intelligence for Asia Pacific markets. With over 8,500 subscribers, including regulatory bodies, exchanges, banks, asset managers and service providers, Regulation Asia plays a key role in shaping the regulatory agenda.