ISDA Launches Digital Platform to Automate IM Documentation

‘ISDA Create – IM’ is expected to significantly reduce the time and resources it takes to negotiate margin documentation for participants in non-cleared OTC derivatives markets. 

ISDA (the International Swaps and Derivatives Association) has launched ‘ISDA Create – IM’, a new digital platform developed with Linklaters that allows firms to deliver IM (initial margin) documentation to multiple counterparties simultaneously and automate their negotiation and execution.

The new service, already tested by over 70 firms, is expected to significantly reduce the time and resources it takes to negotiate margin documentation, while also allowing firms to capture and store structured legal data – which ISDA believes is essential as derivatives markets move to new technologies to drive efficiencies.

ISDA Create – IM is aimed at helping participants in non-cleared OTC derivatives markets that will come into scope of IM requirements in September 2019 and September 2020. The deadlines present a substantial challenge for the industry given the large number of entities set to fall into scope, ISDA says.

“The negotiation of new IM documentation can be complex and laborious, and the whole process has to be repeated for each and every counterparty,” according to ISDA chief Scott O’Malia. “Enabling firms to negotiate with multiple counterparties simultaneously through a digital platform will make the process much quicker and more efficient, helping to reduce the potential for bottlenecks.”

“Importantly, sales and trading desks will also be able to pull information from the platform in real time to check which relationships have regulatory compliant documentation in place.”

From September 2019, firms with over EUR 750 billion in uncleared derivatives notional will be required to post IM. This threshold drops to EUR 8 million in September 2020, bringing into scope an additional 1,100 entities.

While ISDA has been urging regulators to recalibrate the September 2020 threshold to exclude smaller non-systemically important entities, a large number of firms will still be captured under even if the threshold is recalibrated.

“That’s why ISDA Create – IM is so important,” said O’Malia.

ISDA plans to make further enhancements to the platform over time, with its development work guided by a user advisory group of buy- and sell-side firms.

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