Automated processing of derivatives increasing, says Isda

Automated trade confirmations account for around one-third of all credit derivatives transactions and 20% of plain vanilla swaps trades, according to the International Swaps and Derivatives Association (Isda).

That’s a significant increase from an Isda survey one year ago, which found that only 6% of credit derivatives and 13% of plain vanilla swaps trades are electronically confirmed.

“Our findings indicate that many firms recognise the opportunity that automated solutions offer in decreasing operational risk and improving operation efficiency,” said Bob Pickel, Isda’s chief executive. He added that Isda will remain focused on promoting Financial products Markup Language- (FpML-) based solutions to increase take-up of automated confirmations.

Despite this, the growth in overall volumes, particularly in credit derivatives, seems to have outpaced the development and take up of automated technologies.

In February, Gay Huey Evans, head of the capital markets sector at the UK’s Financial Services Authority, sent letters to the chief executives of investment banks expressing concern over the level of unsigned credit derivative trade confirmations.