Isda benchmarking survey shows trade processing improving

Derivatives post-trade processing continues to improve, says Isda Operations Benchmarking Survey

BEIJING - At its 24th Annual General Meeting in Beijing, the International Swaps and Derivatives Association today released the results of the 2009 Isda Operations Benchmarking Survey.
The survey results show that trade processing continues to improve, especially in regard to confirmations outstanding. Credit derivatives, for example, show an average across all respondents over 2008 of 3.8 business days' worth of outstanding confirmations, compared with 6.6 days for 2007. Most other products showed similar improvements.

This reduction in outstanding confirmations has developed despite widespread dislocations in various financial markets. Over-the-counter derivatives event volume increased by 2%, where events include new trades as well as actions such as novations and terminations. Increases occurred in commodity, interest rate and credit derivatives, particularly at large firms, while overall equity derivatives and currency option event volumes decreased. Last year, in comparison, OTC derivatives event volume grew by 38%.

"The results of the 2009 Isda Operations Benchmarking Survey are of particular interest because of the increased attention given to operational issues from the industry and policy makers," said Robert Pickel, executive director and chief executive officer, Isda. "During the year, Isda and its members have played a leading role in strengthening the operational infrastructure of the privately negotiated derivatives industry through our documentation, operational infrastructure and technology initiatives."

Automation of processing functions also continues to progress, with credit derivatives showing by far the highest degree of automation of operational processes. Equity derivatives show the lowest degree of automation. This is due to the more customised nature of many equity derivatives transactions compared with other products as well as the more diverse nature of the market participants. Recognising the opportunity for improvement, more than 90% of respondents report that they plan to increase the automation of equity derivatives processing in the coming year, which will be supported by newly increased standardisation of Isda documentation.