International Swaps and Derivatives Association

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The International Swaps and Derivatives Association (ISDA) is a trade organization of participants in the market for over-the-counter derivatives. ISDA has more than 820 members in 57 countries; its membership consists of derivatives dealers, service providers and end users. It is headquartered in New York, and has created a standardized contract (the ISDA Master Agreement) to enter into derivatives transactions.

Its lobbying activities earned it the Worst EU Lobbying Award [1] in the finance category in 2010, having been jointly nominated with Goldman Sachs for aggressive lobbying to defend their activities and their influence over the EU's response to the financial crisis.[2]

History

ISDA was initially created in 1985[3] as the International Swap Dealers Association and subsequently changed its name switching swap dealers to Swaps and Derivatives. This change was made to focus more attention on their efforts to improve the more broad derivatives markets and away from strictly interest rate swap contracts.

Mark C. Brickell was the President of the International Swaps and Derivatives Association from 1988-1992. He helped defeat US Congressional efforts to regulate derivatives in 1994 and again in 1998.

In 2009 a New York Times article mentioned that in 2005 the ISDA allowed rule changes to CDO payouts (Pay as You Go) that would benefit those who bet against (shorted) mortgage-backed securities, like Goldman Sachs, Deutsche Bank, and others.[4]

Activities

Lobbying

According the organisers of the EU Worst Lobbying Award, ISDA won the finance category alongside Goldman Sachs because of the way in which they have influenced the EU’s response to the financial crisis.

The very people responsible for running up huge banking debts have been advising the EU Commission on what to do next, literally capturing most of the EU advisory bodies on that matter. Needless to say, they haven’t been keen on regulatory reform.[2]

MEP Dennis de Jong told the organisers that the influence of the financial industry was tremendous.

“I have experienced how in 'public' conferences critical voices are being silenced and how members of the Parliament and the financial sector seem to be singing of the same hymn sheet in the European Parliamentary Financial Services Forum. The financial industry has an enormous influence on shaping the policy debate,” he said. [2]

ISDA Master Agreement

The ISDA Master Agreement is typically used between a derivatives dealer and their counterparty when discussions begin surrounding a derivatives trade. There are two basic forms of Master Agreement: single jurisdiction/currency and multiple jurisdiction/currency. One of these documents is generally combined with a Schedule to set out the basic trading terms between the parties; each subsequent trade is then recorded in a Confirmation which references the Master Agreement and Schedule.[5] The terms of the Schedule are often negotiated, and many firms have preferred versions of the Schedule.[6]

According to Financial Times reporter Stacy-Marie Ishmael, the Master Agreement is "fundamental to, and provides a template for, the derivatives market."[7]

ISDA has also drafted a Tahawwut Master Agreement in cooperation with the International Islamic Financial Market, with the aim of standardizing derivatives transactions under Islamic law.[8]

ISDA also manages FpML (Financial products Markup Language), an XML message standard for the OTC Derivatives industry. [9]

Representation in the European Commission

Mark Gilmartin and Antonio Corbi represent the International Swaps and Derivatives Association on the European Commission's Expert Group on automatic exchange of financial account information. The aim of the group is to assist the EU member states on tax laws and collecting the full amount of tax owed to them.[10]

Members

Publications, Contact, Resources and Notes

Contact

London office: One Bishops Square, London E1 6AD
www.isda.org

Resources

Notes

  1. ↑ The Worst EU Lobbying Awards 2010 are organised by Friends of the Earth Europe, Corporate Europe Observatory, LobbyControl and Spinwatch. See www.worstlobby.eu/2010/about
  2. ↑ 2.0 2.1 2.2 Why the EU’s lobbyists need more than a good clean, New Europe, 5 December 2010 - Issue: 914
  3. ↑ About ISDA
  4. ↑ Banks Bundled Bad Debt, Bet Against It and Won By GRETCHEN MORGENSON and LOUISE STORY, December 23, 2009, New York Times
  5. ↑ Bushan K. Jodomar, The ISDA Master Agreement - The Rise and Fall of a Major Financial Instrument (August 24, 2007).
  6. ↑ HM Revenue & Customs, CFM13100 - Understanding corporate finance: derivative contracts: documentation: the ISDA Master Agreement.
  7. ↑ Stacy-Marie Ishmael, Lehman, Metavante and the ISDA Master agreement, FT Alphaville (September 30, 2009).
  8. ↑ Robin Wigglesworth, Derivatives: ‘In need of robust architecture’, Financial Times (May 12, 2010).
  9. ↑ To Join ISDA
  10. ↑ European Commission Commission Expert Group on automatic exchange of financial account information, accessed 4 May 2015.
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