OTC derivatives settlement best practices report

LONDON, Tuesday, October 26, 2010 – The International Swaps and Derivatives Association, Inc. (ISDA) today announced the publication of two best practice documents: The OTC Derivatives Settlements Best Practice and the OTC Derivatives Interest Compensation Claims Best Practice (the “Best Practices”). The Best Practices are the results of the collaborative efforts of firms represented on the ISDA Settlements Implementation Group (“SIG”), which takes direction from the ISDA Operations Steering Committee.

The OTC Derivatives Settlements Best Practice provides cross asset class guidelines to the industry on common settlement risk management issues as identified by the SIG, covering both pre and post settlement issues.

“The settlement process is absolutely critical to the smooth functioning of OTC derivative markets,” said Julian Day, Head of Trading Infrastructure at ISDA. “The publication of best practices to address cross asset class settlement risk management provides an important framework for the industry going forward and is a vital step in the further development of robust infrastructure for the OTC derivative markets.”

Richard Owen, Chair of the Settlements Implementation Group and Executive Director at JPMorgan, said: “Over the last few years, the derivatives industry has made impressive steps forward in co-ordinating and co-operating at all levels to ensure operational processes run smoothly. These best practices documents are a key step forward in facilitating controlled, efficient and effective settlement processes for all parties in the industry.”

Whilst the OTC Derivatives Settlements Best Practice is more general in its coverage, the OTC Derivatives Interest Compensation Claims Best Practice has been published to outline the guidelines for the submission and processing of interest compensation claims arising from payments relating to OTC Derivatives transactions confirmed under the terms of the ISDA Master Agreement 2002 (or any earlier version thereof).

The SIG provides a forum to surface any cross asset class settlement issues and challenges at an industry level, driving cohesion of industry strategy regarding settlements automation and best practice.

Both documents are available on the ISDA website, www.isda.org.

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