ISDA unveils Future of Derivatives survey results

To coincide with the beginning of its 33rd Annual General Meeting, the International Swaps and Derivatives Association has published the results from its latest Future of Derivatives survey.

Challenges cited in the survey include an anticipated decline in the number of derivatives dealers and higher costs. Regulatory compliance was also seen as a major concern by most survey participants.

“While significant progress has been made in implementing regulatory reform initiatives, regulatory compliance continues to be a major focus for the industry,” said ISDA CEO Scott O’Malia. “This underscores the need to calibrate the regulatory framework to ensure it is risk appropriate, while at the same time working to develop industry solutions that bring greater standardization and automation to the derivatives markets.”

Distributed ledgers, artificial intelligence and cryptocurrencies were seen as game changing technologies for the industry. When asked to rate the impact of these technologies on derivatives markets, more than half of survey respondents scored their impact between seven and 10. Most respondents see technology driving cost savings across all areas of derivatives operations.

“New technologies are likely to bring greater efficiencies and cost reduction to the derivatives market, but we need to ensure we retain and, where necessary, adapt the standards, definitions and documentation that have brought more than 30 years of consistency and legal certainty to the derivatives market. This is critical for the safe, efficient functioning of this market,” O’Malia said.

Some 83% of survey respondents see volumes and end-user activity maintaining current levels or growing in coming years. Sixty-five percent of respondents expressed high levels of optimism about the future of derivatives.

“Our survey shows that end-user activity is expected to remain at current levels or even increase in the coming years, emphasizing the value of these products as a means of transferring risk efficiently. These instruments continue to be used by end users because they serve an important economic and social need. It’s therefore vital that firms are able to continue accessing these markets in a cost-effective way,” said ISDA Chairman Eric Litvack.

The 33rd ISDA Annual General Meeting is taking place in Miami this week. New technologies, regulatory reforms, Brexit, non-cleared derivatives and capital rules are key areas of focus. Bill Coen, secretary of the Basel Committee on Banking Supervision, J. Christopher Giancarlo, chairman of the Commodity Futures Trading Commission and Craig S. Phillips, counselor to the secretary of the US Treasury are among keynote speakers.