ISDA Provides Roadmap for Implementing DLT Solutions in Reporting and Collateral Management

In a discussion paper, ISDA provided a roadmap "for participants in the derivatives industry who are working to implement new technology solutions and applications aimed at optimizing and digitizing financial markets."

The paper, a product of the ISDA Future Leaders in Derivatives ("IFLD") program, highlighted the benefits of distributed ledger technology ("DLT") in improving trade reporting and collateral management. The paper focuses on (i) the use of DLT "to simplify, standardize and automate the regulatory reporting process"; and (ii) the "implementation of digital assets within collateral management systems to lower settlement times and reduce risk."

The IFLD said that there is not enough data to support using DLT in trade reporting currently, but maintained that it has many potential benefits including (i) the standardization of data models and logic and improved live data quality, (ii) more efficient and effective implementation of rules and (iii) multi-jurisdictional compliance and oversight. ISDA urged regulators to (i) develop a DLT-based trade network, (ii) adopt a common standard of regulation, (iii) ensure compatibility with existing systems and (iv) engage with market participants to create comprehensive regulation.

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