ISDA CEO Urges Standardization For Digital Asset Derivative Contracts – Finance and Banking – United States – Mondaq News Alerts

United States: ISDA CEO Urges Standardization For Digital Asset Derivative Contracts

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ISDA CEO Scott O’Malia described ISDA’s ongoing effort to develop
common contractual standards to support the digital asset
derivatives market.

In comments published in ISDA’s newsletter,
derivatiViews, Mr. O’Malia emphasized the need for
standardized derivatives documentation tailored to reflect the
unique features of this asset class.

Mr. O’Malia stated that institutions trading digital asset
derivatives are currently using amended versions of existing ISDA
templates, or are using their own bespoke documentation. He warned
that this lack of common contractual standards may mean that
certain unique events that can occur in the digital asset market
are not directly covered by the documentation used for derivatives
linked to those assets. Mr. O’Malia cautioned that the lack of
common contractual standards may result in failure by market
participants to address the distinctive events that can occur in
the digital asset market, such as certain market disruption events
that may impact the valuation, settlement, collateral and legal
viability of a derivatives transaction.

Mr. O’Malia said that the development of common contractual
standards and documentation templates for digital asset derivatives
is a priority for ISDA in 2022, and will largely focus on (i)
addressing the issues highlighted in a white paper previously published by ISDA
regarding the creation of contractual standards for digital asset
derivatives (see previous coverage), and (ii) integrating those
standards within the existing ISDA documentation architecture,
particularly the ISDA Master Agreement.

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