Joint association letter to enhance the digital future of the Financial Markets

A letter asserting a joint commitment from eight associations regarding the digitization of the financial markets was distributed on the 29th July to the Secretariat of the Financial Stability Board, the Secretariat of the Basel Committee on Banking Supervision, and the International Organization of Securities Commissions (IOSCO).

In total, the International Swaps and Derivatives Association (ISDA), the Association of German Banks, the Australian Financial Markets Association (AFMA), International Capital Market Association (ICMA), the International Islamic Financial Market, the International Securities Lending Association (ISLA), London Bullion Market Association (LMBA) and UK Finance have jointly written the letter.

Within the letter it is highlighted that the rapid economic globalisation seen in the early 1990s, coupled with the advent of the internet, revolutionised the globe and ultimately the markets. This is analogous to the most recent developments within the technology sphere where we see distributed ledger technology (DLT) and artificial intelligence (AI) paving the way for significant advancements within the markets through a variety of use cases. The eight associations have subsequently expressed their commitment to define and promote the development of a clear ‘digital future’ in the financial markets, as the markets are “on the cusp of a new paradigm shift”.

The adoption of common data and process standards would enable an efficient method to aggregate and analyze financial data across the board. Specifically, it is mentioned that: “Increased digitization will improve risk management through greater alignment between contracts, processes and data, and allow for the introduction of real-time regulatory oversight. Increased automation will promote more efficient and cost-effective operational processes, reduce complexity, and allow firms to deliver better services and lower costs for businesses and consumers in the real economy.

The letter is categorized under the ISDA Common Domain Model (CDM) on ISDA’s website. The ISDA CDM is further explained in our June 1st 2020 regulatory update located here.

The letter concludes: There is an alternative path. Through the adoption of these principles and objectives, we are embracing transformational change and adopting an ambitious strategy for defining a digital future for financial markets, fostering an environment for technological innovation and building a safer, more robust global financial system.”

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