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Portfolio > Alternative Investments > Hedge Funds

From ISDA, a Spate of Statements

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SINGAPORE (–The International Swaps and Derivatives Association released the results of a survey on credit derivatives post-trade processing–and the survey’s numbers indicate that such processing is improving.

For large firms (those that conduct at least 1,500 swap trades a week) backlogs have decreased over the last year from 23.5 days to 16.2 days, despite a doubling in the number of those firms’ swaps during the same time.

Another measure of effective processing is the percentage of counterparties who confirm a trade within one day after the trade date (T + 1). A year ago, only 33% of the survey’s respondents sent their confirmations T + 1, and only 50% by T + 2. But now, the same percentages are 53% and 67% respectively.

The processing survey was only one of five announcements from ISDA timed to coincide with its 21st annual meeting, held in Singapore. The others:

oUse of collateral in privately negotiated derivatives transactions and related margined activities continues to grow significantly, with the amount of

collateral in circulation now estimated at $1.439 trillion;

oISDA has published 2006 fund derivatives definitions, intended for use in confirmations of derivatives transactions linked to interests in various types of

pooled investment vehicles, including hedge funds, interests in which a liquid secondary market may not exist;

oISDA has added 60 new member firms over the last year, bringing its membership to above 700;

oThe 2005 market survey of privately negotiated derivatives indicates that the notional principal outstanding value totals US$236 trillion across asset classes. The largest chunk of that consists of interest rate derivatives, which grew 6% in the second half of 2005 to US$213.2 trillion notional.

ISDA cautioned that the notional amounts should be taken as an “approximate measure of derivatives activity” rather than a representation of the risks associated with the activity. “In order to determine risk,” ISDA noted in the announcement of the 2005 market survey, “it is necessary to estimate net replacement cost,” data that ISDA doesn’t collect.

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Contact Bob Keane with questions or comments at [email protected].


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