The International Swaps and Derivatives Association (ISDA) has published a whitepaper identifying regulatory and structural frictions that can reduce the availability of securities financing transactions (SFTs) during market stress and proposing targeted changes to improve the calibration and risk sensitivity of the framework for secured funding markets. The paper frames SFTs as increasingly critical to meeting derivatives margin calls as clearing and margin reforms have deepened the links between derivatives and repo markets. A central proposal is to recognize cross product netting in the US capital framework, particularly as the Securities and Exchange Commission’s clearing mandate for US Treasury repo transactions approaches and cross margining services are being extended beyond dealers. ISDA argues the standardized approach for counterparty credit risk (SA-CCR) forces single product exposure calculations that prevent offsets between repos and derivatives, even within the same netting set, and could increase capital requirements when cross margining lowers initial margin. To address this, it proposes an extended SA-CCR methodology that treats repo collateral as a forward derivatives contract and allows joint recognition of SFTs and derivatives under qualifying cross product master netting agreements. Additional recommendations include adjusting the standardized approach for credit risk to better reflect the short term nature of SFT exposures, excluding SFTs from the credit valuation adjustment framework, and revising Basel III liquidity ratios. Beyond prudential calibration, ISDA also points to legal and operational alignment opportunities, including using ISDA documentation to bring derivatives, repos and stock loans under a single close out netting arrangement within the ISDA Master Agreement, and leveraging the Common Domain Model to develop harmonized, machine readable representations of lifecycle events across SFTs and derivatives.
ISDA 2026-03-19
International Swaps and Derivatives Association publishes whitepaper urging cross product netting recognition and other regulatory tweaks to support resilient SFT markets
The International Swaps and Derivatives Association (ISDA) released a whitepaper on regulatory and structural frictions in securities financing transactions (SFTs) during market stress, proposing changes to improve secured funding markets. Recommendations include recognizing cross product netting in the US capital framework, extending the standardized approach for counterparty credit risk (SA-CCR), and revising Basel III liquidity ratios. ISDA also suggests legal and operational alignment through ISDA documentation and the Common Domain Model for harmonized lifecycle event representations.