The International Swaps and Derivatives Association (ISDA) used opening remarks at its Derivatives Trading Forum in Tokyo to outline current industry initiatives aimed at improving consistency and efficiency in derivatives markets, focusing on collateral mobility, digitizing close-out notices, and advocating for more aligned implementation of Basel III market risk rules. On collateral, ISDA pointed to USD 1.5 trillion of initial and variation margin collected by leading derivatives participants at end-2024 and argued that margining can amplify liquidity strains during shocks. With cash representing a declining share of total variation margin received (80% in 2020 to 68% in 2024), ISDA described tokenization as a potential route to make assets such as money market fund shares and gold more operationally usable as collateral. Work is being organized around two tracks: establishing clear legal and regulatory frameworks, including documentation and legal opinions and regulatory certainty that tokenized assets can be used as collateral under margin rules, and building interoperability via common data models, smart contract standards and messaging protocols, leveraging the Common Domain Model. On close-out processes, ISDA highlighted the launch of the ISDA Notices Hub in July, supported by the ISDA 2025 Notices Hub Protocol, and said more than 140 buy-side and sell-side entities have adhered, enabling online delivery of key termination notices and maintenance of address details where physical delivery remains. On Basel III, ISDA argued for risk-sensitive, cross-border-consistent outcomes and urged pragmatism in the Fundamental Review of the Trading Book (FRTB), noting Japan has fully implemented Basel III and FRTB has applied to all banks since March 31, including a targeted adjustment to sovereign exposure treatment for the default risk charge under the internal models approach. The remarks also referenced implementation timing differences elsewhere, including an EU delay of FRTB implementation to the start of 2027, a UK consultation that included delaying the FRTB internal models approach to the start of 2028, and uncertainty over when US agencies will publish revised Basel III endgame proposals, with ISDA indicating it will continue to engage with policymakers.
ISDA 2025-10-17
International Swaps and Derivatives Association sets tokenized collateral workstreams and reports over 140 adherents to the Notices Hub Protocol
At its Derivatives Trading Forum in Tokyo, the International Swaps and Derivatives Association (ISDA) highlighted initiatives to enhance derivatives market efficiency, focusing on collateral mobility, digitizing close-out notices, and aligning Basel III market risk rules. ISDA emphasized tokenization's potential for collateral use, launched the ISDA Notices Hub for online termination notices, and advocated for consistent, risk-sensitive Basel III implementation across jurisdictions.