The initial results show that despite significant growth in monthly volumes for most over-the-counter (OTC) derivative products, post-trade processing has been able to keep pace and in many cases improve over previous years, according to the survey.
Monthly OTC derivative volumes grew by 38 percent across all products, with credit derivatives showing the strongest growth at 73 percent. Large firms experienced even greater increases, reporting 87 percent growth in credit derivative volumes.
In the main asset classes, business days’ worth of outstanding confirmations is lowest for credit derivatives at 6.6 days, followed by interest rate products at 9.9 business days and 13.3 for equities. In interest rate and credit derivatives, 90 percent of electronic confirmations are normally sent by T+1 (within one day of trade date); equity derivatives reach those levels by T+4.
“ISDA’s efforts to standardize documentation further, together with the industry’s commitments to ‘onboard’ clients to automated platforms, should lead to a drop in these figures over the coming year,” said Robert Pickel, Executive Director and Chief Executive Officer of ISDA.
Trade data transfer from front office to operations is now highly automated for all products, averaging 79 percent across respondents. The highest level of automation of confirmation matching is in credit derivatives, averaging 62 percent across all respondents; the lowest is in equity derivatives at 23 percent.
Settlement volumes more than doubled in the main asset classes as a result of the increase in overall trade volumes as well as the ongoing need to settle recurring payment obligations. Automated solutions for payment netting and central settlement services, particularly for credit derivatives, have helped firms handle the increases in settlement volumes.Data submitted by participants cover the calendar year 2007. This year’s survey saw the highest level of participation since the creation of the survey in 2000, with 79 respondents including all major OTC derivative dealers. It is also the first survey that includes a provider of processing services to hedge funds and other buy-side clients.