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As the advocacy role of the Swaps and Derivatives Market Association (SDMA) evolves, industry participants will inevitably compare it to the International Swaps and Derivatives Association (ISDA), which has been in existence since 1985.“We’re not really in competition with ISDA—it’s done a fabulous job, historically, of addressing the needs of a bilateral marketplace,” says Jamie Cawley, CEO of Javelin Capital Markets and co-founder of the SDMA, referring to ISDA’s standardization of contracts and protocols.
ISDA has led the effort in developing the ISDA Master Agreement and related documentation for OTC instruments. The association also plays a key role in the enforceability of the netting and collateral provisions of its agreements to reduce credit and legal risk, according to its website. ISDA has 800 members in 56 countries.
“But, now, as the market moves away from ISDA and as it’s contractually and legally obligated by the Dodd-Frank Act to move into clearing, ISDA has become less relevant,” Cawley says. Master clearing and execution give-up agreements will become more central.
Direct competition aside, the SDMA has members that feel ISDA was “not addressing their needs and perhaps too focused on the wants and needs of the larger ISDA members—the incumbent banks—and not proportionally focused on the needs of the independent dealers, the buy side and so forth,” Cawley says.
ISDA officials decline to comment.
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