The International Swaps and Derivatives Association (ISDA) has further supplemented its Legal Guidelines for Smart Derivatives Contracts series with guidelines focused on credit and foreign exchange (FX) derivatives contracts.

A “smart derivatives contract” is a derivative contract that incorporates software code to automate aspects of the derivative transaction and operates on a distributed ledger, such as a blockchain. As discussed in our post of February 14, 2019, the series marks long-term efforts and discussions between the ISDA and industry participants on the complexities involved in considering how to apply new technologies to existing derivatives processes such as clearing and settlement to make derivatives transactions more efficient.

The newest legal guidelines on the credit derivatives and FX derivatives markets, which make up the sixth and seventh in the series, respectively, are intended to (1) provide high-level background; (2) identify opportunities for the potential application of smart contract technology; and (3) highlight important issues for technology developers to consider when designing technology-enabled solutions for trading and processing these contracts and associated processes.

Below is a summary of the guidelines making up the series so far:

Published Subject
January 2019 Introduction Link
February 2019 ISDA Master Agreement Link
September 2019 Collateral Link
February 2020 Interest Rate Derivatives Link
February 2020 Equity Derivatives Link
November 2020 Credit Derivatives Link
November 2020 Foreign Exchange Derivatives Link

ISDA also plans to host a virtual conference on January 28, 2021, that will “explore how legal documentation is being digitized for implementation within technology solutions and the legal and regulatory issues that may arise when implementing new technology in the derivatives market.”

You can find the Legal Guidelines for Smart Derivatives Contracts: Credit Derivatives here.

You can find the Legal Guidelines for Smart Derivatives Contracts: Foreign Exchange (FX) Derivatives here.

Good day DR2.