The International Swaps and Derivatives Association (ISDA) is actively working to bridge the gap between traditional financial markets and the evolving digital asset space by establishing clear, usable standards for derivatives, tokenized collateral, and risk management, ensuring legal certainty and operational consistency.
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Uh as Brendan said, today's session is
on the connection between uh digital
assets and OTC markets. So we're very
fortunate to have Amy here with us today
from uh Goldman Sachs, but here in our
capacity as the chair of ISDA. So
welcome Amy.
>> Thank you. Thanks Peter. It's a pleasure
to be here. And I wanted to start by
asking you to maybe give a little bit of
a background on IST itself. Uh it's
obviously a wellestablished
organization, 40-year anniversary here
last year. Congratulations. Um but maybe
less familiar to onchain uh
participants. So uh can you give us a
sense of the types of things you've done
and are doing and the breadth of your activities?
activities?
>> Yeah, absolutely. Well, ISTA is the
global derivatives trade association and
our mission is to foster safe and
efficient derivatives markets for our
thousand plus members around the globe
and the purpose there is to make sure
that our members can manage risk with
confidence. Um, you know, Peter, as you
mentioned, ISDA was founded over 40
years ago, and it was founded because
the derivatives markets were growing
rapidly, and they were highly decentralized.
decentralized.
We're talking about bilateral contracts,
bespoke terms, and real question with
regards to legal enforcability.
Since then, ISTA has delivered on legal
documentation as well as market
protocols that the industry has adopted
at scale. And more recently, we've
actually extended that standardization
into data and processes through what we
call the common domain model. And that's
a digital representation of products,
trades, and life cycle events. And as
this group knows, that's really
important as markets continue to digitize.
digitize.
Today, ISD's work spans legal
documentation, market structure, public
policy, digital transformation, and we
regularly engage with regulators around
the world as markets and technologies
continue to evolve.
In our experience, markets scale when
there's legal certainty and operational
consistency and interoperability.
And that's exactly what ISD does for our members.
members.
>> And so tying that more to the digital
asset space specifically, um do you have
a perspective on things that are
happening digital asset markets now and
um the way forward in 2026?
>> Yeah, thanks for that question. ISDA is
focused on where digital assets
intersect with regulated derivative
markets to make sure that there are
clear usable standards. Uh first we
published standardized digital asset
derivatives definitions which is a
little bit of a tongue twister initially
covering instruments like
non-deliverable forwards and options on
Bitcoin and ETH. And this was really
important because what we did was
establish a common set of standards that
the industry could rely upon as opposed
to using bilateral bespoke one-off documentation.
documentation.
Second, we've done a lot of work on
tokenized collateral and that spans both
documentation as well as guidance so
that firms and institutions can use
tokenized securities as collateral with
confidence. And third, we engage
regulators globally on innovation with
an eye towards ensuring that we don't
undermine legal certainty and existing
riskmanagement practices as we continue
to fuel innovation. Overall, ISDA's role
has been to translate digital assets
innovation into frameworks that our
market participants and members can rely upon.
upon.
You mentioned a few of the drivers of um
markets that uh you were important from
your perspective at ISDA. Are there ones
that you would single out though that
are particularly different for onchain
markets versus trady markets that um we
should be more aware of?
>> Yeah, that's a good question. So, at the
end of the day, markets are markets and
so there are a lot of shared
commonalities and similarities between
regulated derivatives markets and
onchain markets. And so the same
fundamentals apply in either instance.
But there are also key differences. Um
you know one difference which this group
will be very well aware of is in the
infrastructure itself.
Onchain markets are built around programmability,
programmability,
instantaneous settlement and 247
continuous operations from day one. On
the other hand, regulated traditional
derivatives markets um we're we're
looking to find ways to retrofit these
capabilities onto existing
infrastructure and that's not an easy
nor simple matter. Another important
difference is in fragmentation.
In traditional markets, fragmentation
tends to be jurisdictional or venuriven.
Whereas in onchain markets,
fragmentation tends to be architectural.
And so ultimately, while the problems
rhyme, I would say that the tools that
we need to use to solve these problems
are actually very different across the board.
board.
>> Interesting. And I know you've taken a
particular interest in modernizing
derivatives markets during your time as
chair. Um so can you tell us a little
bit about your perspective on the role
of technology generally uh in financial
markets and tokenization in particular?
>> Yeah absolutely. Um so when I think
about tokenization I like to
differentiate between digitization and
core infrastructure change. A lot of
tokenization today is effectively
digital rappers and that can be really
beneficial for distribution,
programmability, composability.
But tokenization becomes truly powerful
when we start to compress the trade life
cycle. And that includes issuance,
pledge, margin, substitution, all the
way through to settlement. And we're
able to do this truly end to end. Um so
you know really that integration um is
is what's what's key. Uh it matters most
of all products I would say for cashlike
and highly liquid instruments because
that's where speed and certainty is
everything and matters the most. Um
along those lines though um I think it's
also important to note that tokenization
doesn't replace legal foundations. Um
the goal is actually law plus code,
right? So enforceable rights in
regulated markets paired with verifiable
controls in code. Um so it's really when
those things work together that we can,
you know, look at things that can be
truly transformational.
>> Terrific. And so one of the particular
projects that I know you is has been
involved in and continues to be involved
in is uh collateral mobility um
including the use of stable coins and
tokenized money market funds as
collateral. Uh can you give us a sense
of why that use case is so important and
how tokenization is helping?
>> Yeah. Well, collateral is absolutely
central to derivatives markets. It's how
we manage counterparty risk and it's
also how we ensure that markets remain
um stable. So in recent years we've seen
why collateral mobility is not just an
operational matter but can be a systemic
issue during times of stress like the
2020 dash for cash. External shocks
caused market volatility which resulted
in spikes in margin calls. And when that
happened, we had market participants who
had to transform large amounts of um who
had to source large amounts of cash in
tight time frames in order to to post
post that cash as collateral. And that
created a liquidity strain and in some
instances even amplified market stress.
Today there are well over a trillion
dollars in variation margin in the
system. And as that continues to grow,
even small frictions, small operational
frictions, um, you know, manual
processes or settlement delays can
become destabilizing when markets are
under stress. And so that's why ISDA is
focused on collateral and tokenization
of collateral. Collateral movement can
be operationally intensive with
workflows that weren't designed for
speed nor continuous operation.
um in ISTA has responded in a couple of
ways. First and foremost, we updated
documentation to ensure that tokenized
securities as well as stable coins can
be used as collateral and we followed
that with legal guidance on the
enforcability of tokenized collateral.
Um I I think it's also important to kind
of call out an example. Money market
funds are a good illustration of why
this matters. When you think of money
market funds, you think of trillions of
dollars globally, low volatility, and
small regulatory haircuts. But when you
actually try to use money markets, money
market funds for collateral purposes,
you'll actually find that the workflows
and processes are quite cumbersome,
resource intensive, and can be costly.
because in most instances you actually
have to transform the money market fund
into cash before you can post it as
collateral. And so, you know, this is an
area where tokenization has the
potential to really improve some of
these operational efficiencies so that
you can actually post direct shares or
interest in money market funds as
collateral instead of having to go
through the cumbersome conversion process.
process.
tokenization can help address another
challenge which is making sure that
collateral gets where it needs to be
quickly and you know this of course
leans on um the the accelerated
settlement mechanisms that tokenization
can offer um which removes or eliminates
industry reliance on T1 T2 types of
processes and so for ISDA it's really
about strengthening riskmanagement
plumbing through sound legal framework
frameworks, interoperability, and close
engagement with regulators so that we
can function with uh with modern
technologies going forward.
>> Well, that's great. I mean, uh it sounds
like that's just a very challenging use
case with a lot of moving parts. I know
another technology you're particularly
interested in is artificial
intelligence, so AI. Is this the type of
use case where AI can play a role? um
and if so um how do you think about both
their capabilities and then the the
risks that might come along with the use
of an AI tool?
>> Yes. Yes. And absolutely. Um collateral
management today is hugely data and
process intensive and you know this is
where um standardized data models like
ISD's common domain model can be so
helpful is because AI can only be as
good as the quality of data that it
operates on. And so when it comes to um
the collateral management space, you're
dealing with large portfolios, frequent
changes in valuation, eligibility rules,
and regulatory constraints, all of which
are moving rapidly, especially during
times of market stress. And so, you
know, AI can alleviate some of these
complexities. For example, AI can be
used for things like documentation analysis,
analysis,
um you know, exceptions management as
well as um collateral optimization, just
as some examples. Um but it can also
help firms anticipate market stress by
monitoring patterns in things like
margin calls and capacity.
Now, one thing that I think is really
important to recognize is that when it
comes to things like risk management and
margin, AI is meant to be a co-pilot. It
can augment human judgment but shouldn't
replace human judgment. And so, you
know, I I jokingly call it the bionic
arm because it's meant to aid the people
who are making these types of decisions
at various firms. Um, across the board,
I think that strong governance,
highquality data, and clear
accountability are absolutely paramount
as we continue to forge forward with
these novel capabilities.
>> Fantastic. Well, we're just about at
time, but I wanted to ask if if there's
um a closing thought or two you might
have about lessons learned from your
experience in markets over time and the
like the times we're living in now with
the increasing role of digital assets.
>> Yeah, absolutely. In our experience,
scale tends to follow legal certainty
and um you know the same is true for
interoperability. And so as technology
continues to move quickly, I think it's
absolutely critical that legal
frameworks, operational processes, and
technology evolve together. And ideally
that'll be through collaboration between
traditional institutions and digital
native builders. Well, fantastic. Well,
thank you so much for joining us, Amy.
It's been a nice discussion, and we'll
let everybody go to lunch. Uh, with
that, thanks so much.
>> Thanks, Peter.
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