Derivatives trade body ISDA has identified a number of areas that need improving when it comes to swaps and options trades.

A new whitepaper from the group highlights three areas - documentation, data and process - where further standardisation can be achieved.

The group adds that its own 'Master Agreement', which acts as a service agreement for OTC derivatives transactions globally, can be simplified to reduce complexity and operational challenges.

It comes amid growing demand for new solutions to streamline reporting, trading, clearing and collateral management requirements that have emerged as a result of regulatory changes.

“The derivatives industry has become reliant on legacy infrastructures and processes that have been layered on top of each other over time,” said Scott O’Malia, ISDA’s chief executive.

“That might be the result of historical acquisitions, where the respective systems haven’t been fully integrated. More recently, the sheer pace of regulatory change has meant firms have been under pressure to tackle the next pressing deadline.

“The result is a derivatives infrastructure that is duplicative and based on incompatible operating standards, and this isn’t sustainable.”

ISDA’s whitepaper also identifies opportunities to transform ISDA’s legal documentation by developing ‘smart contracts’ that can automatically execute intended lifecycle events.

It also recommends the use of a standard, multi-use derivatives product identifier as a key requirement for reducing duplication and inconsistency.

“Our members are looking for more effective, less costly and less complex processes, using technology where possible to cut down on manual processes,” adds O’Malia.

“ISDA is helping to respond to these issues, and our whitepaper highlights a number of areas where the Association can work with the industry and regulators to improve trade processing through the lifecycle.

“Our work on the implementation of non-cleared derivatives margin requirements is a good example of where industry standards have and will continue to improve operating efficiency, and there is further room for improvement in the collateral management space.”