In an effort to further standardize and make transparent the over-the-counter (OTC) derivatives market, the International Swaps and Derivatives Association (ISDA) has chosen to collaborate with Bloomberg to publish the Standard Credit Support Annex or SCSA. This joint effort will create efficiencies and transparency in the markets and has broad industry support.
A credit support annex is an agreement between market participants that dictates financial terms (including collateral or margin exchange) for trading OTC instruments. This new SCSA will level the playing field by simplifying this agreement process and promoting consistent and transparent valuation framework.
Bloomberg will act as the calculation agent, data provider and disseminator for ISDA’s SCSA. Our involvement will include calculating the SCSA using overnight interest rates and Bloomberg’s foreign exchange (FX) rates, and publishing these rates daily to the Bloomberg Professional service at SCSA
As Deutsche Bank AG’s Global Head of Institutional Sales Richard Herman said in ISDA’s announcement, the SCSA “represents a major step forward in developing a consistent valuation framework for market participants.”
Also in the announcement, R. Martin Chavez, Goldman Sachs’ Managing Director and Global Co-COO, Equities Franchise, said, “The SCSA is an important industry-driven response to the evolving public and private sector thinking on the topic of risk mitigation. It is another step in the ongoing efforts of ISDA and market participants to standardize OTC derivatives practices and processes.”
Bloomberg is proud to be a part of this important market initiative, to help promote transparency and efficiency in the OTC derivatives markets.