In 2019, Linklaters and the International Swaps and Derivatives Association (ISDA) collaborated to launch ISDA Create, an industry-first digital platform designed to streamline derivatives contacts and processes.
Fast forward 3 years, ISDA Create is leveraged by over 200 ISDA member organizations, including 50 organizations in the Fortune 500 and 6 of the world’s largest banks.
But how did this initiative come about, and what lessons have been learnt along the way?
In an interview with the Reinventing Professionals podcast, Megan O’Flynn, Assistant General Counsel for ISDA, discusses the ways in which this type of project can influence the attorney / client relationship and impact expectations moving forward.
Tell us about your background and your work at ISDA.
I’ve been at ISDA for a few years now working on ISDA’s legal technology initiatives, which include the ISDA Clause Library project, as well as the ISDA Create negotiation platform. Both were created in an effort to digitize and push derivatives contracts to the next generation of standardization and optimization for transactions.
Megan, your legal department has collaboratively developed ISDA Create among other tools with Linklaters. What’s been the genesis of those initiatives?
It came primarily out of ISDA’s tradition of wanting to be at the forefront of helping the industry standardize and optimize their transactions. Traditionally, when people think about ISDA, they think about the ISDA Master Agreement, which has been around for 30-plus years and gone through a few iterations.
The ISDA Master Agreement allows parties to agree to some standardized terms and customize other terms for most derivatives transactions.
It provides transparency and certainty with respect to how transactions function in the market.
However, the world is continuing to move towards a more digital future with DLT, blockchain and smart contracts. We began to think critically about the role that ISDA could play and the way we could interact with the market to help facilitate this transition to a digital future. That coincided with increased regulation of the derivatives market, particularly as a result of the Dodd-Frank Act.
Those regulations led to the genesis of ISDA Create – specifically, the implementation of initial margin regulations. ISDA Create was developed in response to the volume of documentation that would be required for market participants. The platform helped to ensure participants had the appropriate documentation in place to allow them post and receive initial margin.
We were also influenced by the time crunch that market participants were facing in papering all their relationships with counterparties to meet these global initial margin requirements. Thus, we chose to partner with Linklaters to help develop those documents in paper form. However, through that collaboration, we realized we should really help the market by creating a negotiation platform that standardized all of the negotiation aspects and streamlined negotiations to enable counterparties to just focus on the points of contention in the document.
As initial margin continues to be a heavy lift for the industry, we will continue to add more and more negotiated documents to the platform to allow market participants to have even greater flexibility and seamlessness in their transactions.
How is legal technology transforming the work that you do?
This experience has holistically changed the way I work, the way I interact with the members of ISDA, and the market more broadly.
The ISDA Create negotiation platform is one of several initiatives in the technology space that ISDA is pursuing – from creating whitepapers on smart contracts, to working with Linklaters on several documents that are connected to ISDA Create, to use of other technologies.
We’ve also for a long time maintained what we call the Common Domain Model. It is a common language that can help firms represent transactions from the beginning to end using an open-source language that anyone can use. We are currently at a critical point for the market – we need to allow the market to push forward while keeping in mind that everyone has their own individual desires and way that they work by creating these common connections they can use. The Common Domain Model has really transformed the way we view technology and the way we can facilitate efficiencies that the market creates for itself.
It has also changed way of looking at my job as a lawyer. When we draft documents now, we view them with an eye toward technology and an eye toward digitization.
We also think about how we can create materials that ISDA can publish that are technology friendly. We ask questions like ‘are they able to be coded?’ and ‘are they able to be transformed into an output that can be regulation friendly in a technology-friendly format?’.
How was your experience developing tools with your outside counsel impacted your expectations of what they’re capable of doing?
Prior to doing this project, I hadn’t really engaged with a law firm that also had a technical expertise/technical side to it. I am a corporate lawyer by design and by practice, but I knew that, on the litigation side, technology tools like eDiscovery have been around for quite a long time. I also know that the practitioners in those spaces are much more familiar with dealing with law firms, which are then, in turn, familiar with outside vendors or know how to handle things and manage them internally.
On the transactional side, that really isn’t the case; those technologies and thinking about legal issues in a more prescriptive way with an eye towards technology is still emerging in my field. Although they are maturing, there’s still a long way to go.
Furthermore, this experience of working with a law firm like Linklaters with an internal team like CreateiQ has been great. I’ve gained a deeper understanding of the synchronicity between the two sub teams within the group and how they can really create that seamless integration that helps the project move forward with minimal disruption and gap.
So, I certainly think that, for this project and other projects, it’s important from ISDA’s perspective and an in-house counsel perspective to make sure we have law firm partners that have an eye toward technology going forward, particularly on the transaction side.
For further information, please contact:
Shilpa Bhandarkar, CEO, Linklaters