The International Swaps & Derivatives Association has revealed that it is currently preparing one of the biggest overhauls of the derivatives market of all time.

The last big regulation changes in the derivatives industry were introduced in 2004, when the market was much smaller than it is today.


The ISDA says that it is going to offer sets of possible changes to the rules that govern derivative trading to market participant. Those individuals and organizations will offer feedback on the proposed changes, allowing the organization to get a better picture of the effects of the changes on the market.

Bloomberg reported on the story earlier today. The media organization talked to Mark New, the ISDA’s assistant general counsel to the Americas. New said that the strategy is part of a review of the last decade on the derivative market. The ISDA wants to see what has been learned in that time, and how the market can be improved with the new information.

Much of the news of any possible changes in derivative trading rules surrounds a case study of Greece. The country partially defaulted in 2012. That default resulted in a massive payout for investors like Kyle Bass. Those credit default swaps paid out when Greece defaulted. The smooth payout of those derivatives was based on an ISDA decision.

One of the proposals on the table deals directly with credit default swaps. It would make it possible to pay out on those swaps with an asset exchange. This could tone down the exorbitant payouts of some credit default swaps, improving the market’s solidity.

The world of derivatives is changing as it is bound to do. The instruments have become such a vital part of hedge fund and investment banking life in such a short period of time that there has to be substantial room for improvement. The ISDA is bound to study the market, and tweak it in order to allow greater efficiency, and less volatile outcomes.

The timescale for any possible rule changes has not been revealed yet. It is clear that the regulator is in an exploratory phase right now. It will surely wait for several rounds of feedback before it attempts to change the international derivative trading rules. Those rules will be eagerly awaited by investment bankers and fund managers, the impression they have on the market could be revolutionary.