A Financial Markets Revolution

Every financial center has its own unique features, but it was particularly fitting that ISDA's recent Annual General Meeting (AGM) was held in Boston - not only a global hub for asset management and insurance, but also a city that shaped American history. The American Revolution had its origins in Boston in the 1770s, as frustration with British rule and taxation became a unifying force that led to the Declaration of Independence. During the AGM, we reflected on the revolution now playing out in financial markets, as industry solutions and advanced technologies offer the opportunity to reduce bottlenecks and inefficiencies.

For far too long, firms have put up with resource-heavy manual processes, which have increased operational risk. As markets begin to move towards round-the-clock trading, we need smart solutions to standardize, optimize and automate common practices. ISDA has developed several successful industry solutions to help achieve this, but we must never let up in the pursuit of innovation. We need to think continuously about how our solutions are working and how advanced technologies could be used to take them to the next level.

ISDA's Digital Regulatory Reporting (DRR) initiative is a great example of how we are maintaining our pursuit of innovation. Since we launched the ISDA DRR in 2022 to help firms improve the accuracy and consistency of regulatory reporting, we've seen rising adoption as we've extended it to support eight sets of reporting rules around the world. By using the Common Domain Model to convert an industry interpretation of the rules into code, the DRR improves efficiency and reduces the risk of fines for misreported data.

Now we're going a step further, using artificial intelligence (AI) to bring even greater efficiencies to the DRR coding process. We recently selected Gentek AI to develop a traceability tool, which will allow users to look back at the history of DRR decision-making and pinpoint when and why coding choices were made, providing a full audit trail of DRR development. We're also developing an AI-driven translator agent that will review new or updated reporting requirements and support the conversion into code, further reducing the time, effort and cost of keeping pace with evolving rules. In a first for the AGM, we introduced these agents to our membership with a terrific AI-generated animation.

This is just one example of how we think AI could move the needle by revolutionizing industry processes and eliminating friction. ISDA's track record shows we can deliver on ambitious initiatives like these. It's been 10 years since we launched our very first industry solution - the ISDA Standard Initial Margin Model (ISDA SIMM). It was a revolutionary idea that was ahead of its time. But without a standard calculation method, the margin rules for non-cleared derivatives would have been fraught with difficulty. Ten years on, the ISDA SIMM has become a fundamental part of the market structure, reducing the potential for costly margin disputes.

Mutualized solutions like these are the bedrock on which the financial markets revolution will be built, showing the way towards a fully digital future. Like the revolutionaries in eighteenth century America, we don't have all the answers - there will be uncertainties, questions and challenges along the way. But we need to embrace this change and shape the future of markets. We're excited to bring our first AI agents to market later this year and will look for further opportunities to use advanced technologies to boost the firepower of our industry solutions.