- Close-out netting has reduced over-the-counter derivatives credit exposure by over 85%. Without the benefits of netting, banks worldwide might face a capital shortfall of over $500 billion.
- Close-out netting is necessary because it enables derivatives participants to protect against adverse market changes following default of a counterparty.
- Policy-makers have consistently supported the enforceability of close-out netting because it promotes financial system stability.
- Current proposals designed to promote orderly resolution of failed financial institutions should be crafted carefully to avoid weakening the benefits of close-out netting.
Documents (1) for The Importance of Close-Out Netting
Latest
Refreshing the FX Definitions
A lot has changed in the FX derivatives market since 1998, when the last set of standard definitions for FX transactions were published. Trading volumes have grown substantially, and average daily turnover has risen by six times. Market practices have...
ISDA & EMTA Publish New FX Definitions
ISDA and EMTA, Inc., the trade association for emerging markets, have jointly published a revised set of standard definitions for foreign exchange (FX) derivatives transactions, which update key market practices and consolidate various FX and FX-related product templates and provisions...
ISDA Position Paper on SFDR Review
On February 27, ISDA and the Association for Financial Markets in Europe (AFME) published a position paper on the European Commission’s (EC) proposed revisions to the Sustainable Finance Disclosure Regulation (SFDR 2.0). The paper welcomes the EC’s proposal as a...
ISDA Response to HKMA SFC Consultation on Clearing Rules
On February 27, ISDA responded to a joint consultation by the Hong Kong Monetary Authority (HKMA) and the Securities Futures Commission (SFC) on proposed amendments to schedule 2 of the clearing rules for over-the-counter (OTC) derivatives. The proposed amendments introduce...