The International Swaps and Derivatives Association (ISDA) has published the 2013 Standard Credit Support Annex (SCSA).
The SCSA aims to standardise market practices in collateral management for OTC derivatives. It removes embedded optionality in the existing CSA, promotes the adoption of overnight index swap (OIS) discounting, and aligns the mechanics and economics of collateralisation between the bilateral and cleared OTC derivative markets, says the body. The SCSA also seeks to create a, “homogeneous valuation framework, reducing current barriers to resolving novations and valuation disputes.”
Robert Pickel, ISDA chief executive officer, says, “The Standard CSA is part of ISDA’s continuing efforts to increase efficiency and improve standardisation in the OTC derivatives markets. The SCSA simplifies market processes regarding collateralisation by promoting consistent and transparent valuations while making assignment and risk transfer in the bilateral and cleared space more efficient.”
The SCSA is a market-driven initiative with flexible approaches to implementation, slowing firms to move at the pace they deem appropriate. Participants can either adopt the new SCSA or continue using the current CSA.