From this perspective, the effective management of credit risk plays a vital role in the trading market. International Swaps and Derivatives Association (ISDA), an institution dedicated to improving the security and efficiency of OTC derivatives market, was established in 1985. ISDA currently has more than 800 members from 55 countries around the world, mainly financial institutions such as central banks, commercial banks, exchanges and clearing houses. ISDA has written the main terms for participants in global OTC derivatives trading, which are called ISDAMasterAgreement. This clause has been accepted by most major markets in the world and translated into many languages. Since 2007, ISDA China Working Group has been actively seeking to merge ISDAMasterAgreement and NAFMIIAgreement in the interbank market dominated by the central bank, and this work is still in progress.
ISDA compiles the definition of global OTC derivatives trading. When there is a dispute about the classification, definition and terms of a transaction, the definition document issued by ISDA is usually cited as the final explanation with legal effect. The definitions and terminology documents formulated by ISDA are accepted by practitioners, regulators, lawyers and scholars in most countries in the world. ISDA provides advice to policy makers in many countries, especially in Britain and America. When regulators implement new regulatory measures, they usually seek the opinions of ISDA and ask ISDA to issue a consultation report. When practitioners disagree with regulators or legislators, ISDA can represent the industry in legal proceedings and defense.
ISDA has several committees and working groups engaged in industry research and consulting services at the same time, including committees in different regions, different product lines and different job functions, and committees and working groups cooperating with different regulatory agencies.
ISDA stated its mission: to cultivate a safe and efficient derivatives market and provide effective risk management for all derivatives users. They achieved this mission through the following four strategies: 1. As a comprehensive and reliable record provider, they provide standardized records to ensure legal certainty and minimize risks by hedging net positions and margin mortgages; 2. As a safe and efficient market infrastructure builder, support an orderly and reliable market and improve the transparency of regulators; 3. As an inspiration for effective risk management and clearing, improve counterparty and market risk-related operations, and promote the application of central clearing facilities and data depository; 4. As the representative voice of the global derivatives market, it represents the derivatives industry in the fields of public policy, ISDA governance, ISDA services, education and communication.
No matter from the international Greek debt crisis or domestic commercial banks and derivatives trading organizers, ISDA, which aims to provide a safer and more effective financial derivatives market for all market participants, can get the latest information on international industry development and regulatory trends in time after becoming a member, effectively manage risks and reduce the level of credit risk, improve the construction of industry operating facilities, and participate in ISDA's regional and thematic committees and working groups, participate in research and discussion meetings, and participate in decision-making suggestions and consulting work.
ISDA effectively ensures the security and effectiveness of the derivatives market, provides a stable operating environment for financial derivatives users to the maximum extent, and is an effective measure to avoid risks.