The International Securities Lending Association (ISLA) announced the launch of the ISLA Clause and Taxonomy Library, which was developed in association with technology partners D2 Legal Technology.
This launch follows a year of working group meetings that discussed how members configure and rely on the standard provisions of the Master Securities Lending Agreement when negotiating loan transactions.
By preparing the library of clauses and taxonomy, modifications or additions to this standard form have been classified according to their business outcome (rather than the wording used) and a standard clause wording has been defined for each business outcome.
The working group did this for each of the Global Securities Lending Framework Agreements (GMSLA), the GMSLA 2010, and the GMSLA Collateral for 2018.
This is an important development in the process of modernizing the management of securities lending contracts. Documentation and legal teams were constrained by manual processes that haven’t changed much in decades.
As a result, securities lending transactions are not governed by carefully negotiated contractual terms and companies rely on outdated procedures for reporting key information to financial authorities, as required, for example, by the Financial Regulation. securities financing transactions (SFTR).
The ISLA Clause Library and Taxonomy leverage GMSLA pre-printed forms to improve efficiency and reduce the time required to draft, negotiate and execute major trade agreements.
Although the GMSLA is the standard framework agreement to govern securities lending transactions, each market participant has tended to use their own interpretation of this agreement, so that similar business results may be represented in different ways in industry. Advances on the digital path require reaction and widespread adoption of trusted standards, say ISLA and D2LT.
ISLA expects the Clause Library and Taxonomy to be a “living document” that will evolve with the marketplace as members adopt new clauses, variations or variables.
Andy Dyson, CEO of ISLA, said: “Respondents to our recent legal inquiry overwhelmingly supported the idea of developing an integrated clause library that would support industry-wide standardization and pave the way for digitalization. broader scope and the creation of smart contracts.
“The release of the ISLA Clause Library and Taxonomy is the first step on this path that will gradually align business, operational and legal outcomes in a combined cross-market. common domain model framework”.
“The Clause Library and Taxonomy… was one of the action points of the ISLA legal inquiry and it’s great to see it come to fruition,” said Jamie Pullen, former chair of the task force. of ISLA legal management.
The ISLA Clause Library and Taxonomy Working Group meetings will reconvene in 2022, in accordance with the agenda established by the ISLA Digital Steering Group.