International Swaps and Derivatives Association (ISDA)

ISDA is a trade organization active in framing operational structures for engaging in over-the-counter transactions. It is headquartered in New York since its founding in 1985 and has continued to influenced OTC markets by pioneering standardized contracts (the ISDA Master Agreements) pivotal for derivatives transactions. The ISDA produce a wide range of documentation relating to netting and collateral provisions that greatly reduces transaction costs for managing credit and legal risk. ISDA liaise with legislators/regulatory authorities around the world to secure the enforceability of their Master Agreements . Members include a broad range of OTC derivatives market participants spanning corporations, investment managers, upranational entities, insurance companies, energy and commodities firms, and international and regional banks. A number of exchanges, clearinghouses and repositories, law firms, accounting firms and other service providers collaborate with ISDA and use ISDA documentation. Merton and Bodie (2005) pointed out that " Modern swap contracts follow a standard format developed during the early 1980s by the International Swap Dealers Association (ISDA). The ISDA’s standard contract has been tested in a variety of jurisdictions around the world. Over the years the document has been amended and has evolved to meet legal and regulatory requirements virtually everywhere. Now that the legal infrastructure has been thoroughly tested and practitioners and regulators have developed confidence in it, the pace of swap innovation is likely to proceed at a much faster rate and with much lower transaction costs. With the infrastructure in place, the cost of implementing new types of swaps involving other underlying securities, commodities, economic indexes, and the like, will be relatively low. "

A recent video by Stephenson Harwood gives some sense how these agreements are conventionally used: