Algorithmic Descriptions Regulation - White Paper - CFTC/SEC: Joint Study on the Feasibility of Mandating Algorithmic Descriptions for Derivatives - April 7, 2011
|Proposal Date||Comment Deadline||Study Issued|
|December 9, 2010||December 31, 2010||April 7 2011|
April 7, 2011
One of the mandates of the Dodd-Frank Act was a requirement that the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) jointly study the feasibility and logistics of adopting standardized, computer-readable algorithmic descriptions to describe complex financial derivatives, and whether these descriptions, combined with "standardized legal definitions, may serve as the binding legal definition of derivative contracts."<ref>CFTC-SEC delivers report on mandating algorithmic description for derivatives. CommodityOnline. Retrieved on April 11, 2011.</ref>
- current technology is capable of representing derivatives using a common set of computer-readable descriptions. These descriptions are precise enough to use both for the calculation of net exposures and to serve as part or all of a binding legal contract.
- before mandating the use of standardized descriptions for all derivatives, the following are needed:
- a universal entity identifier and product or instrument identifiers,
- a further analysis of the costs and benefits of having all aspects of legal documents related to derivatives represented electronically, and
- a uniform way to represent financial terms not covered by existing definitions.
A copy of the study can be found below.