In a recent Acadia survey, 80 per cent of respondents said that they are moving toward agreement digitisation, highlighting that their documents are at least partially digitised.
In the survey, conducted in collaboration with data company Likezero, respondents said despite this move toward digitisation, costly manual processes still exist and many additional legal hours are necessary to compensate.
The results also highlighted that even with some degree of automation in data collection and aggregation, firms were still split when it came to whether their internal systems are able to take agreement data from multiple sources, with just 30 per cent of respondents confident that internal systems were connected.
Time-to-market challenges impacted nearly all participants as onboarding and negotiation steps slowed the process down, the survey found. Acadia reasoned that this can lead to lost investment or trading opportunities as markets shift and clients find other counterparties to trade with.
The result also underlined a glaring need for digitisation in both new and amended agreement processes, Acadia said.
The manual processes of interpreting and capturing data at inception is error-prone and it can go unnoticed for years, resulting in a sudden and significant adjustment to profit and loss when corrected, Acadia added.
Commenting on the results, John Pucciarelli head of industry and regulatory strategy, says: “The financial crisis highlighted the importance of data and created a path for both buy-side and other sell-side institutions to enhance their agreement process.”
He adds: “Nearly 15 years later, financial markets are still living in an age where documents are creating data rather than data driving document creation. Our findings reflect what we are hearing from clients – there’s a strong desire for digitisation in agreements and it’s time to fast-track this movement.”
The survey was fielded by Aite-Novarica Group between 11 June and 7 July 2021.
Aite-Novarica Group gathered quantitative data and qualitative information from market participants to better understand the degree to which agreements have been digitised at each firm, the challenges associated with manual processes and the estimated time taken to search and amend International Swaps and Derivatives Association (ISDA) agreements.
Audrey Blater, research director at Aite-Novarica, comments: “While ISDA documents were the focus of our study, we found agreement digitisation stretches across an array of legal trading agreements, including those tied to repo and the to-be-announced markets.”
She adds: “ISDA agreements tended to be the farthest along the digitisation maturity curve, despite respondents considering them to be in the early- to mid-phases of digitisation.”
