Alert April 12, 2011

SEC and CFTC Publish Joint Study on Feasibility of Mandating Algorithmic Descriptions for Derivatives

The SEC and CFTC delivered to Congress a joint staff study on “the feasibility of requiring the derivatives industry to adopt standardized computer-readable algorithmic descriptions which may be used to describe complex and standardized financial derivatives” as mandated by Section 719(b) of the Dodd-Frank Act.  As described in the accompanying press release, the joint study concludes that current technology is capable of representing derivatives using a common set of computer-readable descriptions, and standardized computer-readable descriptions are feasible for at least a broad cross-section of derivatives.  The joint study contemplates that other financial regulators and the U.S. Treasury’s Office of Financial Research, along with each regulator’s staff, may engage in a series of public‑private initiatives to foster collaboration between regulators and the derivatives industry, working towards representing a broader cross-section of derivatives in computer‑readable form.