Are ISDA documentation specialists on the cusp of an extinction event?
ISDA documentation isn't the most glamorous or the best paid job to be had in investment banking, but it's not that awful either. According to the most recent Robert Walters salary survey (page 15), an ISDA documentation person with 3+ years' experience, can command a salary of 40-55k, which is up to 7k more than someone working in listed derivatives clearing and settlements.
ISDA documentation professionals also have the very big benefit of almost always being desirable. "It's always a busy area, no matter what the broader market is like," says Malcolm Clark, managing director of recruiters Bayley Needham. "ISDA documentation specialists are always in demand," confirms Oliver Harris at Robert Walters.
It's unfortunate, therefore, that a large body of regulatory rock is about to fall on this happy
scene.
The regulatory reform bill passed by The US Senate last week included a provision to push as much OTC derivatives trading as possible onto exchanges, electronic platforms, and into electronic clearing houses. The FSA and G20 are keen for something similar in the UK and elsewhere.
While this might be wonderful news for anyone working on technology to facilitate the electrification of the OTC derivatives trading process, it's not so great for anyone currently employed to complete derivatives documentation manually.
"A lot of derivatives documentation jobs are going to disappear, and it's going to happen at a fairly accelerated pace," says Ralph Silva an analyst at financial technology consultancy The TowerGroup. "There will always be exception handlers - 10-15% of derivatives contracts are going to have something wrong with them and will revert to a manual process, but it's going to be a fraction of what we have now."
And now for the good news
Recruiters are a little more sanguine about derivative documentation specialists' future. It helps greatly that a high proportion of CDS and credit default swaps are cleared centrally already, and that the immediate focus of the legislation is credit - rather than equity - derivative products.
"Roles that will remain will require candidates with structured product drafting experience," predicts Oliver Harris. "These days, most London-based drafting candidates already have structured product exposure, so we do not envision a glut of candidates coming onto the market."
