ISDA's 2002 Operations Benchmarking Survey was conducted among 65 member firms. It shows automation has increased from last year, with forward rate agreements (FRAs) and vanilla swaps leading the way. However, progress in automating newer and more structured credit and equity derivatives has been noticably slower.

The most common results are either no automation or substantial automation, says Isda, suggesting financial institutions are adopting an all or nothing approach. Functions with a high degree of automation include the transfer of data from the front office to the operations system; transfer of trade data from the operations system to the general ledger and addition of data to the front office trade record. The least automated functions are imaging of incoming confirmations, matching details of confirmations and receipt of incoming advices.

The survey also finds that auto-matching capabilities increased for FRAs and vanilla swaps since last year. Very few firms can auto-match non-vanilla swaps and none can auto-match credit or equity derivatives.

Those respondents that reported no current automation indicated plans for future automation. For FRAs, 69 per cent of respondents plan to automate confirmations sent; for vanilla swaps, 64 per cent plan to automate outgoing notification of rate resets; for non-vanilla swaps, 75 per cent plan to automate transfer of trade data from front office to operations; for credit derivatives, 80 per cent plan to automate trade details; and for equity derivatives, 57 per cent plan to automate outgoing notification of rate resets.

Wider uptake of the industry-standard mark-up language FpML is also expected in the next 12 months. Seventy-six per cent of large firms, six per cent of medium firms, and 20 per cent of small firms are planning to increase their use of FpML over the next 12 months.

Robert Pickel, ISDA's executive director and CEO, states: "The derivatives industry endured a difficult year, with some major firms operating from contingency sites following the September 11 attacks...It is encouraging to see steady progress in automation."