The papers also attempt to identify who would accrue the additional benefits and costs in each instance. Both studies investigate pre- and post trade transparency. They discuss the status of these two asset classes and offer proposed steps towards increasing transparency. 

For CDS, the study found that increased transparency may affect large and small trades differently and suggests it may be necessary to consider different transparency requirements for large trades. The move towards central clearing of standard CDS contracts, the study states, will increase the level of transparency as will reporting of CDS trades to data repositories.

For the interest rate market, trade sizes are large in notional terms but the number of trades tends to be smaller than other markets such as equity, and trades are more customized to meet clients' hedging needs. The study finds that the industry would benefit from improving transparency in key areas, including considering the "end-of-day dissemination of anonymised, composite post-trade indicators for the interest rate market either based on current trades going through electronic platforms or those registered in trade repositories," as this may be more effective and easier to implement than moving IRS to exchanges. 

"These studies, coupled with other research that ISDA has recently conducted among derivatives end-users and market participants, are part of our ongoing commitment to make the OTC derivatives markets safer and more efficient by ensuring appropriate levels of transparency," said Conrad Voldstad, CEO, ISDA. "This work underscores the importance of understanding the current levels and types of transparency that exist in the various OTC derivatives markets, and of developing solutions that balance the desire for greater transparency with the need to maintain liquidity.”

Both studies propose that a distinction be made between regulatory transparency and market transparency. Both also warn that increased public transparency that does not take transaction size into account may affect liquidity in the CDS and IRS space and may have a destabilizing effect on the markets. Additionally, the studies discuss the important impact of increased transparency on the population of block trades. 

The IRS and CDS transparency studies form part of a set of commitments the industry made to an international group of supervisors in March 2010. They were conducted by Finance Concepts with input from an ISDA industry working group with representation from buy- and sell side firms. 

Transparency in Over-the-counter Interest rate derivatives Markets

Transparency in Credit Default Swap Markets