The value of Contract Lifecycle Management Systems for Futures and Derivative Contracts

Peter Thomson

ContractRoom

by Peter Thomson

suitcase-with-money_23-2147515925.jpgA robust contract management system should be able to handle any type of contract.  However, the value proposition of contract management software differs substantially for different types of contracts – and that value may be concentrated at very different phases of the contract management lifecycle.

Today we will touch on the value that contract management systems bring to futures contracts, from standardized exchange-traded agreements to the more customized agreements used for over the counter trading.

Any futures contract is a legal agreement for buying or selling a specific product at a fixed price in the near future. Call or put options on stocks, commodity futures, currency and interest rate derivatives are all forms of futures contracts.

The value proposition of contract management software differs less with what is being traded as the setting in which trading occurs. Exchange traded contracts such as call and put options on stocks or commodities futures are highly standardized to enable rapid trading. Terms are so standardized as to require no negotiation except that implied in accepted prices and dates, allowing rapid trading on exchanges.

Do contract lifecycle management systems then offer value for managing agreements that don’t require negotiation? Yes, but at a different point in the contract lifecycle. For exchange-traded futures contracts, the contract management burden falls not in managing negotiations but in obligation management when the contracts must be settled. Therefore, offer value in managing exchange traded contracts, a contract lifecycle management solution, must be adept at obligation management as well as other parts of the contract lifecycle.

In over the counter futures contracts, a contract lifecycle management solution provides value in up-front negotiation as well as in obligation management. While these contracts are usually created using an ISDA Master Agreement published by the International Swaps and Derivatives Association, this standard agreement is supplemented by a customized schedule that is agreed and signed by both parties. Therefore, unlike an exchange-traded contract, OTC agreements may require substantial negotiation between the parties – negotiation that cries out for a streamlined and secure online process as loudly as any other type of contract. In addition, ISDA agreements can benefit from contract lifecycle management in two other stages: automating document assembly and assistance with review and analysis of legacy contracts. For more on these benefits, read the earlier article How technology can assist with simplifying your ISDA documentation.

To deliver value in all types of futures contract, a contract management solution needs to cover all contract phases – the key distinction between basic contract management and a more sophisticated Contract Lifecycle Management platform such as ContractRoom. Automating and streamlining all parts of the lifecycle also allows enterprises to manage futures contracts using the same unified contract lifecycle management they use for other types of agreements.

Schedule a demo to see ContractRoom’s capabilities for managing futures contracts at contractroom.com.

About the author

Peter Thomson

Peter Thomson

Peter has been involved in technology since he developed his 1st product for the legal industry in 1987 - a case management system called CaseTrack. But didn't stop there, and has continued to push for innovation and disruption to make processes more efficient and just plain happier!

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