Smart Close-out Netting

TL;DR

Smart Close-out Netting proposes a standardized, automated approach to legal and operational processes in close-out netting for financial institutions, enhancing efficiency and consistency through natural language and data-driven methods.

Contribution

The paper introduces the concept of Smart Close-out Netting, combining controlled natural language and data-driven frameworks to improve operational efficiency and standardization.

Findings

Potential for increased efficiency in legal processes

Enhanced standardization of close-out netting procedures

Use of natural language and data frameworks improves accuracy

Abstract

Smart Close-out Netting aims to standardise and automate specific operational aspects of the legal and regulatory processes of close-out netting for prudentially regulated financial institutions. This article provides a review, analysis and perspective of these operational processes, their benefits for prudentially regulated trading institutions, their current inefficiencies, and the extent to which they are amenable to standardisation and automation. The main concepts of Smart Close-out Netting are introduced, including the use of a controlled natural language in legal opinions and the use of a data-driven framework during netting determination.