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Smart close-out netting
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 paper 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 closeout 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.
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Akber Datoo is founder and managing partner of D2 Legal Technology LLP (D2LT), a boutique legal data consulting firm, dedicated to the capital markets space. With over 15 years’ experience of derivatives and a blend of both technology and legal perspectives, Akber works with financial institutions to create legal risk frameworks to ensure regulatory compliance and business optimisation. This has included the provision of strategic change management advice relating to process and systems for contract data modelling, document assembly, search, information retrieval, know-how and legal opinion management.
Christopher D. Clack is a professor in the Department of Computer Science at University College London (UCL) and holds a higher doctorate (ScD) from the University of Cambridge. He is co-founder and joint field chief editor of the open-access research journal Frontiers in Blockchain, leading an international editorial board of over 480 researchers across 44 countries and 7 specialist sections. He is an expert on Blockchain technologies, Smart Contracts and Computable Contracts, especially in the finance sector where he has focused on smart derivatives contracts and mechanisms to ensure that smart contract code is faithful to the contract. This includes formalising the meaning of legal contracts, investigating new languages for expressing contracts, and exploring methodologies and architectures to support the translation from contract to code. He assists the development of global standards for the automation of financial derivatives via collaboration with institutions in the financial services sector, and more generally assists the adoption of smart contracts by engaging with the legal profession and contributing to emerging standards. During his career, he has made seminal contributions in other areas such as architectures for parallel functional programming; strictness analysis and abstract machines; financial applications of evolutionary computing; and interdisciplinary work in agent-based simulation. He has founded a series of highly successful award-winning initiatives at UCL and elsewhere in collaboration with leading financial sector institutions, including Credit Suisse, Goldman Sachs, Merrill Lynch, Morgan Stanley and Thomson Reuters. He also advises industry, institutions, professions, trade associations and smaller technology companies.