ISDA AGM: Bespoke Total Return Swaps Expand Amid E-Trading Bottlenecks

BlackRock is expanding its use of total return swaps (TRS) on custom indexes, according to reporting from Risk.net on May 1, 2026. The asset manager is currently working to resolve operational challenges related to liquidity, documentation, and execution to allow the company to scale its trading of these instruments.

The development comes amid a broader trend of increased utilization of these derivatives. Jenny Xiao, the global head of rates trading and systematic execution at BlackRock, confirmed that the firm has seen a significant increase in utilisation of TRS on custom indices.

Operational Hurdles in Electronic Trading

Despite the growth in demand for custom index TRS, BlackRock is facing bottlenecks in the transition to more efficient trading. The firm is specifically addressing issues surrounding trade execution and the limitations of current e-trading infrastructure for these complex over-the-counter (OTC) derivatives.

Total return swaps allow an investor to receive the total return of a specific asset or index—including both income and capital gains—without having to actually own the underlying securities. When these swaps are based on custom indexes, they provide a highly tailored exposure that is often difficult to execute through standard electronic venues, leading to the bottlenecks currently being addressed by the firm.

Industry Context and Market Trends

The push toward scaling these instruments coincides with broader discussions at the International Swaps and Derivatives Association (ISDA) Annual General Meeting (AGM) held in late April 2026. The event, which took place in Boston, highlighted a wider shift toward the digitalization of financial markets.

During the AGM, ISDA CEO Scott O’Malia noted that financial markets are undergoing a revolution driven by artificial intelligence and tokenization. These technologies are being positioned as potential solutions for the very types of operational inefficiencies BlackRock is encountering, particularly in the realms of liquidity management and collateral workflows.

The challenges BlackRock is managing—specifically documentation and liquidity—are common pain points for institutional investors using OTC derivatives. Because custom indexes are not standardized, the documentation process is often manual and labor-intensive, which hinders the ability to scale trading rapidly through electronic means.

By addressing these bottlenecks, BlackRock aims to move away from the manual constraints of traditional OTC trading toward a more systematic execution model, aligning with the broader industry trend of migrating complex derivatives into electronic ecosystems.