Updated: Linklaters Nakhoda launches deal platform ISDA Create – and what that really means
In recognition of the fact that data extraction and analysis is far harder than often billed and very much a long, not a short game, Linklaters’ technology arm Nakhoda is working towards “breaking the loop” in the creation of yet more unstructured data, the first incarnation of which is a new online document negotiation platform launched in conjunction with ISDA.
The International Swaps and Derivatives Association, as it is properly albeit less often referred to, has worked with Nakhoda to launch ISDA Create – IM, which allows firms to electronically negotiate initial margin documentation while digitally capturing the resulting data.
The platform – which was first announced by ISDA in April last year and launched at the end of January this year – has been built to help financial institutions comply with new, onerous regulatory IM requirements as they come into the scope of the new margin rules in September 2020, creating a huge compliance burden: Linklaters is ISDA’s global counsel on the drafting of IM documentation.
Other ISDA documentation will be added to ISDA Create over time, creating an electronic negotiation and execution ecosystem for ISDA and related documentation.
This is the latest development from a technology arm that started out life in 2017 as a due diligence tool for Linklaters banking clients (in collaboration with Eigen Technologies) and has grown into an umbrella brand for the more cutting-edge tech development work that the magic circle firm is doing with its clients. Nakhoda now has 30 staff* at any one time including permanent employees such as Nakhoda’s COO Partha Mudgil but also rotating secondees from across the firm. Astonishly, it now has 25 dedicated developers.
Explaining that initial ‘build not buy’ approach, Mudgil told Legal IT Insider: “We looked at the existing technology on the market and it couldn’t do what we needed it to do so we started building our own. We advise banks on their ringfencing programs and realised that within the due diligence exercises we’re doing, certain processes are not possible. They need to classify customers and we built them a tool that allows them to accurately classify and instantly reduce the search time. They can now automatically search for thousands of names and that product is deployed as a software solution.
“We then tried to build this solution for ISDA, which has been in the sandbox and in testing since September with around 65 financial institutions.” For those who say that law firms ought not to be building legal tech, it is worth noting that this is the kind of exposure that startups in this space find it impossible to compete with.
Edward Chan, Linklaters partner and Nakhoda founder, told us: “The problem we set out to solve was how do we make legal data much more powerful – it’s a problem a lot of people are trying to solve as data is all locked up in hard copies such as PDFs etc. At the moment you put text into it in a PDF, which is like a nice black hole that’s protected and you can’t do anything with that, which is what we and the clients struggle with. In theory we can use extraction technology but right now much of that technology is still experimental and struggles because data is all in silos.
“The only other way of solving the problem is getting people to create data differently going forward. This prompted the collaboration with ISDA. What we’ve created is more than a workflow tool. We can deploy our expertise to automate and capture structured legal data.”
He adds: “What we are doing is taking ISDA documentation and deconstructing it. ISDA Create provides for a certain number of permutations and you pick your combination of choices and what you pick automatically dictates what is in the document, but those choices are valuable and create an audit trail.”
Chan emphasises: “The real value is in the structured data. That’s what’s missing and what extraction technology has been trying to solve.”
It is worth pausing for a second to note that if you are feeling (often justifiably) despairing of the progress being made by law firms in reinventing the way they deliver their services, the development of this sort of contract negotiation and management platform is a far, far cry, from the days in which the solution would have been to throw more bodies at the problem, with a suitably eye watering bill to boot.
It will be interesting to see what the adoption levels are like of the platform, given that the issue facing other contract management platforms is cultural: lawyers are finding it hard to change their processes from being heavily Microsoft Word and Outlook bound and still distrust new technology. The Linklaters/ISDA brand should help here.
While creating structured data now doesn’t help with the challenge of analysis of past unstructured data, that is almost beside the point. Mudgil says: “We’ve realised that the issues around natural language technology will take a long time to solve. Data is typically all over the place and that’s a big problem in all organisations. Extraction technology is immature. It can do some things well and it’s getting better but not at the rate that we think is needed.”
Chan adds: “Right now we’re just adding to the pile of unstructured data and need to break that loop. Nakhoda’s partnership with ISDA is the start of that.”
*Update: We originally said 10 staff.