Trade associations sign CDM agreement
02 August 2021 United Kingdom
Image: adobestock/Elaelo
Three industry associations, the International Capital Markets Association (ICMA), the International Swaps and Derivatives Association (ISDA) and the International Securities Lending Association (ISLA) have signed a memorandum of understanding (MoU) to guide their collaborative work in developing the Common Domain Model (CDM).
The CDM provides a common data representation of transaction events, offering a common template or set of fields that the industry will use to share trade information and other key data. This is a standardised, machine-readable blueprint for how financial products can be managed across the trade lifecycle.
The MoU lays down a framework for collaboration between the industry associations, defining a model for joint governance, the use and development of open-source elements of the CDM, and related intellectual property considerations.
For close to three years, the International Swaps and Derivatives Association (ISDA) has been active in the OTC derivatives market in promoting a common digital representation of the steps, or ‘lifecycle events’, associated with a derivatives transaction.
Subsequently, ISLA has been working with ISDA and the International Capital Markets Association (ICMA) to apply a CDM to securities lending.
With this objective, it completed a pilot with REGnosys, its technology vendor for the CDM project, in November 2020 and launched its minimum viable product CDM at the start of July 2021.
On 5 July, ICMA confirmed that it is working with REGnosys, ISLA and their respective association members to extend the CDM for repo transactions and outright bonds.
ISDA is stepping up the pace of adoption by integrating CDM into regulatory reporting for new rules required by the Commodity Futures Trading Commission (CFTC) and the European Securities and Markets Association (ESMA). The Association indicates that market participants are coding reporting rules into machine-readable models for these regimes in the CDM. For the CFTC regulatory reporting, this is likely to be production ready as early as 2022.
ISDA is also working with the market to bring greater standardisation and efficiency to collateral processing and legal documentation handling, establishing representations of credit support annexes (CSAs) and other documentation in CDM format for application on collateral infrastructure platforms.
Building on the foundations established by ISDA, ISLA’s CDM Working Group has introduced enhancements to allocation procedures, to the transfer function required for physical settlements, as well as introducing the ability to associate more than one legal agreement with a trade. ISLA says it has also established the first concept of a bill within the CDM.
ICMA chief executive Martin Scheck said: “The CDM contributes directly to digitising common standards and best practice, practically assisting our members in their journey towards digitisation. It has the potential not only to facilitate interoperability and cross-industry efficiencies, but to facilitate regulatory reporting and create the foundation for innovation in years to come.”
Andrew Dyson, ISLA’s CEO said: “The completion of this MoU marks an important milestone on the journey to deliver digital standards to our collective members and other stakeholders including the regulatory community. The basis of this collaboration will now allow us to set an ambitious forward-looking agenda over the coming months that will deliver real benefits to our joint communities.”
ISDA chief executive Scott O’Malia said: “ISDA is committed to building out the CDM to promote a consistent and scalable taxonomy to develop a more automated and cost-effective financial services infrastructure. We will work to align our product definitions, digital legal agreements and operations with CDM and we are excited to be working closely with ICMA and ISLA to develop this digital infrastructure.”
The CDM provides a common data representation of transaction events, offering a common template or set of fields that the industry will use to share trade information and other key data. This is a standardised, machine-readable blueprint for how financial products can be managed across the trade lifecycle.
The MoU lays down a framework for collaboration between the industry associations, defining a model for joint governance, the use and development of open-source elements of the CDM, and related intellectual property considerations.
For close to three years, the International Swaps and Derivatives Association (ISDA) has been active in the OTC derivatives market in promoting a common digital representation of the steps, or ‘lifecycle events’, associated with a derivatives transaction.
Subsequently, ISLA has been working with ISDA and the International Capital Markets Association (ICMA) to apply a CDM to securities lending.
With this objective, it completed a pilot with REGnosys, its technology vendor for the CDM project, in November 2020 and launched its minimum viable product CDM at the start of July 2021.
On 5 July, ICMA confirmed that it is working with REGnosys, ISLA and their respective association members to extend the CDM for repo transactions and outright bonds.
ISDA is stepping up the pace of adoption by integrating CDM into regulatory reporting for new rules required by the Commodity Futures Trading Commission (CFTC) and the European Securities and Markets Association (ESMA). The Association indicates that market participants are coding reporting rules into machine-readable models for these regimes in the CDM. For the CFTC regulatory reporting, this is likely to be production ready as early as 2022.
ISDA is also working with the market to bring greater standardisation and efficiency to collateral processing and legal documentation handling, establishing representations of credit support annexes (CSAs) and other documentation in CDM format for application on collateral infrastructure platforms.
Building on the foundations established by ISDA, ISLA’s CDM Working Group has introduced enhancements to allocation procedures, to the transfer function required for physical settlements, as well as introducing the ability to associate more than one legal agreement with a trade. ISLA says it has also established the first concept of a bill within the CDM.
ICMA chief executive Martin Scheck said: “The CDM contributes directly to digitising common standards and best practice, practically assisting our members in their journey towards digitisation. It has the potential not only to facilitate interoperability and cross-industry efficiencies, but to facilitate regulatory reporting and create the foundation for innovation in years to come.”
Andrew Dyson, ISLA’s CEO said: “The completion of this MoU marks an important milestone on the journey to deliver digital standards to our collective members and other stakeholders including the regulatory community. The basis of this collaboration will now allow us to set an ambitious forward-looking agenda over the coming months that will deliver real benefits to our joint communities.”
ISDA chief executive Scott O’Malia said: “ISDA is committed to building out the CDM to promote a consistent and scalable taxonomy to develop a more automated and cost-effective financial services infrastructure. We will work to align our product definitions, digital legal agreements and operations with CDM and we are excited to be working closely with ICMA and ISLA to develop this digital infrastructure.”
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