ICMA, ISDA and ISLA sign MoU on the Common Domain Model, laying the foundations for a digital future for financial markets

 

2 August 2021 ICMA, ISDA and ISLA have signed a Memorandum of Understanding (MoU) to strengthen collaboration between them on the future development of the Common Domain Model (CDM), the single, common digital representation of trade events and actions across the lifecycle of financial products. This cross-industry initiative marks an important step in the Associations’ commitment to defining and promoting the development of a digital future for financial markets, as set out in a joint letter a year ago.

The MoU establishes a framework for closer collaboration between the three Associations, providing a path for joint governance and setting out arrangements in relation to the open-source components of the CDM and associated intellectual property for market-specific components. The MoU is intended to unlock further synergies in the development of the CDM across financial markets, creating efficiencies for market participants and setting digital standards which will enable the use of innovative technologies in future.

ICMA, together with its CDM Steering Committee, has recently concluded the initial phase of its CDM project for repo and bonds, which provides a single, unambiguous representation of the execution, clearing and settlement of a fixed-term repo transaction, as well as a bond transaction. For more information please see the virtual showcase event held on 21 July.

ISDA is accelerating the pace of adoption of the CDM via digital regulatory reporting, specifically for new rules required by the Commodity Futures Trading Commission and the European Securities and Markets Authority. Industry participants are coding reporting rules into machine readable and executable models for these regimes in the CDM, for production implementation as early as 2022 in the case of CFTC. In the area of collateral processes and legal documentation, CDM development will be implemented into ISDA Create, facilitating output of executed representations of the various Credit Support Annexes and other documentation in CDM format, for consumption on collateral infrastructure platforms. In terms of risk management, ISDA has pointed to the potential for the CDM to automate and streamline the preparation and collection of risk, capital and margin data in a recent whitepaper and imminent pilot project.

At the beginning of July, ISLA’s CDM Working Group, comprising some 35 member firms, made major contributions and enhancements to the extensive foundations laid by ISDA, including enhancements to the allocation function, the ability to associate more than one legal agreement with a transaction, updates to the transfer function critical for physical settlement, and the very first concept of a bill within the CDM.

“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. We look forward to continuing our collaboration with our members and counterparts at ISDA and ISLA.”
Martin Scheck, Chief Executive, ICMA.

“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 the CDM and we are excited to be working closely with ICMA and ISLA to develop this digital infrastructure.”
Scott O’Malia, Chief Executive Officer, ISDA.

“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 progressively deliver real benefits to our joint communities.”
Andrew Dyson, CEO, ISLA.

Further information on the CDM can be found via the below links:

ICMA resources on the CDM for repo and bonds

ISDA resources on the CDM
ISLA resources on the CDM
ICMA Zurich

T: +41 44 363 4222
Dreikönigstrasse 8
8002 Zurich
ICMA London

T: +44 20 7213 0310
110 Cannon Street
London EC4N 6EU
ICMA Paris

T: +33 1 70 17 64 72
62 rue la Boétie
75008 Paris
ICMA Brussels

T: +32 2 801 13 88
Avenue des Arts 56
1000 Brussels
ICMA Hong Kong

T: +852 2531 6592
Unit 3603, Tower 2
Lippo Centre
89 Queensway, Admiralty
Hong Kong
 
Copyright © 2021 International Capital Market Association.