ISDA’s Common Domain Model (CDM)

Ian Sloyan

Director, Market Infrastructure and Technology

ISDA

Technology Advisory Committee meeting,

CFTC, Washington D.C.,

Wednesday, 26th February 2020
What is the market infrastructure?

Thinking of the key entities, institutions, authorities and services we know make the ma

function: all parties store trade data in bespoke formats and make changes to these rec

lifecycle events inconsistently.

Central ClearingCounterparty (CCP)

Trade Data Reposit

Central Banks + Regulators

(CFTC, FED, ECB, BoE, FCA etc)

Investment Bank

Dealing Swap

TradingVenue

Corporate BanHedging

Judiciary+ Regulation

firms

Government

LegalDocumentation

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The ISDA CDM is just one part of ISDA’s strategy to go from deliv

market standards as documentation, to delivering standards as 

• ISDA Legal Technology

& Fintech Legal

groups: analysis of

ISDA documentation

in for potential to

smart

contracts/automation

and publication of

Guidelines docs

• ISDA Clause Library

project

• Revision of ISDA

Definitions (e.g. 2019

Rates Definitions)

• Publication of new

documentation

templates (e.g. CSAs

for non‐cleared

margin)

Standardize

• Develop ISDA CDM to

cover standard clauses

and processes found in

both ISDA

documentation and

market practices

• Enhance ISDA Create to

cover more templates

allowing negotiation and

storage in digital form

(i.e. ISDA CDM format)

• Maintain FpML data

dictionary and model

updated to contain

updated definition and

documentation terms

for use in messaging and

ISDA CDM

Digitize

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What is the ISDA CDM?

COMMON DOMAIN MODEL ‐ A DIGITAL MODEL OF PRODUCTS, CALCULATIONS AND EVENTS

o Presented as data and functions in the model

o Composable product model assembled with reusable components

o Product classification logic inferred from economic components

o Composable workflow and lifecycle event model assembled from primitive event

components

o Primitive = state transition...with before and after state

o Event classification logic inferred from primitive components

o Functions to define primitive state transitions

o Function specifications: inputs, outputs, plus constraints

o Contract mechanics with functions specifying ISDA Definitions

o Calculations and operational clauses

Model 

for eas

Intro video on ISDA CDM portal* and ISDA CDM web page**

*https://porta**https://www

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What is the ISDA CDM?

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Specific applications of ISDA CDM which are current 

Implementation of CDM for Interest Rates clearing proc

CDM for Collateral data and proc

CDM Equity derivatives model is being enhanced ‐ incl. imp

corporate action processes on a DLT ne

CDM applied to regulatory repor

Digitisation of ISDA definitions – including applications of 

transition modelling fall‐back mechanisms amongst other cruc

transition

Broadening Community and Partners ‐ i.e. working with oth

ISDA CDM to other markets

(*The focus of this presentation is just on these 

transformation)

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• ISDA CDM enables

interoperability between

systems/services, removing

burden of setting up connections

to different systems/entities, laying

groundwork for STP.

• E.g. collateral workflow management:

A CSA shared with two collateral

management systems, in different

parts of the collateral process. If data +

processes are defined in ISDA CDM, it

allows for portability and easyinterchange of information.

Enhance interoperability

& straight through

processing

• ISDA CDM promotes transparency

and alignment between regulators

and market participants.

• E.g. regulatory obligations, such as

reporting or stress testing, could be

met by specifying via code that certain

CDM components or data should becollected in a certain way. This will

drastically improve fidelity and

integrity of regulatory outcomes.

Deliver better

regulatory oversight

• 

– 

Crefor 

ma

Three themes of the benefits of ISDA CDM

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Creates an environment for innovation in financial m

Research business

domain

Gain subject matter

expertise

Design proprietary

model

Implement model on

technology

Convince market

solution is reliable and

consistent with market

practices

Research business

domain

Gain subject matter

expertise

Design proprietary

model

Implement model on

technology

Convince market

solution is reliable and

consistent with

market practices

Learn about ISDA

CDM

Implement relevant

ISDA CDM

components in

building solutions

Learn about ISDA CDM

Implement relevant

ISDA CDM components

in building solutions

Learn about ISDA CDM

Implement relevant

ISDA CDM components

in building solutions

BIn

12

3

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Bank

New trad

Increas

Margin 

Collater

Maturit

Venue

Client

Bank

Venue

New trade

Increase

Margin &

Collateral

Maturity

LIFECYCLE

Each party

captures and

processes the

trade and lifecycle

in their own

different way

Enhancing interoperability, reduces reconciliation & 

CSA CSA

C

S

A

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Enhancing interoperability, reduces reconciliation & 

C ‐ Conn

Focussing on CDM’s potential on collateral processes in th

CDM is being applied to Collateral workflows to improve efficiency by

modelling collateral legal documentation in digital form, so a consistent

model for the crucial reference data and calculations used in systems

throughout collateral infrastructure can be achieved and implemented.

A ‐ Reference data from CSAs and other collateral documentation needs to

be in a consistent standard ‐ CDM models for collateral docs which can be

executed on electronic platforms such as ISDA Create* solves for this

B ‐ Collateral eligibility and the identification of eligible assets and

instruments is a special case of above and important area where ISDA is

seeking a standard and modelling this in CDM

C ‐ Connecting different systems in collateral lifecycle with consistent data

model is a prerequisite for automation‐ CDM solves for this (ISDA has been

working with vendors on the same)

D ‐ Inconsistent calculations cause breaks and disputes – ISDA is working to

model in CDM functions/calculations for clauses such as delivery amount

found in documentation and processes such as margin calls

*ISDA Create is an electronic document negotiation and management system for amongst other docs ISDA margin CSAs Copyright © 2
Enhancing interoperability, reduces reconciliation & 

Focussing on CDM’s potential on collateral processes in th

ISDA CSA IM 2016 Japanese

ISDA CSA IM 2016 New York

ISDA CSA VM 2016 New York

ISDA CSA IM 2016 English

Common Domain Model

foundations for

“ Standardised Digital Documents”

A ‐ CDM models for collateral docs

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Enhancing interoperability, reduces reconciliation & 

Focussing on CDM’s potential on collateral processes in th

CSA Free Format Eligible Collateral Schedule No set standard

open to misinterpretation

B ‐ Collateral eligibility and the identification of eligible assets

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Enhancing interoperability, reduces reconciliation & 

Focussing on CDM’s potential on collateral processes in th

D. Digitizing Collateral Documentation Calculations

From 2018 IM CSA Calculation Legal Text To Equivalent ISDA 

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Enhancing interoperability, reduces reconciliation & 

Focussing on CDM’s potential on collateral processes in th

SUMMARY ‐ Putting the model components together: CDM Collateral Initial Margin w

sign

LegalAgreement

Execution

LegalAgreement

CSA Initial Margin

IM Amount

Posted

Collateral

Threshold

Min Transfer

Rounding

CSA Initial Margin

objects referenced by contract

Margin

Amount

Eligible

Collateral

Schedule

Determine C

post and it

Obse

Delivery orReturn amountdetermined by

IM CSA agreed CSA

between parties

Step 1 Step 2 Step 3 

CDM Entry Point

Negotiation –> CSA Calculation ‐> Collateral Select

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Map of Trading Scenarios

Reporting Sample per

Scenario

Dealer X

Dealer Y

INDUSTRY PARTICIPAN

Implement their own solutions based on indiv

Vendor Z

Example Artefacts:

REGULATORS & TRADE ASSOCIATIONS

Publish rules and develop best practices

Delivers better regulatory oversight

How does the market implement regulation today?

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INDUS

Implement th

REGULATORS & TRADE

ASSOCIATIONS

 Directly operational output (software) Eliminates reconciliation issues by

promoting a single interpretation of

regulation as code

 Enables inter‐operability of solutions

Map of Trading Scenarios

Reporting Sample per Scenario

Example Artefacts:

Delivers better regulatory oversight

How can the market implement regulation with ISD

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A working implementation: CFTC Part 43 Reporting g

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QUESTIONS?

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