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 to guide their collaborative work in development of the common domain. Model (MDP).
The MDP provides a common data representation of transaction events, providing a common model or set of fields that industry will use to share business information and other key data. It is a standardized, machine-readable model of how financial products can be managed throughout the transaction lifecycle.
The MoU establishes a framework for collaboration between industry associations, defining a model of joint governance, the use and development of open source elements of the CDM, and intellectual property considerations.
For nearly three years, the International Swaps and Derivatives Association (ISDA) has been active in the OTC derivatives market by promoting a common digital representation of the stages, or “life cycle events”, associated with a transaction. on derivative products.
Subsequently, ISLA worked with ISDA and the International Capital Markets Association (ICMA) to apply a CDM to securities lending.
With this objective in mind, in November 2020 it carried out a pilot with REGnosys, its technology editor for the MDP project and launched its minimum viable product CDM early July 2021.
On July 5, ICMA confirmed that it was working with REGnosys, ISLA and their respective member associations to expand the CDM to repurchase agreements and firm bonds.
ISDA is accelerating the pace of adoption by incorporating CDM into regulatory reporting for new rules required by the Commodity Futures Trading Commission (CFTC) and the European Financial Markets Association (ESMA). The Association says market participants encode the reporting rules in machine-readable templates for these schemes into the CDM. For CFTC regulatory reports, this should be ready for production as early as 2022.
ISDA is also working with the market to bring greater standardization and efficiency to collateral processing and legal documentation management, establishing representations of Credit Support Schedules (CSAs) and other documents in CDM format. for application on warranty infrastructure platforms.
Building on the foundations established by ISDA, the ISLA CDM working group made improvements to the allocation procedures, the transfer function required for physical settlements, as well as the possibility of associate more than one legal agreement with a transaction. ISLA says it has also established the first concept of a bill within the CDM.
ICMA Director General Martin Scheck said: “The CDM directly contributes to the digitization of common standards and best practices, virtually helping our members on their journey to digitization. It has the potential not only to facilitate interoperability and cross-sectoral efficiency, but also to facilitate regulatory reporting and to lay the foundations for innovation in the years to come.
Andrew Dyson, CEO of ISLA, said: “The completion of this MoU marks an important milestone on the road to delivering digital standards to our collective members and other stakeholders, including the community. regulatory. The basis of this collaboration will now allow us to define an ambitious and forward-looking program over the coming months that will bring real benefits to our common communities. “
ISDA Managing Director Scott O’Malia said: “ISDA is committed to developing 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 work closely with ICMA and ISLA to develop this digital infrastructure.