ISDA Deploys Reporting Blueprint for Derivatives Markets

The International Swaps and Derivatives Association (ISDA) has announced the deployment of its Common Domain Model (CDM. 2.0) to support financial institutions’ test phase two of the digital regulatory reporting (DRR) pilot for derivatives.

The DRR is a project the Financial Conduct Authority (FCA) and Bank of England have been working on to explore the use of technology in helping firms comply with regulation and improve the quality of information reported. One stream of it, which ISDA is now involved in, is to explore that idea for derivatives markets, looking at ways to report as outlined by regulations like the European Market Infrastructure Regulation (EMIR) and the revised Markets in Financial Instruments Directive (Mifid II) digitally in a more coherent and centralized way.

The ISDA CDM has been developed in response to regulation and high costs associated with manual processes. One of the problems with the growing number of regulations has been the variety of interpretations of how to provide complex datasets.

“When a developer has to build a system to get information from a trading system to the regulator via a trade repository, the developers make decisions about what the field or value should be,” says Ian Sloyan, director, market infrastructure and technology, at ISDA. “If we can produce that as code that can operate on the same data and in the same format, hopefully we remove some of the interpretation risk that exists today from institution to institution.”

ISDA has worked on CDM for two years with input from buy-side and sell-side firms and technology providers. Phase two of the DRR began early this year. Other participants in the pilot include Barclays, Credit Suisse, HSBC, NatWest, Santander and Lloyds. 

There are a number of benefits of having a formal central representation for regulatory reporting. “Every bank has its own implementation of Mifid II and EMIR,” says Sloyan. “We want to provide a more formal representation of that implementation that can be transparently shared and centralized. Then we can go to the regulators and say, ‘This is what we have put together for EMIR and Mifid; does this match with what you would like to see?’ It is also easy to centrally update the reporting model and say, ‘Actually, the way we have reported this field for this product should be adjusted slightly.’ That is the kind of future state that we are exploring now to see if that is helpful.”