By establishing a standard set of digital representations for events and processes, the CDM cuts down on the need to constantly cross-check and reconcile trade information, and enables firms to develop automated solutions that can be interoperable and scalable. It also promotes greater transparency and alignment between regulators and market participants, improving the integrity of regulatory data and removing regulatory and interpretation risk.
Earlier this year, the CDM was deployed by the UK Financial Conduct Authority, the Bank of England and certain financial institutions in a digital regulatory reporting pilot to explore how technology could help firms meet their derivatives reporting requirements and improve the quality of the information reported. Watch this space: a number major infrastructure providers and technology vendors are looking to use the CDM to help solve some of the biggest challenges the industry faces, including in other asset classes.
Another important initiative is to bring greater standardization to legal documentation. For example, ISDA has developed a taxonomy and clause library related to the ISDA Master Agreement. ISDA recognizes that market participants will always need to negotiate bespoke terms, but this work will introduce greater standardization in the way firms negotiate and agree certain contractual terms, increasing efficiency in contract negotiation and enabling use of technology to capture structured legal data.