Digital Asset Is Writing Code to Help ISDA Standardize Derivatives Data

Enterprise blockchain company Digital Asset is working with the International Swaps and Derivatives Association (ISDA) to develop software meant to ease adoption of the trade group’s potentially cost-slashing data standards.

Announced Tuesday night in New York, the reference code library is intended to help developers implement ISDA’s Common Domain Model (CDM) in solutions for trading and managing derivatives. The software is written in DAML, the smart contract language created – and recently open-sourced – by Digital Asset.

“Following our success at the Barclays DerivHack in London last year, we have been working closely with ISDA with the joint goal of standardizing processes across the derivatives industry,” Kelly Mathieson, head of enterprise solutions at Digital Asset, said in a press release. “We are very excited to now make this reference implementation available to users … enabling financial institutions to be in control of their own data.”

Stepping back, the CDM is a broad, ambitious initiative by ISDA, first proposed in 2017, to standardize the ways derivative trade events and processes are represented so that the IT systems of various entities can talk to each other, improving efficiency and trimming costs. U.K.-based megabank Barclays has estimated the CDM could save the financial sector $3 billion a year.

While CDM is not a blockchain-specific project, such data standardization is seen as a prerequisite for distributed ledger technology (DLT) to reap much of a benefit for the financial industry. Indeed, Barclays, a DLT trailblazer, has championed the effort, setting up an internal CDM adoption working group about a year ago. In June, ISDA published an initial digital representation of the CDM, so that the association’s members can access and test it.

Making things simpler

Digital Asset’s reference code library will help simplify and standardize the generation of derivative “life cycle” events (everything that happens over the course of a trade, from agreeing on terms to amending the contract to termination) defined in the ISDA CDM, the company said.

“This may otherwise involve a number of complex steps. For example, generating payments involves rolling out a calculation schedule and applying date adjustments, before calculating day-count fractions and interest amounts as defined in the ISDA CDM,” Digital Asset explained in a press release.

The reference code library will be available under an open-source license, and the specification will be compiled, or translated, “to executable libraries in other languages,” the company said. The ISDA CDM is now available in DAML on the ISDA’s Rosetta portal, along with Java and JSON.

A spokesperson for Digital Asset said ISDA is not paying the company to develop the reference application.

One of the most prominent startups in enterprise DLT, New York-based Digital Asset is best known for its former CEO, Wall Street veteran Blythe Masters, and its ongoing assignment to replace back-office systems for the Australian Securities Exchange.

Image of Digital Asset’s CTO Shaul Kfir via CoinDesk Archives