ISDA, Common Domain Model and Barclays Hackathon

ISDA, Common Domain Model and Barclays Hackathon

We are the lucky generation that can start taking advantage of the tremendous amount of possibilities that distributed ledgers unlock. But without data modelling standards, unlocking the full benefits of distributed ledgers could be prevented by a myriad of languages and inevitably lead to the horrors of… stranded assets!

You can, of course, create your own way of representing assets on ledger and push for it to become a standard used by everyone but typically these sorts of efforts have been much more successful when driven at an industry level. ISDA, and the creation of the Common Domain Model (CDM) for modelling derivatives and operations on derivatives, is one such recent example of this.

There are many documents and webinars about CDM on isda.org (just search for tag “CDM”), so I will only very briefly describe here the main goals of CDM:

1) Provide standard digital representation of events that occur during the lifetime of a derivative product

2) Provide standard digital representation of derivative products

Both for events and products the overarching principle is to compose more complex products/events from less complex ones, so-called primitives. When it comes to the primitive events, the notation states the before and after state of the product in question.

R3 recognise the importance of this endeavour and want to enable solutions providers to quickly and seamlessly integrate CDM and Corda. We also believe in the interoperability benefits distributed ledgers can bring and the key role that standardized data formats can bring. Given how many ideas CDM and Corda share (such as primitive events v. commands, before/after states v. input/output states, events v. transactions, lineage v. transactions chain) integrating CDM and Corda is actually not all that difficult. Initial analysis of the CDM led us to build a highly reusable component translating CDM events to Corda transactions, which can then be stored on the ledger. This component is soon to be shipped as part of Corda Finance, enabling companies to combine the powers and potentials of both CDM and Corda. I will be referring to this component as the CDM/Corda Bridge from now on.

When undertaking as massive a task as creating a new industry standard for modelling derivatives, it is absolutely crucial to keep gathering feedback from potential users. What better way to get that feedback than unleashing a bunch of DLT enthusiasts on it during a two-day hackathon?

Barclays Hackathon

The Barclays Hackathon happened over two days at the end of September 2018 in London and New York. 15 teams in London and 15 teams in New York took part. Each team were handed the following six use cases, right at the door:

1) Set-up a business network of three dealers, five clients and one central counterparty

2) Upload 200 trades, provided in the CDM Event notation, on a platform of choice

3) Process 15 CDM events changing the previously uploaded trades

4) Consume market data and lifecycle events provided in CSV format, construct CDM events out of them and update your platform accordingly

5) Simulate settlement of payments generated in previous use case using a provided dummy settlement service

6) Report on all transactions created in the previous use cases for a given date and report on the transactional history of a single contract

The teams using Corda (roughly half of the total 30) could start punching the air because the first use case is the perfect fit for Corda Business Networks and the second and third come virtually for free if you use the CDM/Corda Bridge component discussed earlier. On top of the six tasks, most teams also wanted to showcase the product they came to represent.

After quick introductions the teams set to work. A very friendly atmosphere prevailed right from the beginning and throughout. With teams, judges, organisers and observers happily mingling together, it wasn’t until 11pm that the rooms got (forcibly) emptied. At this stage each team would have first out of two sessions with the judges already behind them.

The highlight of the second day were undoubtedly the pitches. Each team having three minutes to talk about their product, it was fascinating to see the breadth of ideas that are taking shape and that were enabled by DLT.

At the business end of the second day the winners of the various categories were announced and prizes were collected. The Corda teams took their fair share, taking prizes for the ‘most complete solution’ and ‘best pitch’ in London.

What did the event show us?

The event showed that there is genuine appetite across the industry to adopt CDM and that the solutions builders are more than capable of providing the right feedback to ISDA, which will help them further improve it. R3 were delighted to see so many teams chose Corda as their DLT platform simply because it was the most natural choice. A no brainer, like taking an umbrella on a rainy day.

We anticipated that the CDM/Corda Bridge would be well received but reality exceeded our expectations. Numerous teams mentioned the ease of its use, how it streamlined their workflow and enabled them to focus on the more business-specific problems. But the praise also came from ISDA and the organisers, recognising the approach R3 had taken to integrating CDM and DLT as a very promising way forward.