Digitalization: CDM and Tokenization

In reconciling trade records and reporting to regulators, adoption of the CDM has been announced. In collateral and settlement operations, surveys and experiments on tokenization are under way.

The three parts of digitalization

Digitalization of derivatives trading and operations is treated here as three developments. The content draws on sources as of October 2026.

How the CDM model works is covered in The ISDA Common Domain Model (CDM). What is covered here is who has started to use it and how, along with adjacent developments such as tokenization.

Background: reducing reconciliation and manual work

When firms record trade lifecycle events in different ways, reconciliation is needed to bridge the differences. One aim of the CDM is to reduce reconciliation and manual work through a standard representation, and to move toward straight-through processing, in which a trade is handled as one continuous process⁴.

If each firm uses its own format, the two firms must reconcile their records to bridge the differences. CDM is not a destination for records but an agreed way to represent them. If both firms record in the format of CDM, the standard data model, reconciliation and manual work can be reduced more easily.

How the CDM has been adopted

The CDM (Common Domain Model) is a data model that represents financial products, trades, and trade lifecycle events in a form that machines can read and execute. The table below lists events with dates confirmed in ICMA's announcements, the FINOS (Fintech Open Source Foundation) blog (October 2025), and other sources.

The scope of the CDM is OTC derivatives, cash securities, securities finance, and commodities⁶. In individual announcements, ICMA made it possible to automate the processing of repo trade execution, clearing, and settlement, and of lifecycle events such as revaluation, interest payments, and collateral substitution⁵. ISLA extended the CDM to pre-trade and post-trade processing of securities lending².

The CDM has met the requirements for a FINOS Active Project. The maintainers include people from ISDA, ISLA, ICMA, JPMorganChase, REGnosys, and TradeHeader. The FINOS blog says institutions are moving ahead with production and pilot adoption².

Digitalization of trade reporting

ISDA's DRR is a mechanism that uses the CDM to turn industry-agreed interpretations of new or amended reporting rules into code that machines can execute⁷. The reporting obligations and procedures themselves are covered in Regulatory Reporting. The announced adoptions of this mechanism, based on the FINOS blog, are as follows².

• BNP Paribas introduced DRR for CFTC rules in 2022.
• JPMorganChase adopted DRR as a main reporting mechanism.
• JPX announced in June 2025 that it was running CDM-based DRR in parallel with its production environment. The blog says this was a world first for a Japanese financial institution and for a clearing house.
• DTCC and Goldman Sachs, among others, have supported development of the mechanism and are carrying out pilots and adoption.

Smart contracts and derivatives

A smart contract is a mechanism that runs processing automatically when conditions set in advance are met. Two points have been announced about its use in derivatives.

One of the CDM's explanatory documents (CDM Smart Contracts Overview) describes a standardized flow of machine-executable smart contract processing, built on the CDM, for post-trade events such as floating-rate resets⁸. ISDA and Tokenovate also announced a working group (the Smart Contract Task Force) to build an open-source library of CDM functions and processing components for automating post-trade events².

Both are announcements of framework and standards work.

Tokenization of assets

The FSB's report defines tokenization as the issuance and representation of assets in an electronic form called a token, using new technologies such as distributed ledger technology (DLT). Any asset, such as equities, bonds, or bank deposits, can be covered⁹. Derivatives on crypto-assets are not included here. The FSB report also excludes central bank digital currencies and crypto-assets from its scope⁹.

DLT refers to the protocols and supporting infrastructure that record information on a ledger shared by multiple parties. Depending on who can write to the ledger, platforms are either "permissioned," where a coordinating body approves participants, or "permissionless," where anyone can take part¹⁰. Most of the initiatives by traditional financial institutions that the FSB examined issued tokens on permissioned platforms¹¹.

On collateral and settlement, the FSB report raises the following points.

• On benefits, proponents of tokenization point to a mechanism that settles two transfers at the same time (atomic settlement). They say it could shorten the time collateral is tied up and reduce counterparty risk and settlement risk, and could make certain assets easier to use as collateral by removing operational barriers¹².
• On the liquidity burden, the report says that if settlement happens on the spot for each trade, the funds required rise and the liquidity market participants hold could fall¹³.
• On automatic liquidation, the report says smart contract programs could detect a collateral shortfall and liquidate automatically. It points out that selling could spread, for example when the token keeps trading while the market for the underlying asset is closed¹³.
• On rehypothecation of collateral, the ease of combining tokens with other trades on the ledger could lead to repeated rehypothecation of received tokens, building up leverage across the system. The report says regulation setting haircuts on tokens used as collateral may not yet be sufficient¹⁴.

There are also experiments on the money side of settlement, not only on the asset side. On April 3, 2024, the Federal Reserve Bank of New York announced its participation in Project Agorá, led by the BIS Innovation Hub and the Institute of International Finance (IIF). The research examines whether tokenizing central bank money and commercial bank deposits and running them on a shared, programmable ledger can improve wholesale cross-border payments. The seven participating central banks include the Bank of Japan. The New York Fed says its participation is limited to research and experimentation¹⁵.

On the CDM side, a working group on tokenized assets (the Tokenized Assets Working Group) is reported to be building data and processing standards so that tokenized assets can move consistently across different platforms².

Expected benefits and challenges

The table below sets out the expected benefits of tokenization in the FSB report, together with the conditions and challenges the same report lists¹²¹⁶.

Many of the benefits depend on trades, asset settlement and money settlement being carried out on the same platform or on fully interoperable platforms. As of the FSB report (October 2024), such platforms did not exist for many tokenized assets. The asset used for money settlement is not always available on a platform, and across countries there are also differences in laws and regulations¹⁶. Adoption involves the cost of running existing systems and DLT systems in parallel, and differences in operating hours and fragmented liquidity also need to be managed¹⁶. Over the longer term, existing systems and DLT systems may coexist¹².

How authorities see it

On October 22, 2024, the FSB published a report on tokenization and financial stability. The report says that publicly available data are limited, but the degree of tokenization adoption is low and appears to be growing. It concludes that, mainly because of its small scale, tokenization in finance is not currently a material threat to financial stability³.

The report groups the vulnerabilities associated with DLT-based tokenization into liquidity and maturity mismatch, leverage, asset price and quality, interconnectedness, and operational fragility. It says financial stability could be affected if tokenization grows to a large share, if complexity and opacity lead to unpredictable outcomes under severe stress, or if the vulnerabilities are not adequately addressed by supervision and regulation³.

For the near term, the FSB lists as challenges how to fill the data gaps that limit monitoring of adoption, how to understand how tokenization and its functions fit within existing laws, regulations, and supervision, and how to share regulatory and supervisory information across borders³. The FSB's documents state at the outset that they are not legally binding on its members, including decisions about FSB activities.

What this page does not cover

The following is not covered on this page.

• The number or share of users, the size of the improvements or effects, and how widely the CDM is used across the industry
• How much reporting errors have fallen, and the details of DRR based on ISDA's own materials
• The scale at which derivatives trades or collateral actually run on smart contracts
• CDM developments after October 2025, regulatory developments after the FSB's October 2024 report, and individual national frameworks

Notes

1. FINOS, "FINOS Launches Common Domain Model Project in Partnership with ISDA, ISLA and ICMA for Standardizing Financial Products and Workflows" (February 16, 2023). The announcement of the open-source release, and the September 2022 selection of FINOS. ↩ ↩² ↩³

2. FINOS, "From Standards to Impact: CDM Becomes an Active FINOS Project" (October 20, 2025). The DRR adoptions and the ISLA extension in "CDM in Practice", the working groups in "New CDM Applications", CDM 6.0 and 7.0 (planned for November 2025), and the maintainers' affiliations. ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶ ↩⁷ ↩⁸ ↩⁹

3. FSB, "The Financial Stability Implications of Tokenisation" (October 22, 2024), Executive summary (pages 1–2 of the report). The scale of adoption, the classification of vulnerabilities, the conclusion that there is currently no material risk, the conditions under which financial stability could be affected, and the initial issues for the FSB and national authorities. ↩ ↩² ↩³ ↩⁴

4. FINOS, "Overview of the FINOS CDM", "Purpose". Interoperability and straight-through processing, less reconciliation, a foundation for applying technology, and consistency of regulatory reporting. ↩

5. ICMA, "FINOS Common Domain Model (CDM)" page. The notice of the July 21, 2021 phase 1 event, the completion of phase 2 in February 2023, and the description of lifecycle processing such as revaluation, interest payments, and collateral substitution. ↩ ↩² ↩³

6. FINOS, "Overview of the FINOS CDM", "Scope". ↩

7. FINOS, "Overview of the FINOS CDM", the explanation of ISDA's Digital Regulatory Reporting that follows "What is the FINOS CDM?". ↩

8. FINOS, "Overview of the FINOS CDM", "CDM Smart Contracts Overview" in the list of additional explanatory documents that follows "What is the FINOS CDM?". ↩

9. FSB report, Executive summary (page 1) and chapter 1 Introduction (page 3). The definition of tokenization, the assets covered, and the exclusion of central bank digital currencies and crypto-assets. ↩ ↩²

10. FSB report, section 2.2 "DLT-based tokenisation and its key features" (pages 6–7). The description of DLT, and the distinction between permissioned and permissionless. ↩

11. FSB report, section 2.3 (page 10). That most of the initiatives analyzed issue tokens on permissioned platforms. ↩

12. FSB report, section 2.4 "Potential benefits of tokenisation" (pages 10–11). The list of benefits, the proponents' view that tokens become easier to use as collateral, and the statement that the benefits are not yet demonstrated. ↩ ↩² ↩³

13. FSB report, section 3.1 "Liquidity and maturity mismatch" (page 15). The liquidity burden of prefunding, and automatic liquidation through smart contracts. ↩ ↩²

14. FSB report, section 3.2 "Leverage" (page 16). The build-up of leverage through reuse of collateral, and the possible lack of regulation setting haircuts. ↩

15. Federal Reserve Bank of New York, "New York Fed to Participate in Joint International Research Effort on Tokenization and Cross-Border Payments" (April 3, 2024). ↩

16. FSB report, Executive summary (page 1), section 2.2 "Choice of settlement asset" (page 8), section 2.4 (page 11), and section 2.5 "Key challenges for scaling tokenisation" (pages 12–13). ↩ ↩² ↩³