The financial sector is facing increasing regulatory demands, and firms need new approaches to maintain compliance while driving operational efficiency.
Author: PJ Di Giammarino, JWG
Industry experts shared their perspectives at FINOS’ October 2024 OSFF event in NYC and demonstrated how traditional methods of regulatory reporting, often disjointed and expensive, are being revolutionized by the use of open source technologies like the Common Domain Model (CDM), Digital Regulatory Reporting (DRR) and the FINOS Opensource Regulatory Reporting project, coordinated by JWG.
Through partnerships with industry bodies like ISDA and FINOS, leading financial institutions such as BNP, JP Morgan, BMO and RBC are creating a future where regulatory compliance is not only cost-effective but also transparent, scalable, and interoperable.
Financial institutions are under pressure from global regulators to meet rising demands, including trade reporting and systemic risk assessments. Legacy systems, fragmented and proprietary, have struggled to cope, leading to issues with data quality, escalating costs, and even regulatory penalties.
As Elenor Hsu from ISDA highlighted in a recent DRR discussion, reporting approaches often result in inconsistencies, making it difficult for regulators to efficiently analyze data, which in turn triggers penalties for firms unable to provide consistent, accurate reports. This is where open-source digital regulatory reporting solutions become essential.
The CDM, a standardized and machine-executable model for financial products, transactions in those products, and lifecycle events, is a game-changer. Managed by FINOS as an open-source solution, CDM ensures that all market participants operate from the same set of standards, reducing discrepancies and enabling interoperability.
Nicholas Moger, a Regulatory Technology Product Director, who leads JP Morgan’s regulatory transformation efforts within the Equity Derivatives Business, emphasized the broad impact of CDM, noting, “CDM addresses challenges we didn’t anticipate solving when we first applied it to regulatory reporting, opening up avenues to improve B2B communications and offer future value to our clients.” The model’s ability to streamline various aspects of financial operations has been a key factor driving its adoption.
DRR, powered by CDM and developed by ISDA, transforms regulatory requirements into executable code. This automation helps firms align with regulatory expectations by delivering consistent, accurate reporting, while minimizing the potential for human error.
DRR is an open-source platform, allowing firms of all sizes to access its capabilities, promoting a more equitable financial ecosystem and enabling widespread collaboration. As reported by JWG 2 years ago here, BNP Paribas implemented the DRR code for CFTC rewrite reporting.
Moger stated that JP Morgan’s adoption of DRR for ASIC (Australia) and MAS (Singapore) regimes is already yielding positive results. “We’re in the middle of our ASIC implementation and already seeing reduced testing complexity and increased automation capabilities” he shared.
Meanwhile, RBC is taking a leadership role in advancing DRR with cloud-based implementations, which enhance scalability and accessibility. At the OSFF, Stephen Sui, Associate Director Data Architecture at RBC Capital Markets, stressed that this approach is not only lowering costs but also reducing risk by improving transparency and control over data.
The FINOS Open Reg Tech initiative is accelerating the shift toward efficient, scalable regulatory reporting through use of open-source technology in a multiphase project called Open Regulatory Reporting (ORR). Phase 1 of ORR has proven that tools like CDM and DRR can automate regulatory processes while being deployed via the cloud, delivering results across multiple jurisdictions.
Phase 2 will build on these successes by expanding DRR’s scope to cover additional regulatory regimes and asset classes, as well as enhancing the performance and scalability of the technology in real-world financial environments. Moger noted, “The real value of CDM and DRR will come as we expand into new jurisdictions—we won’t need to start from scratch but can integrate new regulations into existing systems with lower overhead and costs.”
For institutions like JP Morgan and RBC, the business case for open-source adoption is clear: lower costs, greater efficiency, and reduced regulatory risk. Historically, regulatory compliance has been viewed as an unavoidable cost. But with CDM and DRR, it’s evolving into a source of competitive advantage.
Moger explained, “By simplifying our technology stack and automating manual processes, CDM and DRR will inevitably cut our regulatory reporting costs. More importantly, they’re improving the accuracy of our reports, which will reduce regulatory queries and the time spent on corrections.”
RBC’s focus on cloud-based DRR implementation has also delivered notable benefits. Stephen Sui, Associate Director, Data architecture shared that by integrating CDM with cloud platforms like Databricks, and JWG’s RegDelta, RBC can process large datasets in real-time and ensure compliance across multiple regulatory regimes simultaneously.
The adoption of open-source solutions like CDM and DRR signals a paradigm shift in how the financial industry approaches regulatory reporting. By collaborating with ISDA, FINOS, and other industry groups, financial institutions are creating mutualized, reusable solutions that benefit the entire sector. This collaborative approach is breaking down silos and promoting shared responsibility across the industry.
As Sui pointed out, “We’re no longer just solving our own compliance issues. We’re part of a broader initiative to develop solutions that work for everyone.”
Open-source technologies like CDM and DRR are transforming the regulatory reporting landscape. With institutions such as BNP Paribas, JP Morgan and RBC leading the charge, these innovations are reducing costs, improving accuracy, and fostering greater collaboration across the financial sector.
As the use of these technologies continues to grow, they promise to reshape the future of regulatory compliance, making it more transparent, efficient, and scalable.
For more information on the JWG and FINOS programmes please see the NextGen Reg Reporting article here.
1. What is CDM in regulatory reporting?
The CDM is a model for financial products, trades in those products, and the lifecycle events of those trades. It is an open-source standard that aligns data, systems and processes and is available as code in multiple languages for easy implementation across technologies.
It allows common development of solutions to industry problems, such as streamlining regulatory reporting into one mutualised open source solution to reduce discrepancies across the market.
2. What is Digital Regulatory Reporting (DRR)?
DRR converts regulatory requirements into executable code, automating compliance processes and ensuring consistency with industry standards.
3. How are JP Morgan and RBC using open-source technologies for compliance?
JP Morgan and RBC are using CDM and DRR to automate regulatory reporting, lower costs, and improve reporting accuracy. RBC is focused on cloud-based solutions for scalability.
4. What are the benefits of using open-source technology in regulatory reporting?
Open-source technologies foster collaboration, reduce costs, and provide greater transparency and scalability in regulatory reporting.
5. What is the FINOS Open Regulatory Reporting (ORR) project?
The FINOS ORR project aims to create scalable, open-source solutions for regulatory reporting, with successful Phase 1 results and Phase 2 expanding into new functionality and reporting regimes. It fits into FINOS’ wider Open Reg Tech initiative and includes the auditability of regulatory text interpretation throughout the code lifecycle.
To learn more watch the video here or contact pj@jwg-it.eu or jane.gavronsky@finos.org.