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Strategic DDD for Commodities Trading domain

From a DDD perspective, commodities trading decomposes into bounded contexts around trade, risk, logistics, finance, compliance, and analytics.

  • Entities & Aggregates manage core business objects (Trade, Shipment, Settlement, Portfolio).
  • Value Objects model immutable concepts (Price, Quantity, Currency).
  • Domain Events capture state transitions critical to business processes.
  • Context Maps define how subdomains collaborate.

Core Domain & Subdomains

At its heart, commodities trading is about managing trades and risks across physical flows and financial instruments. We can split the domain into subdomains:

  • Trade Capture & Deal Lifecycle (core)
  • Risk Management (core)
  • Logistics & Operations (supporting)
  • Financing & Settlement (supporting)
  • Compliance & Reporting (generic/subdomain)
  • Analytics & Decision Support (supporting/strategic)

Strategic Design

  • Core Domain: Trade Capture & Risk Management (where competitive advantage lies).
  • Supporting Domains: Logistics, Financing, Analytics (specialized but not unique).
  • Generic Domains: Compliance, Reporting (mandatory but commoditized).

This informs build vs. buy decisions — e.g., build risk engine in-house, but buy compliance modules.

Bounded Contexts

Each subdomain can be modeled as a bounded context with its own ubiquitous language and models.

Trade Capture Context

  • Entities: Trade, Counterparty, Instrument, Contract
  • Value Objects: Price, Quantity, TradeDate, TradeId
  • Aggregates: Trade (root, holds trade lines, instrument, counterparty, status)
  • Events: TradeCaptured, TradeAmended, TradeCancelled
  • Services: TradeValidationService, TradeBookingService

Risk Management Context

  • Entities: Position, Exposure, RiskLimit, Portfolio
  • Value Objects: MarkToMarket, VaR, ScenarioResult
  • Aggregates: Portfolio (root for positions & exposures)
  • Events: PositionUpdated, LimitBreached, PnLCalculated
  • Services: RiskCalculationService, MarketDataFeed

Logistics Context

  • Entities: Shipment, StorageFacility, InventoryLot
  • Value Objects: Quantity, Location, Incoterms
  • Aggregates: Shipment (root; includes lots, schedules, destination)
  • Events: ShipmentScheduled, ShipmentDelivered, InventoryAdjusted
  • Services: LogisticsSchedulingService, InventoryReconciliationService

Financing & Settlement Context

  • Entities: Settlement, PaymentInstruction, LetterOfCredit
  • Value Objects: Currency, Amount, SettlementDate
  • Aggregates: Settlement (root; holds trade reference, payment details, status)
  • Events: PaymentSettled, LCExpired, SettlementFailed
  • Services: SettlementProcessingService, BankIntegrationService

Compliance Context

  • Entities: RegulatoryReport, AuditLog, KYCRecord
  • Value Objects: LEI, UTI, Timestamp
  • Aggregates: Report (root)
  • Events: ReportGenerated, KYCFlagged
  • Services: RegulatoryReportingService, AuditTrailService

Analytics Context

  • Entities: Curve, Scenario, Forecast
  • Value Objects: ForwardPrice, StressFactor
  • Aggregates: MarketAnalysis
  • Events: CurveGenerated, ScenarioRunCompleted
  • Services: PricingEngine, ForecastingService

Context Map

title Commodities Trading Domain - Context Relationships

rectangle "Trade Capture" as TC
rectangle "Risk Management" as RM
rectangle "Logistics" as LG
rectangle "Financing & Settlement" as FS
rectangle "Compliance" as CP
rectangle "Analytics" as AN

TC -[#blue]-> RM : Customer-Supplier
TC -[#blue]-> LG : Customer-Supplier
TC -[#blue]-> FS : Customer-Supplier
RM <-[#green]-> AN : Partnership
FS -[#orange]-> CP : Open Host Service
TC -[#purple]-> CP : Published Language
RM -[#purple]-> CP : Published Language
LG -[#purple]-> CP : Published Language

legend right
  == Legend ==
  Blue: Customer-Supplier
  Green: Partnership
  Orange: Open Host Service
  Purple: Published Language
endlegend

Bounded contexts interact through integrations and translations:

  • Trade Capture → Risk Management: trades feed into positions & exposures.
  • Trade Capture → Logistics: physical trades trigger shipment creation.
  • Trade Capture → Financing: financial obligations flow into settlements.
  • Risk Management ↔ Analytics: pricing, curves, scenarios enrich valuations.
  • Financing → Compliance: settlements must generate reports and logs.
  • All contexts → Compliance: audit trail is ubiquitous.

Trade Capture → Risk Management

  • Pattern: Conformist / Customer-Supplier
  • Risk depends on trade data and has to conform to the model exposed by Trade Capture.
  • Implication: Risk Management consumes trades, but does not redefine them.

Trade Capture → Logistics

  • Pattern: Customer-Supplier
  • Logistics depends on physical trade details (quantities, delivery terms).
  • Implication: Logistics must align with trade capture’s definitions of quantity, commodity, counterparty.

Trade Capture → Financing & Settlement

  • Pattern: Customer-Supplier
  • Settlement requires trade details to generate obligations.
  • Implication: Trade Capture is the source of truth; Finance aligns to its schema.

Risk Management ↔ Analytics

  • Pattern: Partnership
  • Risk and Analytics collaborate — risk engines depend on analytics (curves, scenarios), analytics depends on trades and positions.
  • Implication: Shared model, high collaboration.

Financing & Settlement → Compliance

  • Pattern: Open Host Service
  • Compliance “subscribes” to settlement events and consumes data for regulatory reporting.
  • Implication: Compliance is generic and should not impose its model upstream.

Trade Capture → Compliance

  • Pattern: Published Language
  • Compliance consumes trade data for audit and regulatory reports.
  • Implication: A shared vocabulary (UTI, LEI, trade identifiers) ensures consistency.

Risk Management → Compliance

  • Pattern: Published Language
  • Compliance consumes risk metrics (VaR, exposures).
  • Implication: Needs standardized reporting language.

Logistics → Compliance

  • Pattern: Published Language
  • Compliance consumes shipment and delivery events.
  • Implication: Compliance translates delivery events into regulatory language (e.g., REMIT).

Event Storming

Key domain events across contexts:

  • TradeCaptured, TradeConfirmed, TradeAmended
  • PositionUpdated, LimitBreached, PnLCalculated
  • ShipmentScheduled, ShipmentDelivered
  • PaymentSettled, LCExpired
  • ReportGenerated, KYCFlagged

These events form the backbone of an event-driven architecture.