ISDA
<FpML>
FpML Representation for
Public Price Transparency Reporting
March 2011
® ISDA is a registered trademark of the International Swaps & Derivatives Association, Inc.
® FpML is a registered trademark of the International Swaps & Derivatives Association, Inc.
FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 1
<FpML>
Table of Content
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The Overall Approach
The Schema Extensions to Support the Additional Requirements
The Schema Restrictions
 Interest rate swap
 Credit default swap
 Total return swap
 FX Forward
 FX Swap
 FX Option
 FX Digital Option
FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
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p. 4
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p. 31
p. 33
p. 35
p. 41
March, 2011 - SLIDE 2
Overall Approach
<FpML>
• Prescriptive approach:
– Maintain existing FpML element names and structure
• Transparency representation is a subset of standard
confirmation representation
– Make minimum data reporting requirements mandatory in
the schema
– Eliminate all elements associated with non-standard terms
• Rationale:
– Provide strong guidance on what is and is not required as
an aid to implementers
– Avoid including fields for customized products, which are
inappropriate for price transparency
– Avoid including fields for detailed settlement calculations,
which have little price impact
FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 3
Schema Extensions
<FpML>
• Additions to support transparency reporting:
– Product extensions: None at this time
– Trade header extensions
• Discussed on next page
– Post-trade event support
• Detailed support exists in schema, may need to evolve
as business requirements clarify
– Messaging framework extensions
• Some extensions have been made to fit better with
SDR choreography requirements
• More detailed acknowledgements (including copy of
submitted message)
• Dual correlation IDs (submitter/SDR)
FpML Reporting WG
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March, 2011 - SLIDE 4
Trade Header Extensions
<FpML>
• Added CFTCrequired fields
– Cleared
indicator
– Non-standard
terms indicator
– Block trade
indicator
– Execution
venue
– Counterparty
Types (to
support interdealer
indicator, etc.)
FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
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March, 2011 - SLIDE 5
<FpML>
Interest Rate Swap
FpML Reporting WG
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March, 2011 - SLIDE 6
Interest Rate Swap
<FpML>
The “Swap” Type
Parent structure for IRS
The proposal is to :
 Fix the number of streams to 2
 Delete structures that don’t affect pricing
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earlyTerminationProvision
Delete terms that are obviously bespoke:
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Additional terms
Additional Payment
2
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 7
Interest Rate Swap - Streams
<FpML>
The “InterestRateStream” Type
Structure for Each Stream of Swap
The proposal is to eliminate:
 Parties and accounts
 Structures for customized swaps
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Stubs
Cashflows
Non-deliverable settlements
Formulas
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FpML Reporting WG
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March, 2011 - SLIDE 8
Interest Rate Swap - Dates
<FpML>
The “CalculationPeriodDates” Type
Structure for Calculation Periods
The proposal is to eliminate:
 Relative dates
 All business date adjustment rules
 Stub details
 Compounding Frequency(?)
The proposal is to retain:
 Effective and termination dates
FpML Reporting WG
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Copyright © 2011 International Swaps and Derivatives Association, Inc.
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March, 2011 - SLIDE 9
Interest Rate Swap - Payment Dates
<FpML>
The “PaymentDates” Type
Structure for Payments
The proposal is to eliminate:
 All references
 Stub-related dates
 Pay in advance/arrears indicator
 Payment lag
 Date adjustments
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 10
Interest Rate Swap - Resets
<FpML>
The “ResetDates” Type
Structure for
Resetting
The proposal is to
eliminate:
 All references
 Reset in
advance/arrears
indicator
 Stub-related dates
 Averaging related
fields
 Reset lag
 Date adjustments
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Retains:
•
Reset Frequency
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FpML Reporting WG
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Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 11
Interest Rate Swap - Calculation
<FpML>
The “CalculationPeriodAmount” Type
Structure for Calculating Amounts
The proposal is to eliminate:
 All schedules
 Customized payment amounts
 Forecasting and discounting
elements
 Compounding-related elements
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FpML Reporting WG
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Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 12
Interest Rate Swap - Floating Rate
<FpML>
The “FloatingRateCalculation” Type
Structure for Floating Rates
The proposal is to eliminate:
 Multipliers
 Rate treatment rules
 Rounding rules
 Averaging related rules
 Schedules
 Buyers/sellers (for caps/floors)
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FpML Reporting WG
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March, 2011 - SLIDE 13
<FpML>
Credit Default Swap
FpML Reporting WG
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March, 2011 - SLIDE 14
Credit Default Swap
The “CreditDefaultSwap” Type
<FpML>
Parent structure for CDS
The proposal is to remove:
 Detailed settlement terms
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 15
Credit Default Swap
<FpML>
The “GeneralTerms” Type
CDS General Terms
The proposal is to remove:
 Party information
 Date Adjustments
 Additional terms and additional provisions
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 16
Credit Default Swap
<FpML>
The “FeeLeg” Type
CDS Fee Leg
The proposal is to remove:
 Party information
 Date Adjustments, adjusted dates
 Periodic Payment Frequency
 First and last period related terms
 Calculation amount (must be same as protection
amount)
 Day count fraction
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Open questions:
 For standard coupon CDS, should:
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1) sender provide upfront payment amount and SDR calculate
implied fixed rate? Or
2) sender provide implied fixed rate in “marketFixedRate”?
3) sender provide implied fixed rate in a “priceNotation” field in
the public execution notification message root?
?
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FpML Reporting WG
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Copyright © 2011 International Swaps and Derivatives Association, Inc.
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March, 2011 - SLIDE 17
Credit Default Swap
<FpML>
The “ProtectionTerms” Type
CDS ProtectionTerms
The proposal is to remove:
 Most credit events (should be standardized)
 Deliverable obligations
 Floating amount events
Open Questions:
 Should restructuring be retained?
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
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March, 2011 - SLIDE 18
<FpML>
Open Issues
• Credit Default Swap
– For standard coupon CDS, who should be
responsible for calculating the implied market
fixed rate from the upfront fee?
• Market Participant?
• SDR?
– Should restructuring be included as a credit
event?
FpML Reporting WG
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March, 2011 - SLIDE 19
<FpML>
Total Return Swap
FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 20
Total Return Swap
<FpML>
The Return Leg
Amount to which the payment date
refers (i.e. Equity Amount as defined
in the ISDA Equity Definitions):
The proposal is to remove:
 The terms that are obviously
bespoke:
 The formula and encoded
description structures for
specifying the amount to which
the payment date relates.
 The structures that allow to
support bespoke dividend terms.
 The non-parametric representation of
calculation dates.
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 21
Total Return Swap
<FpML>
The Return Leg
Type of return:
 The proposal is to limit the return terms to the specification
of the type of return (i.e. price, vs. dividend, vs. total) and
remove the dividendConditions structure, which is
meant to specify the conditions governing the payment of
the dividends to the receiver of the equity return. This is
indeed understood as corresponding to ‘bespoke’ terms.
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 22
Total Return Swap
<FpML>
The Return Leg
Amount to which the payment date
refers (i.e. Equity Amount as defined
in the ISDA Equity Definitions):
The proposal is to remove:
 The terms that are obviously
bespoke:
 The formula and encoded
description structures for
specifying the amount to which
the payment date relates.
 The structures that allow to
support bespoke dividend terms.
 The non-parametric representation of
calculation dates.
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 23
Total Return Swap
<FpML>
The Return Leg
FX terms:
The proposal is to remove the ability to
specify quanto or composite FX terms,
as those as understood as
corresponding to ‘bespoke’ terms.
Averaging Dates:
The proposal is to remove the ability to
specify averaging dates, which are
understood as corresponding to
‘bespoke’ terms.
FpML Reporting WG
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Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 24
Total Return Swap
<FpML>
The Interest Leg
Amount to which the interest
payment date refers:
Similar to the return leg, the proposal
is to remove:
 The formula and encoded
description structures for
specifying the amount to which
the payment date relates, as
those are understood as being
obviously bespoke.
 The non-parametric
representation of
calculation dates.
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 25
Total Return Swap
<FpML>
The Interest Leg
Reset & payment dates:
The proposal is to remove the
ability to specific a specific
schedule of fixing and payment
dates, and solely rely upon a
parametric representation of
those dates.
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 26
Total Return Swap
<FpML>
The Interest Leg
Stub:
The proposal is to remove the ability to specify a stub
period, as it is understood as corresponding to
‘bespoke’ terms.
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FpML Reporting WG
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March, 2011 - SLIDE 27
<FpML>
Total Return Swap
Legal annex terms relating to the equity underlyer provision:
The proposal is to remove the EquityUnderlyerProvisions.model, an
optional component that is used to specify when specific legal annex
terms are applicable, which is understood as corresponding to
‘bespoke’ terms.
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 28
<FpML>
Total Return Swap
Extraordinary events:
The proposal is to remove the extraordinaryEvent,
used to specify events affecting the issuer of shares
(when applicable) that may require the terms of the
transaction to be adjusted. This is understood as
corresponding to ‘bespoke’ terms.
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 29
<FpML>
Total Return Swap
Early termination clause:
The proposal is to remove the structure
that specify the following terms, which
are understood as being ‘bespoke’:
 Whether the break funding recovery
will apply
 The fee that might be applied to the
break clause
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FpML Reporting WG
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March, 2011 - SLIDE 30
<FpML>
FX Forward
FpML Reporting WG
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March, 2011 - SLIDE 31
<FpML>
FX Forward
Non-deliverable settlement:
The proposal is to remove the specification of
such clause as part of the real-time price
reporting, the rational being that it is
understood as being ‘bespoke’.
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FpML Reporting WG
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March, 2011 - SLIDE 32
<FpML>
FX Swap
FpML Reporting WG
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March, 2011 - SLIDE 33
<FpML>
FX Swap
Non-deliverable settlement:
 Similar to the FX Forward, the proposal
is to remove the specification of such
clause as part of the real-time price
reporting, the rational being that it is
understood as being ‘bespoke’.
 The schema adjustment would apply to
both legs of the swap (nearLeg as well
as farLeg).
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FpML Reporting WG
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March, 2011 - SLIDE 34
<FpML>
FX Option
FpML Reporting WG
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March, 2011 - SLIDE 35
<FpML>
FX Option
American exercise terms:
 The proposal is remove the multiple
exercise construct, as it is perceive as a
very ‘bespoke’ clause.
 On the other hand, it is proposed to keep
the expiry time and associated cutName
(which is the code by which the expiry time
is know on the market), as it can have a
price impact – even if limited.
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 36
<FpML>
FX Option
Asian & barrier terms:
 The proposal is to consider the Asian and barrier specification
terms as being part of ‘bespoke’ terms which will then not be part
of the price transparency reporting.
 As a result, the features element would be removed from this
reporting view of the schema.
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 37
<FpML>
FX Option
Exercise procedure:
The exercise procedure having no implication on the trade price, the proposal is to remove it from the
reporting schema.
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FpML Reporting WG
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March, 2011 - SLIDE 38
<FpML>
FX Option
Settlement terms:
With the payment date specified as part of the paymentDate construct, the proposal is to remove the
settlementInformation block, as those further settlement terms are not required for price transparency
reporting.
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 39
<FpML>
FX Option
Non-deliverable settlement:
Similar to the FX Forward, the proposal is to
remove the specification of such clause as
part of the real-time price reporting, the
rational being that it is understood as being
‘bespoke’.
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 40
<FpML>
FX Digital Option
FpML Reporting WG
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March, 2011 - SLIDE 41
<FpML>
FX Digital Option
Trigger & touch terms:
 The proposal remove the elements that are not central to the
pricing information:
 Information source
 Observation start and end dates
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 42
<FpML>
FX Digital Option
Exercise procedure:
The exercise procedure having no implication on the trade price, the proposal is to remove it from the
reporting schema (similar to the FX Option).
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 43
<FpML>
FX Digital Option
Settlement terms:
The proposal is to remove the
settlementInformation blocks from both
the payout and the premium constructs,
as those settlement terms are not
required for price transparency
reporting, nor do they include the
settlement schedule, which is specified
in other constructs:
 The premium settlement date is
specified through the paymentDate
element.
 The payoutStyle element specifies
whether the payout is immediate of
deferred.
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FpML Reporting WG
Copyright © 2011 International Swaps and Derivatives Association, Inc.
March, 2011 - SLIDE 44