ISDA
<FpML>
FpML Funding Model
Discussion points for
FpML Standards Committee
Not for further distribution
May 14, 2012
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® FpML is a registered trademark of the International Swaps & Derivatives Association, Inc.
Copyright © 2012International Swaps and Derivatives Association, Inc.
May, 2012 - SLIDE 1
Agenda
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<FpML>
Current situation
Issues
Objectives
Possible funding options
Next Steps
Copyright © 2012International Swaps and Derivatives Association, Inc.
May, 2012 - SLIDE 2
Current Situation
<FpML>
• All FpML working groups and materials
are open to any member of the public
• FpML Standards Committee is open only
to ISDA members
• All funding for FpML is provided from ISDA
general budget
Copyright © 2012International Swaps and Derivatives Association, Inc.
May, 2012 - SLIDE 3
Issues
<FpML>
• Difficult to quantify value produced by
FpML
• “Free rider” problem
• EDM council
• Might be difficult in the future to
increase/maintain funding by ISDA Board
without measurable benefits
Copyright © 2012International Swaps and Derivatives Association, Inc.
May, 2012 - SLIDE 4
Objectives
<FpML>
• Demonstrate value of FpML process to the
industry
• Avoid creating the perception that FpML is
a “closed” standard
• Over time, raise funds specific to FpML
Copyright © 2012International Swaps and Derivatives Association, Inc.
May, 2012 - SLIDE 5
Possible Funding Options
<FpML>
• Usage Fees
• FpML membership fees
• New ISDA membership category
Copyright © 2012International Swaps and Derivatives Association, Inc.
May, 2012 - SLIDE 6
Usage Fees
<FpML>
• Description:
– Impose some kind of per-message charge for some or all
users of FpML
• Pros
– Would allocate the greatest costs to largest users of the
standard
– Could generate substantial revenue
• Cons
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Difficult to collect
Incompatible with being an open standard => backlash
Might prevent some uses by regulators
Might slow adoption of the standard
Copyright © 2012International Swaps and Derivatives Association, Inc.
May, 2012 - SLIDE 7
FpML Membership Fees
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<FpML>
Description
– Charge fees to participate in FpML activities/use FpML resources, e.g.
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Participate in WG
Participate in SC or CC
Access internal drafts prior to publication
– Fees could be waived or reduced for ISDA members (or for some classes of ISDA
members)
– Fees could be portion of the ISDA fees
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Pros
– Compatible with being an freely-licensed standard
– Similar to FIX model
– May be fairly easy to administer if number of members is low (e.g. if ISDA members
are automatic FpML members)
– Different categories could be created
– Creates a perceived value for participation in WGs
– Better aligns revenues with costs of maintaining the standard
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Cons
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May create adverse impression of “openness”
May limit input from smaller firms (depending on thresholds)
May be difficult to administer if there are many FpML members
If ISDA members need to pay additional fees, there may be a backlash
Copyright © 2012International Swaps and Derivatives Association, Inc.
May, 2012 - SLIDE 8
New ISDA membership category
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Limit FpML WG participation to ISDA members, but add a new, lower-priced
category
Current associate member category
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<FpML>
Associate category currently covers vendors, law firms and others large/small
Benefits such as netting opinions are vary valuable for some(law firms), not for others
Small and large pay same fee (assuming they are not users of derivatives)
New category
– ISDA/FpML technology membership category
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Focused on FpML and technology
No access to other ISDA benefits (netting opinions, reduction on legal documentation,
courses)
Minimum requirement for FpML participation: WG’s, access to drafts
Access to Standards Committee: requires different membership
– Pros
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May attract some new ISDA members
May create stronger perception that ISDA is also about technology
Eliminate free rider problem at least at the level of access to the information (standard itself
stays open and available to all)
– Cons
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Complicates ISDA membership decisions/process
Risk that a few current ISDA associate members might switch to a cheaper category (less so
if benefits are low in this category)
Copyright © 2012International Swaps and Derivatives Association, Inc.
May, 2012 - SLIDE 9
Comparison:
<FpML>
• FIXProtocol.org:
– Premier member: $25k/year (27)
– Regular buy-side: $4k/year
– Regular non-buy side: $8k/year
– Emerging markets: $2k/year
– Total membership: ~250 (all classes)
– Estimated total revenues ~$1.5-2mm/year
• ISITC
– Unknown fees (lowest levels are moderate)
– ~ 100 member firms
Copyright © 2012International Swaps and Derivatives Association, Inc.
May, 2012 - SLIDE 10
Possibly Affected Firms
<FpML>
• Existing working group participants that
are not ISDA members may be affected
• This includes organizations such as:
– ARK EDI Solutions
– EDM Council
– FIA
– IM Trading
– Rosenthal Collins Group
– Willis Group Consulting
Copyright © 2012International Swaps and Derivatives Association, Inc.
May, 2012 - SLIDE 11
<FpML>
Next Steps
• Analyze potential impact
– Affected firms
– Potential revenue impacts
• Agree proposal on SC
• Review with ISDA Board (strategic
planning end of June)
• Present publicly
Copyright © 2012International Swaps and Derivatives Association, Inc.
May, 2012 - SLIDE 12