FpML - Financial products Markup Language
Scalable Collateral Management
Using ISDA’s
FpML Open Standard
FpML Collateral Working Group
Copyright © 2011 International Swaps and Derivatives Association, Inc.
January 2011 – SLIDE 1
FpML enables interoperability
What is FpML?
• An open electronic standard, vendor-neutral, freely-licensed, sponsored by ISDA
• Provides a standard for communicating within & between firms about OTC derivatives
• Provides flexible representation of OTC transactions and business processes –including
collateral management– enables automation and reduces costs
FpML Collateral Working Group
Copyright © 2011 International Swaps and Derivatives Association, Inc.
January 2011 – SLIDE 2
Open standard gives you choice
• Proprietary messaging format locks you and limits you
to a particular vendor/application/service/network
– You can’t communicate with partners that do not use the same service
(limited network)
– You haven’t solved your data translation problems internally
• FpML open standard gives you choice and control
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Choice of vendors, services, partners (vendor and platform neutral)
Control over your data (audit, reporting, long term availability)
Streamlines business processes, increases automation
Enables interoperability with external systems without data conversion
Benefit from an evolving standard developed by peers
Extend the standard to meet your internal needs
FpML Collateral Working Group
Copyright © 2011 International Swaps and Derivatives Association, Inc.
January 2011 – SLIDE 3
Collateral coverage in FpML
• 3 processes, 21 collateral messages developed in latest FpML version 5.1
Margin Call (10)
requestMargin
requestMarginRetracted
marginCallStatus
marginCallStatusRetracted
requestCollateralAcceptance
requestCollateralAcceptanceRetracted
collateralAcceptanceStatus
collateralAcceptanceStatusRetracted
disputeNotification
disputeNotificationRetracted
Substitution (6)
requestSubstitution
requestSubstitutionRetracted
substitutionStatus
substitutionStatusRetracted
substituteConfirmationStatus
returnConfirmationStatus
Interest (5)
requestInterest
requestInterestRetracted
interestStatus
interestStatusRetracted
interestStatement
• Covers end-to-end processes and messages as defined in ISDA’s electronic
messaging data requirements (November 2009) and more (see slide 11)
• Schema, Documentation and examples available for download from FpML.org
• Proposal to use FpML as a universal data exchange format for collateral
management
• Benefits of using FpML
– Open standard defined by the OTC industry, Collective design
– Provides flexible framework for future requirements
– Basis for company wide systems integration, process automation. FpML covers collateral and
more…
FpML Collateral Working Group
Copyright © 2011 International Swaps and Derivatives Association, Inc.
January 2011 – SLIDE 4
Margin Call Process
Equivalent FpML Margin Call Process
ISDA Electronic Messaging PDF – Margin Call
Streamlined electronic process covers full acceptance,
partial dispute, full dispute, collateral proposal,
acceptance/rejection of collateral, dispute notification
and more…
e.g.,
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support for segregated independent amounts
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gross vs net exposure treatment
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full disclosure to expedite dispute identification
FpML Collateral Working Group
Copyright © 2011 International Swaps and Derivatives Association, Inc.
January 2011 – SLIDE 5
Collateral Substitution Process
Equivalent FpML Substitution Process
ISDA Electronic Messaging PDF – Substitution
Streamlined electronic process covers substitution
request, rejection and acceptance of collateral
substitution, messages to confirm the
substitution, and more…
FpML Collateral Working Group
Copyright © 2011 International Swaps and Derivatives Association, Inc.
January 2011 – SLIDE 6
Interest Process (Bilateral)
Equivalent FpML Bilateral Interest Process
ISDA Electronic Messaging
Interest Process (Bilateral)
Streamlined electronic process covers interest
notification, acceptance or rejection of interest
notification and more…
FpML Collateral Working Group
Copyright © 2011 International Swaps and Derivatives Association, Inc.
January 2011 – SLIDE 7
Interest Process (Matching Party)
ISDA Electronic Messaging
Interest Process
FpML Interest Process
(using a third party matching service)
The same FpML collateral interest messages can
easily be used in a bilateral exchange or using a
third party matching service.
FpML Collateral Working Group
Copyright © 2011 International Swaps and Derivatives Association, Inc.
January 2011 – SLIDE 8
FpML Collateral Roadmap
2010 Q1
Jan
Feb
Q2
March
April
May
Q3
June
July
Aug
Q4
Sept
Oct
2011 Q1
Nov
Dec
Jan
Feb
March
Kick-off
Phase I Processes
Margin Call (completed)
Margin call development + reusable building blocks
Substitution (completed)
Interest
Substitution
Interest
(completed)
Phase II – 2011 (TBD)
Portfolio Reconciliation
Dispute Resolution
Settlement (?)
Phase II
1st Working Draft
• Full set of collateral messages in FpML 5.1
• Final version on schedule for February 2011
• Advanced draft available now for implementation
• Collaborative design, industry-driven
• Weekly meetings (since January 2010)
• Open forum, transparent decisions
(all communications, minutes available online)
ISDA electronic
messaging Nov 09
Fed Commitment
Letter March 1
2nd Working Draft
FpML 5.1 deliverables
Last Call Trial
Recommendation
Collateral Mgmt
Roadmap April 15
FpML 5.1 (First draft)
FpML Collateral Working Group
RECOMMENDATION
Copyright © 2011 International Swaps and Derivatives Association, Inc.
FpML 5.1 REC
January 2011 – SLIDE 9
FpML Standards Process
•
The ISDA electronic messaging document is a set of detailed business requirements that have gone
through a standards process that includes extensive analysis, committee review and standard
reviews to ensure it fits within the overall FpML structure and answers industry needs.
New industry requirements
e.g., Collateral messaging
FpML Collateral Working Group
Open
• Extensive analysis
• Broad industry input, real world scenarios
Scrutiny
• Implementation (leverages 5th Gen. framework)
• Group review  Testing
• Feedback  Refinements  Agreement
Quality
• Technical reviews
• Public reviews (working drafts)
• New messages validated for industry use
Copyright © 2011 International Swaps and Derivatives Association, Inc.
January 2011 – SLIDE 10
FpML vs ISO vs original data reqs
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Open forum (all emails, minutes, decisions are publicly available online / the only open forum)
Vendor neutral (only a vendor-neutral standard can enable true interoperability)
Broad industry participation (60+ participants, 37 firms represented)
Evolved from the ISDA requirements the messages evolved from the original requirements based
on the input from the group to support greater scalability from the perspective of agreement
types supported or the margining scenarios supported i.e.
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Reusable components built upon FpML’s inherent building block design
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The substitution messages could be designed in one session. The interest messages only took 2-3 sessions thanks to the work
put into designing reusable components during the development of the Margin Call messages (6 months of weekly meetings)
Benefits from FpML’s broad reach in the OTC derivatives space
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support for segregated independent amounts,
gross vs net exposure treatment
full disclosure to expedite dispute identification
It also recognized where requirements had evolved i.e. dispute resolution piece and segregated independent amounts.
Portfolio Reconciliation (already available in FpML 4.4)
CCP (LCH, CME, ICE actively participate in the development FpML, chair the FX WG, contribute proposals to BPWG, collateral
WG, are on the FpML Standards Committee)
Collateral industry will need a standard that can reach across the collateral process (Collateral Margin Call + Subst. + Interest +
Portfolio Rec + CCP)
long term working towards a common business model with both FpML and ISO 20022 compliant
syntax
FpML Collateral Working Group
Copyright © 2011 International Swaps and Derivatives Association, Inc.
January 2011 – SLIDE 11
Collateral Industry Challenges
and solution
Clearing
Inter-
operability
Port
Rec
Margin Call
Substitution
Interest
FpML
FpML data exchange standard provides existing functionality that spans across key collateral activities.
- an open, extensible, and rich framework that can be freely used as a common language internally and between trading partners
- an inherent way to interconnect disparate processes together, enable interoperability and meet regulatory demands
FpML Collateral Working Group
Copyright © 2011 International Swaps and Derivatives Association, Inc.
January 2011 – SLIDE 12
Resources
• Download the collateral schema and examples at:
– http://www.fpml.org/spec/fpml-5-1-4-lcwd-1/ (see the reporting view)
• Drive the design of messages to fit your needs and the collateral
industry needs, Participate to the FpML Collateral Working
Group
– http://www.fpml.org/wgroup/colwg/colwg.html Charter
– http://www.fpml.org/_wgmail/_colwgmail/threads.html Mailing List
• Questions
– Karel Engelen, ISDA ([email protected])
FpML Collateral Working Group
Copyright © 2011 International Swaps and Derivatives Association, Inc.
January 2011 – SLIDE 13