FpML-CD updated minutes 2007-07-25

Changes between *

From: cdwg@xxxxxxxx [mailto:cdwg@xxxxxxxx] On Behalf Of Marc Gratacos
Sent: Thursday, July 26, 2007 4:06 AM
To: cdwg@xxxxxxxx
Subject: FpML-CD minutes 2007-07-25

Participants

Ben Lis (T-Zero), chair

Rupali Parab (Goldman Sachs)

Andrew Parry (JPMorgan)

Derek Kleinbauer (JPMorgan)

Karel Engelen (ISDA)

Marc Gratacos (ISDA)

Henri Pegeron (DTCC)

Andy Byatt (DTCC)

Overview of Credit Event Notice Timeline and Documentation

March/April 2006 ISDA looked at doing an RFP (Request For Proposal) process to cover credit events. This was deferred until December since the settlement protocol took priority. In December the RFP was reopened focusing on credit event notices. The figure of a central event administrator was discussed. However, the RFP was not implemented since the Senior Operations representatives wanted to cover this in DTCC. Since then, there have been discussions to incorporate a messaging service for credit event notices at DTCC, not linked with the trade warehouse for the moment. Some of the topics of discussions are the inclusion of the publicly available information and whether it would available for request. In terms of the description of the business process, DTCC is drafting a service description for how this process will work in the warehouse. This will be reviewed by the legal experts and the FpML community. It is expected that DTCC will submit a proposal to the FpML CDWG based on the service description. There is a proposal available in FpML for credit events.

2. Mortgage Credit Events & Floating Rate Payment Events

Rupali went through her presentation.

Validation rules

There was a joint session with the Validation WG to review the rules and add support for the new products. There were some questions for the group:

Description of Pre-Conditions:

- SingleName: creditDefaultSwap/generalTerms/referenceInformation/referenceObligation/bond or creditDefaultSwap/generalTerms/referenceInformation/referenceObligation/convertibleBond

*While discussing this precondition, Ben asked whether we should include convertibleBond as part of the pre-condition since it seems that most of users tend to use only bond as underlyer for single name CDS. Andrew Parry clarified the following points:

#1 The base type of credit underlyer in FpML is Bond

#2 Convertible Bond extends Bond to include underlying equity and redemption date

#3 Distinct credit underlyer types such as Loan and Mortgage have been introduced to support credit derivatives on these types. These types extend the base class UnderlyingAsset rather than Bond

We had also a discussion of the extreme case of everything being untyped and just identified, which would result in a "run time" identification of type by each message endpoint that was able to look up reference data for that identifier

Everyone agreed that we will adhere to the current practice of type and identification being the minimum content, other optional information which is not strictly transactional may be carried, such as borrower, lien, ... which may be carried on a Loan*

- Loan: creditDefaultSwap/generalTerms/referenceInformation/referenceObligation/loan

- ABS/MBS: creditDefaultSwap/generalTerms/referenceInformation/referenceObligation/mortgage

cd-1: Loan prerequisite needs to be added: new rule cd-1c with Loan prerequisite.

cd-2: It applies to all products. Is AsSpecifiedInMasterAgreement enough to identify the party?

Do we need to specify a short/long form for cds on loans/mortgages? We got agreement that the group needs to spend more time on this reviewing existing definitions and looking at new rules of loans and mortgages. In addition it would be good to publish some of these rules

LCDX tranches

Clients have asked DTCC to add support for LCDX tranches. Add a scheme value ‘LCDXTranche’. Henri will send an e-mail proposing this.

AOB

For mortgage products, would the effective date of the new trade change in respect to the original trade? Karel will check if there is an exception for mortgages but as default the effective date of the new trade should be the effective date of the original trade.

Roadmap. The current coverage for version 4.4 seems to be adequate in terms of agenda for the group.

Let me know if I missed anything.

Kind Regards,

-Marc

+13472846531

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