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FPML-CWG Collateral WG Kick-Off Meeting Minutes - 1/27/2010



Participants

-        Anil Panchal (GlobeOp Financial Services)

-        Sammy Lee (GlobeOp Financial Services)

-        Kaizad Bhathena (GlobeOp Financial Services)

-        Charles Miller (JPMorgan)

-        Jamie Hough (DE Shaw)

-        Lucio Iida  (Blackrock)

-        Michael Dever (State Street)

-        Wayne (State Street)

-        Nicole Jolliffe (Swift)

-        Vinod Jain (Headstrong)

-        Vivian Wu (Goldman Sachs)

-        Eugene Sirota (Goldman Sachs)

-        Karel Engelen (ISDA)

-        Marc Gratacos (ISDA)

-        Irina Yermakova (ISDA)

-        Lyteck Lynhiavu (ISDA)

 

 

Discussion on the scope of the Working Group

-        Karel provided background information on the scope of the collateral work. The ISDA Collateral Committee has several very active working groups since last summer looking at different areas of the collateral process. One area included looking at ways to automate the collateral process. As a result, the committee published the processes in a detailed document “Standards for the Electronic Exchange of OTC Derivatives Margin Calls” at the end of 2009. The goal of the Working Group is to see how we can translate the requirements from that document into FpML.

-        Mike Dever (State Street) questioned the timing of the effort considering the move towards Central Clearing eliminates some of the processes we aim to automate.

·        Karel noted it is not known yet to what degree Central Clearing will happen for the different asset classes. There will continue to be OTC contracts and therefore the need to provide the OTC coverage even though they might not represent the bulk of the volume.

·        On the regulatory side, there is an understanding of the move towards Central Clearing but, at the same time, regulators want to see issues around dispute resolution and the bilateral collateral process standardized and automated.

 

·        ISDA is also working with Swift to cover collateral in the ISO 20022 model.

 

-        Vivian Wu (Goldman Sachs) requested clarification on the industry commitments on electronic messages and the timeframe for implementation.

·        Karel noted the OTC derivatives industry is working on a new letter to regulators that will be released early March and will give better direction on the commitments. The commitments and the letter will provide good guidance for implementation.

·        The working group wants to be in a position to say that the necessary messages are ready (or sufficiently far evolved) by the time the letter is released so that vendors can start working on implementation.

 

-        Mike Dever (State Street) inquired if the flows to custodians is in scope.

·        Karel clarified the starting scope is the process that has been described by the ISDA Collateral Committee (OTC process)

·        In the immediate term we want to make sure the FpML syntax is ready to cover these messages. However, the group can consider expanding the scope and should do so if other flows need to be covered, such as the custodian process. We'll update the draft scope document to reflect this.

·        Mike mentioned the flows have already been documented by the ISITC WG from the buy-side to the custodians (what is not covered is the upfront between the buy-side and counterparty) à Mike to circulate the document.

 

 

Action Items

1.      à ISDA to update the Working Group Charter (done -see attached)

·        ISDA to keep the group updated on the commitments that the Industry is making towards the regulatory community (done)

·        Expand the scope of the Working Group to include Custodian flows (done)

2.      à Mike to send the document on Custodian flows to Karel for circulation to the group

3.      à Anyone interested to chair the working group to contact Karel Engelen directly (kengelen@xxxxxxxx)

4.      à Everyone to review the ISDA paper on collateral processes (http://www.isda.org/c_and_a/pdf/Electronic-Messaging.pdf)

 

 

Logistics

-        The group agreed to meet Wednesdays at 10am NY

 

 

Next Meeting – Wednesday February 3, 2010 @ 10am NY / 3pm London time (1h30)

-        We’ll start looking at the collateral document and how we want to cover that in FpML

-        The charter will be reviewed for sign-off by the FpML Standards Committee

 

Dial-in details will follow

 

 



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Title: FpML Collateral Working Group Charter

FpML Collateral Working Group

bullet Group Charter

Title of Working Group FpML Collateral Working Group

Chair of Working Group TBD

Mission:

To extend the current FpML standard with the definition of the appropriate messages to support the collateral processes, building on the defined messaging framework.

Scope:

The FpML Collateral Working Group will extend the FpML standard with a definition of the standard messages to support the Collateral business processes, building on the work done by the ISDA Collateral Committee http://www.isda.org/c_and_a/pdf/Electronic-Messaging.pdf, which described the business processes to support:
  • Margin Call
  • Interest Payment
  • Substitution

The Working Group may also work on additional collateral processes (e.g., flow to custodians) depending on industry and regulatory priorities, however the main focus of the working group will be to cover business processes described by the ISDA Collateral Committee. This is part of the broader collateral efforts committed to the regulators by the OTC derivatives industry. ISDA will keep the working group updated on these commitments as more information becomes available.

The group may propose appropriate amendments / additions to the product working groups in order to fit the appropriate product content within the messages. For proposed changes to the messaging framework, the group will work with the Architecture Working Group. The FpML messages are expected to be ISO compliant, a submission will be made to cover the business model in ISO 20022.



Milestones Date for completion:
Kick-Off Meeting January 2010
Working Draft for review February 2010
Working Draft published TBD
Recommendation Released TBD
Dissolution of the Products Working Group TBD

Meeting Schedule

The whole group should meet weekly by telephone (up to 2 hours).
A group discussion list will be used to manage group communication and to provide an archive of discussions and decisions.


Rules of Operation

The working group will adopt the FpML Rules of Operation (Working Groups section). These outline best-practices for meetings, managing member participation, reaching group consensus and voting.

Estimated time commitment from Participants:

Members should be prepared to commit approximately 1/2 day per week. Full members must have the agreement and support of their management before signing up to the Working Group.

It is expected that participants will be signing up for action items and proposals, and will generally be participating in discussions during the week. Participants will also need to liaise with other working group members to ensure the consistency of the standard.

Experience has shown that occasional face-to-face meetings can expedite the process so members should be aware that some travel and full-day meetings might be required.

Target Participants:

Collateral business specialists, business analysts, technical architects.





bullet Chair Contact Information

Chair of Working Group: TBD
Chair Email Contact: TBD