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FPML-CWG FpML Collateral WG - MC1 discussion



We received some good feedback below from Kaizad regarding the MC1 message (Issuance of Margin Call).

 

I encourage everyone to comment by email by replying to this thread (colwg@xxxxxxxx). Based on your feedback we can take another crack at modeling the schema and developing examples for next week.

 

1)      Can other firms confirm the scenarios or can think of other scenarios?

2)      & 3) Based on the MC1 data elements (listed ISDA’s electronic-messaging.pdf p.16-17) can you identify which fields we should consider making optional

4)       

5)      There was general agreement from the group on this approach (and that portfolio reconciliation is out of scope). We’ll see how we can reference existing portfolio messages (supported in FpML) in the margin call message. The concern some firms had was that if the portfolio information was not part of the initial margin call message, it would result in an unnecessary number of dispute messages (requesting clarification on the portfolio).

 

Thanks, Lyteck

 

 

From: Kaizad Bhathena [mailto:kbhathen@xxxxxxxxxxx]
Sent: Thursday, February 04, 2010 9:11 AM
To: Lyteck Lynhiavu
Cc: Sammy Lee; Anil Panchal
Subject: RE: FpML Collateral WG - MC1 discussion

 

Hi,

 

Please be advised that since I do not have the group ID I am replying to you. If required you could have this added on the minutes of the said call.

 

On the yesterday discussion of the FpML schema, please find below the points which may require some feedback

 

1)     Currently the “Request Margin Call” message (MC1) schema displays the combine margin call which could be raised by the concern parties. However from our experience there may be a possibility where separate calls are raised by the concern parties (One on the upfront Margin and the other on the MTM). These calls have separate collateral amounts placed irrespectively. In these cases we may require a new schema to handle such calls.

Below table shows 3 scenarios and how the margin requirement could differ:

 

Example of collateral Call (as per schema)

Example of collateral Call (only on Upfront Margin)

Example of collateral Call (only on MTM)

MTM

                   2,000,000.00

 

                   2,000,000.00

Upfront Margin

                       500,000.00

                       500,000.00

 

Total collateral held

                   1,000,000.00

                   1,000,000.00

                   1,000,000.00

Margin Requirement

                   1,500,000.00

                     (500,000.00)

                   1,000,000.00

  

 

2)     We would also require verifying if all the fields mentioned on the schema is “mandatory” if so, we may require changing the same. The reason being in some of the cases there may not be any Threshold amounts or MTA or Rounding available and if we keep those fields mandatory it might cause some issue.

 

3)     We may also look at re-arranging the order of the fields for example keeping the “Margin Requirement” at the end of the message etc.

 

4)     As discussed this schema only provide the summarized margin call. It does not have functionality of sending the portfolio associated to the call. We need to look at how to provide linkage between the schema and the portfolio (if sent separately).

 

Many thanks

Kaizad Bhathena

Associate Director - OTC

Globeop Financial Services

801/802, 8th Floor, Interface Bldg., No. 11,

Malad (W), Mumbai 400 064, India.

Phone : (91-22) - 40948636

www.globeop.com

 

From: Lyteck Lynhiavu
Sent: Wednesday, February 03, 2010 1:01 PM
To: 'kbathen@xxxxxxxxxxx'
Subject: FpML Collateral WG - MC1 discussion

 

Kaizad:

 

Thanks for your active participation in the collateral discussions.

 

As discussed, could you send me a summary of the points you raised? I can summarize them in the minutes.

 

You can also send to the group if you want… that may generate good discussion from others via the mailing list.

 

--

Best,

 

Lyteck Lynhiavu

ISDA

360 Madison Ave, 16th Floor

New York, NY 10017

212-901-6010

 



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