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FPML-CWG Collateral WG Meeting: Wed 10 February 2010



Please find the details for tomorrow’s meeting.

 

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

 

Dial in Details:

      US Dial-in:             888-481-3032

      UK Toll Free:           0800 904 7961

      International Dial-in:  617-801-9600

      Passcode:               8682747

 

Note:

 

Following last week’s meeting where the group had many good questions related to the MC1 data fields during the review of the draft schema and XML examples, perhaps it will make better sense going forward, to step back and first validate the data elements listed in ISDA’s Electronic Messaging PDF.

 

Once we agree on the fields, and we’re confident they can support our business messaging requirements, we’ll then be able to build and validate the schema and examples more efficiently and rapidly.

 

This week, we propose to review the data fields for 3 core messages from the margin call process.

 

è Please review the following data fields beforehand, for discussion at the meeting.

 

Agenda:

-    Revisit MC1 message (request for margin call) based on last week’s comment (revised schema and example to follow)

-    à Review MC3a data fields (accept call & propose collateral) (PDF page 18-19)

-    à Review MC5 data fields (full dispute) (PDF page 22-23)

-    à Review MC6 data fields (partial dispute) (PDF page 23-24)

-    AOB

 

Thanks, Lyteck

 



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Attachment: Electronic-Messaging.pdf
Description: Electronic-Messaging.pdf

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From: owner-colwg@xxxxxxxx [mailto:owner-colwg@xxxxxxxx] On Behalf Of Lyteck Lynhiavu
Sent: Thursday, February 04, 2010 11:56 AM
To: colwg@xxxxxxxx
Subject: 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)      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


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Participants

-          Anil Panchal (GlobeOp Financial Services)

-          Sammy Lee (GlobeOp Financial Services)

-          Kaizad Bhathena (GlobeOp Financial Services)

-          Charles Miller (JPMorgan)

-          Lucio Iida  (Blackrock)

-          Malene McMahon (Swift)

-          Nicole Jolliffe (Swift)

-          Vinod Jain (Headstrong)

-          Eugene Sirota (Goldman Sachs)

-          Harry McAllister (BNP Paribas)

-          Mike Rouse (BNP Paribas)

-          Karel Engelen (ISDA)

-          Marc Gratacos (ISDA)

-          Irina Yermakova (ISDA)

-          Lyteck Lynhiavu (ISDA)

 

Notes

-          The group approved the working group charter (updated: it was approved 2/08 by the Standards Committee)

-          The group reviewed a first version of the MC1 and MC2 messages modeled in FpML. This generated good discussion and feedback that will be considered in the next revision of the schema:

·         Scope clarification

1.       Portfolio reconciliation should not be modeled but referenced in message

2.       Collateral Recalls can be modeled using MC1

·         Syntax (e.g., expand MTA abbreviation)

·         Cardinality (optionality) of elements (e.g., MTM, Upfront Margin) may differ from ISDA requirements document (à1 , 2)

·         Order of elements may differ from ISDA requirements document (à1, 2)

·         CreditSupportAgreement should include the (currently optional) ‘identifier’ element which would reference the contractual agreement (that grants authority to the margin call)

·         Decimal representation: (please correct me if I am wrong) the data elements as defined in the current draft schema will allow for decimal values to be captured; It will be up to a rendition engine to render/round for final presentation. (The current ISDA requirements document calls for numbers “with commas & no decimal places”, e.g., 3,000,000.)

 

Action Items

1.       à Kaizad to circulate raised concerns/points including examples – done (attached MC1 discussion)

2.       à Firms to compare data elements from ISDA requirements document with actual notices being exchanged. It would help if firms can share margin call examples with the group.

 

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

-          We’ll revisit MC1 based on feedback and tackle ancillary messages related to the Margin Call Process.

-          We’ll start looking at an initial set of messages for the Substitution and Interest Payment processes.

 

Dial-in details and materials (schema and xml examples) will be sent Tuesday

 

Thanks, Lyteck

--- Begin Message ---

 

From: owner-colwg@xxxxxxxx [mailto:owner-colwg@xxxxxxxx] On Behalf Of Lyteck Lynhiavu
Sent: Thursday, February 04, 2010 11:56 AM
To: colwg@xxxxxxxx
Subject: 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)      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


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