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Re: FPML-CWG Collateral WG Meeting: Wed 17 February 2010




Hi, I have a couple of suggestions for re-structuring the RequestMarginCall (MC1) message.

The first is a structure to express the direction of MTM exposure amounts:



We identify both parties on either side of the exposure relationship, consistent with the party-neutral FpML models expressing relationships such as BuyerSeller, PayerReceiver etc. (see fpml-shared.xsd). Not sure about the element naming - "exposed" party seems reasonable, but I wasn't sure how to express the other side - I took the idea of "obligation" from the 2005 ISDA Collateral Guidlines, but I'm open to suggestions.

Second, we need a structure to enforce the presence of at-least-one-of (total MTM, upfront margin):



- so we can have totalMarkToMarket optionally followed by totalUpfrontMargin, or totalUpfrontMargin alone, but both elements cannot be absent.

I attach the edited schema file - please note this is just an initial edit for purposes of illustration, not a completed solution.

Best regards,
Harry










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17/02/2010 04:07

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FPML-CWG Collateral WG Meeting: Wed 17 February 2010





Please find the details for tomorrow’s meeting.
 
Wednesday February 17, 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
 
è Please review the following data fields, for discussion at the meeting.
 
Agenda:
-   Revisit MC1 message (request for margin call) based on last week’s comments + Richard & Kaizad proposals (doc/zip file)
-   Continue discussion on MC3a data fields (accept call & propose collateral) (PDF page 18-19)
-   Confirm that MC3b (accept call) and MC3c (propose collateral) are covered by MC3a
-   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
 
(Ref: http://www.isda.org/c_and_a/pdf/Electronic-Messaging.pdf)
 



The information contained in either this email and, if applicable, the attachment, are confidential and are intended only for the recipient. The contents of either the email or the attachment may not be disclosed or used by anyone other than the addressee. If you are not the intended recipient(s), any use, disclosure, copying, or distribution is prohibited and may be unlawful. If you have received this communication in error, please notify us by e-mail at isda@xxxxxxxx <mailto:isda@xxxxxxxx> then delete the e-mail and all attachments and any copies thereof. This communication is part of an ISDA process and is not intended for unauthorized use or distribution.


----- Message from Kaizad Bhathena <kbhathen@xxxxxxxxxxx> on Tue, 16 Feb 2010 09:26:13 -0500 -----
To:
Lyteck Lynhiavu <LLynhiavu@xxxxxxxx>
cc:
Anil Panchal <apanchal@xxxxxxxxxxx>, Sammy Lee <SLee@xxxxxxxxxxx>
Subject:
RE: FpML Collateral WG - MC1 discussion


Hi Lyteck,
 
Further to your correspondence, please be advised that from our current experience, we have seen a change in the manner the Threshold gets reported on the margin call. Threshold is applied on the sum total of “Total MTM and Total Upfront Fees”.
 
Also on your MC1 schema the name and IDs of the concern party is mentioned at the very end. Ideally this should be on the top of any generated calls. The reason behind is that when a person is looking at the margin issuance call, he/she would like to know which are the 2 parties associated to the said call.
 
We would also need to look at how to accommodate the “negative number” in the margin call issuance schema
 
Below is the order in which the elements could be grouped.
 

  Where Threshold is considered on sum total of upfront fee and MTM
Example
1
Valuation Date
10-Feb-2010
2
Base Currency
 USD
3
Total Exposure (Total MTM)                      5,000,000.00
4
Upfront Margin (Initial Margin)                      1,000,000.00
5
Threshold                      1,000,000.00
     
6
Collateral Held / (Pledged)                      2,000,000.00
7
Collateral Pending                    (1,000,000.00)
8
Minimum Transfer Amount                          250,000.00
9
Rounding Amount                            10,000.00
10
Margin Requirement                      4,000,000.00
11
Currency of the call
 USD
12
Type
 Cash

 
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 [mailto:LLynhiavu@xxxxxxxx]
Sent:
Friday, February 12, 2010 8:25 PM
To:
Kaizad Bhathena
Subject:
RE: FpML Collateral WG - MC1 discussion

 
Kaizad:
 
Based on the last few discussions, the group seems to agree that the MC1 content model would be easier to use/understand if some data elements were grouped or reordered.
 
Would you be willing to propose a grouping (e.g., new XML containers that wrap a few related elements) and a better order for the elements?
 
                <valuationDate>2010-02-01Z</valuationDate>
               
<baseCurrency>USD</baseCurrency>
               
<totalMTM>20000000</totalMTM><!-- made optional in schema -->
               
<threshold>1000000</threshold>
               
<totalUpfrontMargin>2000000</totalUpfrontMargin><!-- made optional in schema -->
               
<pendingCollateral>222222</pendingCollateral>
               
<totalCollateral>5000000.12</totalCollateral><!-- can include decimals -->
               
<minimumTransferAmount>100000.99</minimumTransferAmount>
               
<marginRequirement>16000000</marginRequirement>
               
<rounding>
                               
<roundingDirection>Down</roundingDirection>
                               
<precision>1</precision>
               
</rounding>
               
<expectedCollateral>
                               
<currency>USD</currency>
                               
<type>Cash</type>
               
</expectedCollateral>
If you are interested, we could review enhancement proposals at the next meeting. Let me know.
 
Thanks,
Lyteck
ISDA
 
From: Lyteck Lynhiavu
Sent:
Thursday, February 04, 2010 11:56 AM
To:
colwg@xxxxxxxx
Subject:
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
 
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
 
 



The information contained in either this email and, if applicable, the attachment, are confidential and are intended only for the recipient. The contents of either the email or the attachment may not be disclosed or used by anyone other than the addressee. If you are not the intended recipient(s), any use, disclosure, copying, or distribution is prohibited and may be unlawful. If you have received this communication in error, please notify us by e-mail at isda@xxxxxxxx <mailto:isda@xxxxxxxx> then delete the e-mail and all attachments and any copies thereof. This communication is part of an ISDA process and is not intended for unauthorized use or distribution.



This email with all information contained herein or attached hereto may contain confidential and/or privileged information intended for the addressee(s) only. If you have received this email in error, please contact the sender and immediately delete this email in its entirety and any attachments thereto.[attachment "Collateral_xml_20100217.doc" deleted by Harry MCALLISTER/UK/EUROPE/GROUP] [attachment "Collateral_xml.zip-email" deleted by Harry MCALLISTER/UK/EUROPE/GROUP]

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