RE: FPML-CWG Collateral WG Meeting: Wed 10 March 2010

Please find attached an update to the spreadsheet I forwarded last week. As requested I have tried to show the suggested message content with some example scenarios. They may not make a lot of sense without some explaination but I hope we can cover this in todays call.

There are three messages Margin Call Response, Collateral Proposal and Collateral Proposal Response. The first two are suggested replacements for MC 3a, b, c, 5, 6. The last one in conjunction with the second would work to replace MC8, 9, 10, 11, 12.

In the Margin Call Response I have tried to capture a few, but in no way exhaustive, set of scenarios. These cover responses to calls where there is segregation of IM and VM, no segregation of IM and VM, disputes, partial agreement, full agreement, a combination of agreeing and disputing for IM and VM in a single response and also showing individual responses too. Also note that because i am trying to represent this in a flat structure it does not look like the final message definition itself would look but i was hoping this would help to initially explain the approach and then we could introduce a more xsd representation.

For the Collateral Proposal and Collateral Proposal Response this covers proposals of cash, securities, multi movements for the same proposal, proposals covering segregating IM and VM, proposals where the IM and VM are not segregated.

The response to the proposal supports agreeing, rejecting and scenarios where there is agreement and rejection when it comes to segregated proposals. I did not add examples to the response yet.

Please note that the premise of the reduced messages are that for proposal and proposal response this would handle the proposal and counter proposal ISDA definition without the need for separate messages. To counter propose you would use the comment field with a rejection where you would specify the piece(s) you would prefer to receive. This could be specific ISIN/Notional combinations in the case of returns, where the collateral held by the other party is known or general instrument types where there is a request for new collateral and it is not known what the other party may have in their inventory.

thanks

Richard

From: owner-colwg@xxxxxxxx [mailto:owner-colwg@xxxxxxxx] On Behalf Of Lyteck Lynhiavu
Sent: Tuesday, March 09, 2010 4:24 PM
To: colwg@xxxxxxxx
Subject: FPML-CWG Collateral WG Meeting: Wed 10 March 2010

Please find the details for tomorrow’s meeting.

Wednesday March 10, 2010 @ 10am NY / 3pm London time

Dial in Details:

US Dial-in: 888-481-3032

UK Toll Free: 0800 904 7961

International Dial-in: 617-801-9600

Passcode: 8682747

Agenda:

· Special guests Emily Gu and James Duff from UBS will provide an overview of recently published collateral papers (see ISDA news release):

- ISDA Independent Amount Whitepaper (March 1, 2010)

- ISDA Market Review of OTC Derivative Bilateral Collateralization Practices (March 1, 2010)

· Working Group Chair

· Next week’s schedule change (Daylight Saving Time): Proposing 10am NY / 2pm London (instead of 3pm)

1. Discuss Margin Call Response (MC3/5/6 message consolidation) proposal (Richard to send updated Excel)

2. Discuss Collateral Proposal/Accept/Reject (MC7/8/9/10 message consolidation) proposal (Richard)

3. MC5/MC6 Dispute Reasons: review consolidated list

4. What happens after MC12/13? Closing the process loop (action item 3)

Thanks, Lyteck

Ref: http://www.isda.org/c_and_a/pdf/Electronic-Messaging.pdf

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