FPML-CWG MC3c Propose Collateral / Securities & FpML equivalent

At the last meeting (June 2^nd) we reviewed the Collateral Proposal message (MC3c). We focused on the <security> structure that we plan to use to capture securities-related information, when securities are proposed as collateral. We agreed the model needs to be improved, could have better integration with the existing FpML <bond> model, and perhaps reuse existing FpML extensions work (re: <Collateral> and <BondContract>).

The forwarded email below contains supporting material (send 5/11) that could be helpful in the redefinition of the <security> model. Perhaps we can use this consolidated email as a basis for discussion.

Here is the current MC3c model as last proposed:

[…]

<instrumentId instrumentIdScheme="ISIN">D20659DK7</instrumentId>
                                                                <description>EUR Region of Lazio 6.355%</description>
                                                                <maturity>2030-10-14</maturity>
                                                </bond>
                                                <currency>EUR</currency>
                                                <nominal>500000</nominal>
                                                <price>10.0</price>
                                                <valueDate>2010-06-09</valueDate>
                                                <marketValue>5000000</marketValue>
                                                <haircut>0.90</haircut>
                                                <collateralValue>4500000</collateralValue>
                                </security>
                </deliver>

[…]

The elements listed inside <security> correspond to the data fields listed in the ISDA electronic-messaging.pdf, p.21, for MC3c.

Thanks, Lyteck

From: owner-colwg@xxxxxxxx [mailto:owner-colwg@xxxxxxxx] On Behalf Of richard.barton@xxxxxxxxxxxxxxxx
Sent: Tuesday, May 11, 2010 8:46 PM
To: colwg@xxxxxxxx
Subject: FPML-CWG MC3c Propose Collateral / Securities & FpML equivalent

All,

Please find reference to the 2 FpML extensions which Harry was referring to at the last call: JPM (bond contract) and Repo (forward leg…)

Basically, extensions are proposals that fall outside the OTC scope and not included in the spec, or reviewed by ISDA or working groups… they extend the FpML schema with new definitions.

The info still needs to be distilled but here’s the raw information:

1. FpML extension 2.2 for from the Repo WG

- http://www.fpml.org/documents/extensions.html (see v2.2)

- FpMLExtensionsV22.doc

- Harry mentioned the forwardLeg among other elements of interests

Here’s the collateral piece expanded from the Repo Working Group

2. FpML extension 1.0 for bond Contract from JPM (earlier version as Harry suggested)

- http://www.fpml.org/documents/extensions.html (see v1.0)

- FpMLExtensionsV10.doc

- Page 7

BondContract

From: Lyteck Lynhiavu
Sent: Wednesday, May 05, 2010 1:41 AM
To: 'richard.barton@xxxxxxxxxxxxxxxx'
Subject: MC3c Propose Collateral / Securities & FpML equivalent

Richard,

*** the ISIN/Cusip/Sedol will be captured in FpML using <instrumentId>

*** several elements from MC3c could be mapped to existing FpML elements

MC3c FpML

Nominal <----> parValue (Specifies the nominal amount of a fixed income security or convertible bond.)

ISIN/Cusip/Sedol <----> instrumentId

Security Name <----> description

Maturity Date <----> Maturity

Price?

Haircut?

Market Value <----> faceAmount ? (Specifies the total amount of the issue. Corresponds to the par value multiplied by the # of issued security.)

<instrumentId> In the specification:

6.3.1.1 bond and convertibleBond

For a credit default swap, bond or convertibleBond is used to specify a Reference Obligation's CUSIP/ISIN, Maturity and Coupon values. The instrumentId element is used to specify CUSIP/ISIN. The mandatory instrumentIdScheme is used to specify whether the id provided is a CUSIP or an ISIN. Since multiple occurrences of instrumentId are allowed, the schema supports the specification of both the obligation's CUSIP and ISIN, if they both exist. The couponRate and maturity elements are used to represent the Coupon and Maturity terms respectively.

Below are several examples taken from FpML examples (downloadable with the FpML schema). InstrumentId is reused within several blocks, including bond, convertibleBond, equity.

Ex-1

         <convertibleBond>
            <instrumentId instrumentIdScheme="ISIN">ExampleISIN2</instrumentId>
            <currency>JPY</currency>
            <clearanceSystem>DTCC</clearanceSystem>
            <issuerName>DEF Holdings</issuerName>
            <couponRate>0.0</couponRate>
            <maturity>2009-06-15-05:00</maturity>
            <paymentFrequency>
               <periodMultiplier>6</periodMultiplier>
               <period>M</period>
            </paymentFrequency>
            <redemptionDate>2009-06-15-05:00</redemptionDate>
         </convertibleBond>

Ex-2

<underlyer>
               <basket>
                  <basketConstituent>
                     <equity>
                        <instrumentId instrumentIdScheme="http://www.fpml.org/spec/2002/instrument-id-ISIN-1-0">IBM.N</instrumentId>
                        <description>ABN AMRO HOLDING NV</description>
                        <exchangeId>AEX</exchangeId>
                        <relatedExchangeId>LIFFE</relatedExchangeId>
                     </equity>
                  </basketConstituent>
                  <basketConstituent>
                     <equity>
                        <instrumentId instrumentIdScheme="http://www.fpml.org/spec/2002/instrument-id-ISIN-1-0">MSFT.O</instrumentId>
                        <description>AEGON NV</description>
                        <exchangeId>AEX</exchangeId>
                        <relatedExchangeId>LIFFE</relatedExchangeId>
                     </equity>
                  </basketConstituent>
                  <basketConstituent>
                     <equity>
                        <instrumentId instrumentIdScheme="http://www.fpml.org/spec/2002/instrument-id-ISIN-1-0">B.N</instrumentId>
                        <description>AIR LIQUIDE</description>
                        <exchangeId>PAR</exchangeId>
                        <relatedExchangeId>LIFFE</relatedExchangeId>
                     </equity>
                  </basketConstituent>
               </basket>
            </underlyer>

Ex-3

         <bond>
            <instrumentId instrumentIdScheme="CUSIP">ExampleCUSIP1</instrumentId>
            <currency>JPY</currency>
            <clearanceSystem>Clearstream</clearanceSystem>
            <couponRate>0.014</couponRate>
            <maturity>2011-03-20-05:00</maturity>
            <parValue>10000000000</parValue>
            <faceAmount>10000000000</faceAmount>
         </bond>

Ex-4

         <underlyer id="USD-LIBOR-BBA">
            <floatingRate>
               <floatingRateIndex>USD-LIBOR-BBA</floatingRateIndex>
               <indexTenor>
                  <periodMultiplier>3</periodMultiplier>
                  <period>M</period>
               </indexTenor>
            </floatingRate>
         </underlyer>
         <underlyer id="_411352AA5">
            <bond>
               <instrumentId instrumentIdScheme="http://www.fpml.org/spec/2002/instrument-id-CUSIP-1-0">411352AA5</instrumentId>
            </bond>
         </underlyer>

Ex-5

            <underlyer>
               <singleUnderlyer>
                  <equity>
                     <instrumentId instrumentIdScheme="http://www.example.com/instrument-id-Reuters-RIC-1-0">BMWG.DE</instrumentId>
                     <instrumentId instrumentIdScheme="http://www.example.com/instrument-id-ISIN-1-0">DE0005190003</instrumentId>
                     <description>BMW ORD</description>
                     <currency>EUR</currency>
                     <exchangeId exchangeIdScheme="http://www.example.com/exchange-id-REC-1-0">GER</exchangeId>
                  </equity>
                  <openUnits>100000</openUnits>
                  <dividendPayout>
                     <dividendPayoutRatio>1</dividendPayoutRatio>
                  </dividendPayout>
               </singleUnderlyer>
            </underlyer>

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