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RE: FpML-EQD Change Equity Option field from Integer to decimal

Robert,

The multiplier was originally added for the AEJ Options MCA.

In this context it is used on an index option to adjust the Option Cash
Settlement Amount in line with the multiplier used in the corresponding
futures contract. That way you can align your hedge and the payoff from
your options.

This explains the documentation for the element: 

<xsd:documentation xml:lang="en">Specifies the contract multiplier that
can be associated with an index option.</xsd:documentation> 

It also explains the nonNegativeInteger... multipliers are never
decimals for futures contracts.

If you have clients asking for the multiplier to be a decimal for use
with the Rate of Return on an equity swap, then there should be no
problem with making it a decimal. 

Perhaps you will want to update the documentation for the element to
specify it's exact use for equity swaps as opposed to options?

Thanks,


Piers Evans

-----Original Message-----
From: eqdwg@xxxxxxxx [mailto:eqdwg@xxxxxxxx] On Behalf Of Robert Masri
Sent: 08 October 2007 16:51
To: eqdwg@xxxxxxxx
Subject: Re: FpML-EQD Change Equity Option field from Integer to decimal

Hi Andrew,

The Multiplier refers to the percentage or amount specified on a
confirmation, which allows parties to adjust the Rate of Return.
This field is used in the ISDA 2005 AEJ MCA where one is the default,
but the MCA allows the value to be modified in the transaction
supplement.
Currently, FpML only allows whole numbers, and firms need the ability to
specify ".5" for 50%  or ".75" for 75% .

Also, do you know why this field, a multiplier,  was limited to only
whole numbers?


Regards,
Robert




 

             andrew.p.parry@jp

             mchase.com

             Sent by:
To 
             eqdwg@xxxxxxxx            eqdwg@xxxxxxxx

 
cc 
 

             10/03/2007 03:27
Subject 
             AM                        Re: FpML-EQD Change Equity Option

                                       field from Integer to decimal

 

             Please respond to

              eqdwg@xxxxxxxx

 

 

 




Robert

What is the business justification for this change ?

Regards

Andrew Parry
+44 20 7325 1486
Exotics and Hybrids Architecture
JP Morgan




Robert Masri <rmasri@xxxxxxxx>
Sent by: eqdwg@xxxxxxxx
02/10/2007 22:17
Please respond to
eqdwg@xxxxxxxx


To
eqdwg@xxxxxxxx
cc

Subject
FpML-EQD Change Equity Option field from Integer to decimal







We have received requests from dealers to allow the Index Option
multiplier to support decimals.
In the fpml-eqd-4-3.xsd scheme, the
EquityOptionTransactionSupplemen.multiplier element should have its type
changed from "xsd:positiveInteger"  to "xsd:decimal".


The change has been bolded below:

<xsd:complexType name="EquityOptionTransactionSupplement">
    <xsd:annotation>
      <xsd:documentation xml:lang="en">A type for defining equity option
transaction supplements</xsd:documentation>
    </xsd:annotation>
    <xsd:complexContent>
      <xsd:extension base="EquityDerivativeShortFormBase">
        <xsd:sequence>
          <xsd:element name="exchangeLookAlike" type="xsd:boolean"
minOccurs="0">
            <xsd:annotation>
              <xsd:documentation xml:lang="en">For a share option
transaction, a flag used to indicate whether the transaction is to be
treated as an 'exchange look-alike'. This designation has significance
for how share adjustments (arising from corporate actions) will be
determined for the transaction. For an 'exchange look-alike' transaction
the relevant share adjustments will follow that for a corresponding
designated contract listed on the related exchange (referred to as
Options Exchange Adjustment (ISDA defined term), otherwise the share
adjustments will be determined by the calculation agent (referred to as
Calculation Agent Adjustment (ISDA defined term)).</xsd:documentation>
            </xsd:annotation>
          </xsd:element>
          <xsd:element name="exchangeTradedContractNearest"
type="xsd:boolean" minOccurs="0">
            <xsd:annotation>
              <xsd:documentation xml:lang="en">For an index option
transaction, a flag used in conjuction with Futures Price Valuation
(ISDA defined term) to indicate whether the Nearest Index Contract
provision is applicable. The Nearest Index Contract provision is a rule
for determining the Exchange-traded Contract (ISDA defined term) without
having to explicitly state the actual contract, delivery month and
exchange on which it is traded.</xsd:documentation>
            </xsd:annotation>
          </xsd:element>
          <xsd:element name="multipleExchangeIndexAnnexFallback"
type="xsd:boolean" minOccurs="0">
            <xsd:annotation>
              <xsd:documentation xml:lang="en">For an index option
transaction, a flag to indicate whether a relevant Multiple Exchange
Index Annex is applicable to the transaction. This annex defines
additional provisions which are applicable where an index is comprised
of component securities that are traded on multiple
exchanges.</xsd:documentation>
            </xsd:annotation>
          </xsd:element>
          <xsd:element name="methodOfAdjustment"
type="MethodOfAdjustmentEnum" minOccurs="0" />
          <xsd:element name="localJurisdiction" type="Country"
minOccurs="0">
            <xsd:annotation>
              <xsd:documentation xml:lang="en">Local Jurisdiction is a
term used in the AEJ Master Confirmation, which is used to determine
local taxes, which shall mean taxes, duties, and similar charges imposed
by the taxing authority of the Local Jurisdiction If this element is not
present Local Jurisdiction is Not Applicable.</xsd:documentation>
            </xsd:annotation>
          </xsd:element>
          <xsd:choice minOccurs="0">
            <xsd:element name="optionEntitlement" type="xsd:decimal">
              <xsd:annotation>
                <xsd:documentation xml:lang="en">The number of shares
per option comprised in the option transaction
supplement.</xsd:documentation>
              </xsd:annotation>
            </xsd:element>
            <xsd:element name="multiplier" type="xsd:decimal">
              <xsd:annotation>
                <xsd:documentation xml:lang="en">Specifies the contract
multiplier that can be associated with an index
option.</xsd:documentation>
              </xsd:annotation>
            </xsd:element>
          </xsd:choice>
        </xsd:sequence>
      </xsd:extension>
    </xsd:complexContent>
  </xsd:complexType>


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