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FpML-EQD FpML EQD WG Minutes 1400 LDN Fri 11 Jan 2008
* Present
James Clark, SwapsWire
Piers Evans, SwapsWire
Ayesh Khanna, DTCC
Robert Masri, DTCC
Andrew Parry, JP Morgan ( Chair )
Irina Yermakova, ISDA
* Apologies
Jim Brous, Metro Solutions
Marc Gratacos, ISDA
Shabbir Irfani, Goldman Sachs
Henri Pegeron, DTCC
* Minutes
Adoption of our business rules for complex type EquityMultipleExercise is
pending implementation by the Validation Working Group
Valuation date is relative to payment date within Short Form Dividend
Swaps, this is made explicit in the Japanese transaction supplements
Basket on Basket support is logically correct, fully backwardly
compatible, and avoids the need to flatten basket weights and lose
structural relationships
We will not address the issue that FpML was designed for first order
derivatives at this time, and makes a distinction between first class
derivative products, and second class underlyers
Depository Receipts do not require any structural changes to the the FpML
Schema, we will add values to contractural-supplement.xml coding scheme
following ISDA documents "2007 Full Lookthrough Depository Receipt
Supplement to the 2002 Equity Derivative Definitions" and "2007 Partial
Lookthrough Depository Receipt Supplement to the 2002 Equity Derivative
Definitions"
Master confirmation coding schema value
""ISDA2004VarianceSwapAmericasInterdealer" is a variance swap annex which
is in line with ISDA2007EquityFinanceSwapEuropean value and would follow
the naming standard of all the other variance swap MCAs:
ISDA2006VarianceSwapJapaneseInterdealer, ISDA2006VarianceSwapJapanese,
ISDA2007VarianceSwapAmericas, ISDA2007VarianceSwapAsiaExcludingJapan,
ISDA2007VarianceSwapEuropean.
Index constituent proposal from DTCC was motivated by need to remove any
ambiguity from Index Disruption, following ISDA guidelines. ISDA do not
release conference materials, so we have been unable to review materials
from the ISDA Disruption handling conference attended by Robert Masri. The
response from the FpML Co Ordination Committee to the first version of the
proposal from the DTCC in their minutes of 19 Nov 2007 are as follows
" Multiple exchange traded instrument proposal (See Proposal Multiple
exchangeId.zip and original e-mail below)
a. Andrew Parry described the proposal from DTCC to allow multiple
exchange Id for equity indices. For equity indices, exchangeId indicates
the exchanges from which valuation/price of each constitutent will be
based in case of disruption.
b. Participants felt this was overloading the use of exchangeId,
which is meant to represent the exchange where a stock is traded.
c. It was suggested to add an additional element within the index
underlyer called constituentExchangeId (optional, multiple occurrence) to
support the business requirement but distinguish it from exchangeId.
d. FpML underlyers should be refactored in 5.0 to make sure that
elements present in an underlyer have sense from a business perspective."
The updated proposal from DTCC adds the element constituentExchangeId IS-A
ExchangeId ( zero to unbounded ) to model group
"ExchangeIdentifier.model", which is used in the base class
"ExchangeTraded", meaning that it is used in complex types ( Bond,
EquityAsset, ExchangeTradedContract, ExchangeTradedFund, Future, Index ),
which are far beyond the intended, for example a single Equity trades on
single identified exchange, so the implementation requires further
consideration
* Decisions
1. Consensus in favour of SwapsWire proposal for Short Form Dividend Swap
for Japanese Underlyers
2. Consensus in favour of Basket proposal
3. Consensus in favour of scheme values for Depository Receipts to
"contractural-supplement.xml"
3.1 ISDA2007FullLookthroughDepositoryReceiptSupplement
3.2 ISDA2007PartialLookthroughDepositoryReceiptSupplement
4. Consensus in favour of scheme value addition to
"master-confirmation.xml"
4.1 ISDA2004VarianceSwapAmericasInterdealer
5. Element equity IS-A EquityAsset should be used to represent Depository
Receipts
6. Next meeting 1400 LDN Fri 25 Jan 2008
* Actions
JC: update XML sample in SwapsWire proposal for Dividend Swaps on Japanese
underlyers for business correctness
JC: explain what valuationDate means in the context of a dividendPeriod.
Annotated as "Dividend period amount valudation date", whereas
the terminology often used of "projected dividend" vs "declared dividend"
MG: timetable to schedule seperation of publishing coding schemes and XML
Schema
MG: merge SwapsWire proposal for Short Form Dividend Swap for Japanese
Underlyers for FpML-4-4
MG: merge Basket on Basket proposal for FpML-4-4
MG: merge coding scheme values to files "contractural-supplement.xml" and
"master-confirmation.xml"
AP: contact Conor Mongey of the Citadel Group for annotation and examples
for second order derivatives
AP: consider implementation of Index Constituent proposal from DTCC
IY: add Igor Sukhov of nabCapital and Catherine Napolitano of White & Case
LLP as observers on the mailing list
Andrew Parry
+44 20 7325 1486
Exotics and Hybrids Architecture
JP Morgan
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