FpML-IM-Custodian FW: HIGH-LEVEL BULLET POINTS FROM TODAY'S FPML CALL

Forwarding to the WG.

From: Morgan, Penny [mailto:Penny.Morgan@xxxxxxxxxxxxxxxx]
Sent: Friday, June 27, 2008 1:35 PM
To: burg.mj@xxxxxxxxxx; Iida, Lucio BGI SF; mjdever@xxxxxxxxxxxxxxx
Cc: Nightingale, Ross; Shiggins, Danny; Neary, David; Soussan, Mark; Blanco, Lydia G.
Subject: FW: HIGH-LEVEL BULLET POINTS FROM TODAY'S FPML CALL

Hi there and Happy Friday!

Not really sure who I should send this to, but this is Western's logic for pro's and con's relating to upfront payments being included in the fpml prepared by Danny Shiggins. Perhaps we can use this as a starting point for discussion and get feedback from various interested parties......

Including Upfont Payment Information in FPML Trade Instruction Message

Pros

One instruction equals less manual effort operationally
Fund accounting at the custodian is able to link the payment to the relevant trade more efficiently resulting in less breaks

Cons / Concerns

SSI's - The trade notification message would have to be expanded to include the broker SSI's
The message would also have to include both the custody account and the relevant cash account for some custodians
Trade revisions - If the economics of a swap were amended but the fees remained unchanged, how would this be communicated ? Resending the message could result in duplicate payments
Returned cash - We often see fees relating to a swap being returned to the bank or vice versa, meaning that we need to re-instruct. How do we communicate this ? Resending the whole message could result in duplicating the trade in the bank's accounting system. If we re-instruct a pure cash instruction will the banks be able to link this to the original trade ?
For the banks that are initially not going to be able to receive swift FPML we are going to convert the instruction to a fax. Are these banks going to be happy with receiving a fax that doubles as both a trade notification and a cash instruction ? We would presume not.

Best Regards and Have a Great Weekend

Penny

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