FpML-IM-Custodian Technical Teleconference 2009-04-22 minutes

["Iida, Lucio BGI SF" <Lucio.Iida@xxxxxxxxxxxxxxxxxx>]

 

WG members,

 

We had a technical call Wed Apr- 22 at 12pm Eastern.

 

Attendees:

Marie-Paule Dumont - Swift

Mike Burg - BNY Mellon

Christina MacDonald - BBH

Marc Gratacos - ISDA

Steve Goswell - BGI

Lucio Iida - BGI

 

 

Agenda and minutes:

• Credit Default Swap upfront payments
• Rehash of current ideas for representation of upfront payments. 
• Lucio stated that for 100/500 CDS the preference is to use only <initialPayment> and that 4.6 CDS validation rules have been modified to allow this.  This best practice will be added to the Derivatives Guidelines and ISITC MP.  It is understood that implementations may lag.
• Marie-Paule mentioned 100/500 European CDS to go live in June 2009 and asked for comments.  The concern is its effect on implementations, much like SNAC CDS had.  Marc stated that a meeting is scheduled for next week to discuss 100/500 European CDS.  New scheme values will be necessary.  Marc to provide update in next meetings.
• Bilateral amendment messages
• Business need.
• A business need exists, given that such bilaterally-agreed events occur.  Two methods used in implementations of Contract messages include: 1) a new ContractCreated using a new conversationId but the same contractId, 2) a full termination message followed by a new ContractCreated.
• There is potential for confusion or misuse of bilateral amendment messages to represent unilateral corrections to notifications, or viceversa.  Unilateral corrections are needed when the sending system needs to restate its previous message.
• Lucio to write up a document on this, contrasting unilateral corrections with bilateral amendments, and including the points above and relevant cases.  It will be discussed in the next meeting of this WG, and will be the basis for feedback to the FpML MTF.
• Contract update messages for non-trading events.
  • Addresses non-trading events such as defaults on constituents of a CDS Index, the resulting factor change and payment.
  • Idea raised in FpML Modeling Task Force.
  • Proposed to be generic, probably containing the FpML contract representation.  Its use could then be extended for usage in other non-trading events.
    • Marc indicated that the business scope of the message is still open.  We may want to start with a narrow scope to deal with the frequent credit events these days.
    • Lucio to collect previous business justification by Mike Dever on CDS Index credit events.  Lucio solicited from call participants examples of other non-trade events that effectively change the contract terms and the accounting, and even require a payment.  e.g. other corporate action, resets on indexes in a TRS.  We will review progress in the next call.  We will eventually send our feedback to the FpML MTF.
• Trade vs Contract in FpML 5.x
  • The FpML MTF will review its work to make the migration as smooth as possible, especially around conversationID, contract ids, and versions.
    • Marc provided additional detail indicating the review will probably focus on the the use of correlationId instead of conversationId to identify distinct events, and the correlationId version instead of contract version for sequencing purposes.
    • Steve pointed out that the projection of FpML 5.0 full recommendation by June may need revising.
• AOB
  • Payment breakdown work
    • Marc raised this topic, asking for an update.
    • Lucio to write up the business justification draft based on contributions from Mike Burg and Randy Magdaluyo.  We will also review in two weeks.
• Next meeting May 6 at noon Eastern.

Please let me know if we need to correct or add anything.

 

Thanks,

 

Lucio Iida
Principal
Design and Development Technologist

TEL 415 597 2288
CELL 415 717 9261
FAX 415 618 1667
lucio.iida@xxxxxxxxxxxxxxxxxx

Barclays Global Investors 400 Howard Street San Francisco, CA 94105

 

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