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FpML-IRD Fw: Cross Currency Settlement method - proposal




I'd like to remind the group about the recent proposal to add crossCurrencyMethod to the "settlement method" choice group in CashSettlement (see detail below). I don't think this proposal is controversial - it is essentially a maintenance release necessitated by development of the ISDA Definitions, which the FpML Standard is required to reflect.

It is clearly desirable that any new addition to the schema is actively discussed by the group, whose approval is required in order for the material to be incorporated in future versions of FpML. I therefore encourage you to submit your comments and/or criticisms on this proposal to the group mailing list.

Best regards,

Harry McAllister
Chair, !RD-WG



__________________________________________________________________________
Harry McAllister
| Information Architect | Fixed Income Architecture | BNP Paribas
4R223 | 10 Harewood Avenue | London NW1 6AA
tel
: +44 (0)20 7595 3416 | email :
harry.mcallister@xxxxxxxxxxxxxx

----- Forwarded by Harry MCALLISTER/UK/EUROPE/GROUP on 01/09/2010 16:09 -----
Harry MCALLISTER

Information Architect
Fixed Income Architecture
10 Harewood Avenue, London NW1 6AA

Phone: +44 (0)20 7595 3416

05/08/2010 22:39

To
irdwg@xxxxxxxx
cc
mgratacos@xxxxxxxx, iyermakova@xxxxxxxx
Subject
Cross Currency Settlement method - proposal




ISDA recently published Supplement 23 to the 2006 ISDA Definitions, which describes a new method for calculating the cash settlement amount for cross-currency swaps in the event of early termination (section 18.3 Cash Settlement Method).

In essence, the new cash settlement provisions remove the assumption that cash settlement of cross-currency swaps will only occur in one currency, and they describe an amended methodology for treating quotes obtained from reference banks, in order to identify and discard outlying valuations. In addition, a new cross currency settlement matrix is published.

Much of the detail of the settlement process will be determined by reference to the ISDA matrix, however the possibility of settlement in two currencies implies a change to the FpML interest rates CashSettlement model, which currently provides for settlement in only a single currency.

I therefore propose to update the CashSettlement complex type with the addition of a new element, crossCurrencyMethod,  to the existing choice group (please see diagram below). A new complex type, CrossCurrencyMethod, is defined for this element. This closely resembles the existing CashPriceMethod, but differs in providing for a maximum of two cashSettlementCurrency elements representing the currency, or pair of discrete currencies, in which settlement is expected to occur. Note that a validation rule is implied to ensure that the cash settlement currency or currencies are consistent with the currencies of the trade.

The proposed schema is contained in the attached zip (in order to minimise the zip file size, I have removed the xml samples) - please refer to module fpml-ird-4-9.xsd, complex type CashSettlement. Your comments are invited.

Best regards,
Harry






__________________________________________________________________________
Harry McAllister
| Information Architect | Fixed Income Architecture | BNP Paribas
4R223 | 10 Harewood Avenue | London NW1 6AA
tel
: +44 (0)20 7595 3416 | email :
harry.mcallister@xxxxxxxxxxxxxx

Attachment: FpML-4-9.crossCurrencyMethod.BNPParibas-proposal.zip
Description: Zip archive

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