FpML-REPO Recap: FpML Repo WG meeting - 04/17/2007

["Irina Yermakova" <IYermakova@xxxxxxxx>]

REPOWG Meeting - 04/17/2007
Next REPOWG Meeting - 05/01/2007

Participants:

Sylvain Benoist (Chair)	JPMorgan
Rob Longridge           RBC
Irina Yermakova         ISDA
John Singler            Helix
Danny Moeller           Helix
Gary Smolyanskiy        Goldman Sachs
Ben Glicher             EquiLend
Jim Barrett			MSolution 

Apology:



Meeting Recap:

1) The participants reviewed Rob Longridge's security lending example.
2) Repos vs. Sec lendings - a discussion in terms of models'
representation.
	- Repo is about funding purpose and short position coverage for
repos; 	also some arbitrage trading (matchbook) 
	- Sec Lending is all about account mgt., fails management, or
short positions coverage.

	- Settlement date: 
		- in Repo - there is only one settlement date, the date
at which 		you exchange cash and collateral (the security).

		- in Sec lendings, in international markets, you can
have cash 		settling on T+0 while securities settle on T+2
or T+3.  The 		return date however can be a simultaneous
exchange.

	- Security:
      	- in Repo - a principal asset is cash
      	- in Security Lending  -  a principal asset is security (equity,
corporate bonds, treasury)

 	- Collateral:
            - in Repo - it is clearly defined security. It protects
against
            counterparty default (refusal to pay). In case of default a
            lender can sell the security.
            - in Security Lending  - it can be anything (security, cash,
...)
            It protects against counterparty default (mark-to-market
            changes against a portfolio). Do not record actual
collateral
            only type of collateral. Collaterals are managed in bulk,
the
            only thing you agree with counterparty is on quantity of the
            collateral. Master Lending agreement will specify what
            collateral will be paid. Counterparty will go through
            negotiation process.
            - in both -  For the allocation purposes, can have as many
            collateral positions as needed in the transaction leg.

      - Spot/Forward leg:
            - in Repo - 'legs' are used for the spot (start) and forward
(end) transaction exchanges,
            - in Security Lending - there is still a need to have spot
and 		forward legs in sec lending. (Gary is using legs to
distinguish 		between the 'security leg' and the 'collateral
leg', which are 		not real legs)

	- Fixed Rate:
      	- in Repo - The fixedRateSchedule element is used to specify the
repo rate initial value.
            - in Security Lending -  The 'rebate' rate is a fixed rate
that
            can be used to specify the rate indicial value that Lender
pays 		Borrower. (Specify the directions of the payment).
'Rebate' 		exists only in cash collateralized contracts.
(Ex: If you give 		some cash as collateral, it can be
reinvested and you get a 		rebate back)

   	- Floating Rate:
      	- in Repo -The 'floatingRateCalculation' element is the float
index and tenor, with a spread. It used for floating rate.
            - in Security Lending -  benchmark + spread rate is a type
of            		floating rebate rate that can be used to specify
what Lender
            pays Borrower. (Specify the directions of the payment).
            'Rebate' exists only in cash collateralized contracts. (Ex:
If
            you give some cash as collateral, it can be reinvested and
you
            get a rebate back)

      - (Fixed Rate| Floating Rate) - in Repo and Security Lending

	Q: Can the same elements' names, 'fixedRateSchedule' and
'floatingRateCalculation', be used in Repo and Security Lending cases
(with proper documentation)?

      - Fee Rate:
      	- in Repo - Not Used.
      	- in Sec Lendings - The fee rate is used to specify what
Borrower pays Lender. (Specify the directions of the payment).

      - ((Fixed Rate| Floating Rate)| Fee Rate) - in Security Lending

      - Margin
		- in Repo - 'margin' element can be optional, since most
of the      		examples have value 'cash', '1.00'
      	- in Sec Lendings  - 'margin' element must be mandatory,
since it always needed and its value is rarely '1.00'

      - Notice Period
		- in Repo - 'noticePeriod' is only used in open ended or
long 		dated Repos.
 		- in Security Lending - 'recallPeriod' is used by Lender
to      		request the return of their loan from Borrower.
Borrower       		has to comply with in 3 days

	Q: Can one of two elements' names, 'noticePeriod' or
'recallPeriod', 	be used in both, Repo and Security Lending cases
(with proper 	documentation)?


3) Gary Smolyanskiy proposed to solicit a feedback from a Lender to see
if
security lending model makes sense from their side.


Feel free to send your comments if I missed any points of the
discussion.


Kind regards,
Irina Yermakova
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