Financial products Markup Language Readies for Cross-Firm Deployment; OTC Derivatives Trading Standard Reduces Costs, Broadens Markets

NEW YORK, Apr 18 - Financial products Markup Language, the e-commerce standard supporting OTC trading of financial derivatives, will be used across firms by the middle of the year, delegates to the FpML Spring Forum are being told today. Chairing the general session on the standard's future, Goldman Sachs' Chip Carver notes, "using FpML to support trading between institutions represents a major step in the standard's evolution. Ultimately it will allow electronic integration of a range of services from electronic trading and confirmation to portfolio specification for risk analysis.

"Each OTC derivative is a unique instrument which requires specific documentation," Mr. Carver says. "Each one must be checked and counterchecked, and the cost of processing them is estimated at $1 billion annually. This high processing cost can be dramatically reduced by everyone using a common language. FpML is the language which will allow the derivative industry, dealers and end users, to reduce the per ticket costs of derivatives." He adds, "The reduced cost of processing will help the number of users of derivatives to continue to expand, as well as increase the usage of derivatives in everyday financial risk management."

The first firm expected to deploy FpML externally is SwapsWire, a collaborative venture within the interest rate derivatives community. The company, an active participant in the non-profit FpML consortium, recently stated that the XML-based FpML standard is seen as a vehicle supporting its business objectives.

The FpML Spring Forum includes updates on the standard and presentations on its use and future direction. Breakout sessions cover proprietary vs. industry financial standards, solutions for straight-through processing, XML tools and details on FpML activities regarding interest rate derivatives products and equity derivatives/FX products.

FpML.org is a consortium comprised of financial, technology and consulting firms. The standard is freely licensed and is intended to automate the flow of information across the entire derivatives partner network, independent of the underlying software or hardware infrastructure supporting activities related to these transactions

Organizations actively participating in the FpML standard:

Bank of America - BNP Paribas - Citigroup - Credit Suisse First Boston - Deutsche Bank - Mizuho Capital Markets Corporation - Goldman Sachs - International Business Machines - JPMorgan - Morgan Stanley - PricewaterhouseCoopers - Reuters - SunGard Trading and Risk Systems - SwapsWire - S.W.I.F.T. - UBS Warburg
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