15 COMMODITY DERIVATIVE PRODUCT ARCHITECTURE

15.1 Introduction

This section provides a detailed description of the product architecture for commodity derivatives. FpML provides support for commodity swaps (whether fix/float and float/float, or weather/weather) and commodity options (American, European and Asian). Physically-settled trades are also covered including swaps for Electricity, Natural Gas, Oil, Coal, and Environmental commodities. Support for Precious and Non-Precious metals Forwards is also included. A representation for a commodity underlyer has also been introduced, which is used within the commodity products but that can also be used within other products such as equity baskets.

15.2 Commodity Underlyer

The 'commodity' underlyer is meant to identify the commodity ‘index’ which is subject to the trade and is flexible enough to support agricultural products, environmental products, freight, weather and energy. Support for other commodity types has not been fully evaluated but this does not preclude their being able to be represented. A number of global elements are already defined in the FpML schema for various asset types. The commodity underlyer follows the same model.

schemaDocumentation/schemas/fpml-asset-5-4_xsd/complexTypes/Commodity.png

The 'instrumentId' and the 'description' elements are derived from the IdentifiedAsset type, which is used by multiple underlyers. The 'instrumentId' contains the unique identifier for the asset, and is intended to hold a Commodity Reference Price in the format set out by ISDA in the 1993 or 2005 Commodity Definitions. However, a CUSIP, ISIN, or any other identifier could also be used. The 'description' contains the name of the asset.

The following sequence of elements is optional and they are specified only in the event that no ISDA Commodity Reference Price or other identifier for this commodity ‘index’ exists.

The 'specified Price' is not defined in the Commodity Reference Price and so needs to be stated in the underlyer definition as it will impact the calculation of the Floating Price.

The 'deliveryDates' element is applicable for a Commodity Transaction that references a listed future.

The 'deliveryDateRollConvention' specifies, for a Commodity Transaction that references a listed future via the 'deliveryDates' element, the day on which the specified future will roll to the next nearby month when the referenced future expires.

The 'multiplier' specifies the multiplier associated with the transaction. This element is intended for use with freight transactions.

15.3 commoditySwap

The commodity swap product is designed to support both fixed/float swaps and float/float swaps, as well as, weather specific swaps. There is also support for describing the attributes of physical commodity delivery. Its design is fully compatible with other FpML products and reuses standard common types.

As with all products in FpML the commodity swaps are accessed through a global element 'commoditySwap' which can substitute the 'product' element used in the construction of trade structures. The following diagram outlines the product structure.

schemaDocumentation/schemas/fpml-com-5-4_xsd/elements/commoditySwap.png

The 'commoditySwap' structure only defines parameters for product-related information (e.g. dates, rates, underlying commodity, price source, etc.). Other trade-related information (e.g. trade date, identifiers, legal documentation, etc.) is held in the containing trade structure.

The 'commoditySwapLeg' element is placeholder within commoditySwap structure for the actual commoditySwap swap legs (e.g. fixedLeg and floatingLeg). The 'weatherLeg' is modeled as a choice to 'commoditySwapLeg' because weather index transactions are strictly financially-settled transaction and not structured with more than two legs each of which is a 'weatherLeg'.

The repeating 'fixedLeg' and 'floatingLeg' elements contain the details of any scheduled payments or exchanges during the life of the instrument and are described later. A simple commodity swap would contain two legs, typically one fixed and one floating, but the repetition allows more complex multi-legged exchanges to be described.

The product representation of physically-settled trades is done within 'coalPhysicalLeg', 'elecricityPhysicalLeg', 'gasPhysicalLeg', 'oilPhysicalLeg', 'environmentalPhysicalLeg' paired with 'fixedLeg' or 'floatingLeg' - see details in the Physical Leg section.

15.3.2 commoditySwap - CommodityContent

CommodityContent.model-Items common to all Commodity Transactions.

schemaDocumentation/schemas/fpml-com-5-4_xsd/groups/CommodityContent.model.png

15.3.3 fixedLeg

A schedule of fixed payments associated with a commodity swap are defined within a 'fixedLeg' using the following structure.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/FixedPriceLeg.png

    • CommodityCalculationPeriods.model-The different options for specifying the Calculation Periods.
    • CommodityFixedPrice.model-The different options for specifying the Fixed Price.
    • CommodityNotionalQuantity.model-The different options for specifying the Notional Quantity. A flat notional for the term of the trade may be specified, or else the Notional Quantity per Calculation Period. In the latter case, there must be a notional quantity specified for each Calculation Period, regardless of whether the Notional Quantity changes or remains the same between periods.
    • CommodityPaymentDates.model-The different options for specifying the Payment Date. This will consist of either a set of Payment Dates or else a Payment Date schedule.
    • CommodityFreightFlatRate.model-The Flat Rate, applicable to Wet Voyager Charter Freight Swaps.

As with other FpML leg structures the payer and receiver parties are explicitly indicated in the 'payerPartyReference' and 'receiverPartyReference'.

The role of the remaining elements is as follows:

  • The 'calculationPeriods' or 'calculationDates' if the Calculation Periods are all one day long or the 'calculationPeriodsSchedule' is only intended to be used if the Calculation Periods differ on each leg. If Calculation Periods mirror another leg, then the 'calculationPeriodsReference' element should be used to point to the Calculation Periods on that leg or 'calculationPeriodsDatesReference' element should be used to point to the single-day-duration Calculation Periods on that leg or the 'calculationPeriodsScheduleReference' can be used to point to the Calculation Periods Schedule for that leg.
  • The 'fixedPrice' structure defines the price for a given unit of the underlying commodity where that price is fixed for the life of the trade.
  • On the other hand, if the fixed price varies over the life of the trade, then the 'fixedPriceSchedule' structure is used instead of the 'fixedPrice'. Note that the intention is that a fixed price step should be specified for each Calculation Period in the trade, regardless of whether there is a change in value between two periods. This is so as to match the fixed price schedule to the calculation periods as clearly as possible. The fixed price steps must be in chronological order (i.e the first step corresponds to the first Calculation Period, the last step to the last Calculation Period).
  • The 'totalPrice' structure specifies the total amount of all fixed payments due during the term of the trade.
  • The notional amount is specified stating either the 'notionalQuantity' or if the notional changes over the life of the transaction, then the 'notionalQuantitySchedule' is specified. The 'settlementPeriodsNotionalQuantity' should be specified for an electricity transaction, the Notional Quantity for a one or more groups of Settlement Periods to which the Notional Quantity is based. If the schedule differs for different groups of Settlement Periods, this element should be repeated. In addition, the 'totalNotionalQuantity' must be specified. Note that the intention is that a notional step should be specified for each Calculation Period in the trade, regardless of whether there is a change in value between two periods. This is so as to match the notional quantity schedule to the calculation periods as clearly as possible. The notional steps must be in chronological order (i.e the first step corresponds to the first Calculation Period, the last step to the last Calculation Period). If notional amount mirror another leg, then the 'quantityReference' element should be used to point to the Notional Quantity.
  • The 'paymentDates' structure supports either the definition of dates as either a series of unadjusted dates along with a date roll convention and business calendar location list for adjustment, or as set of adjusted dates relative to some other date schedule defined elsewhere in the product (e.g. in the floating leg).
  • The 'relativePaymentDates' are specified when the payment dates are relative to the calculation periods.
  • The Flat Rate, applicable to Wet Voyager Charter Freight Swaps. Whether the Flat Rate is the New Worldwide Tanker Nominal Freight Scale for the Freight Index Route taken at the Trade Date of the transaction or taken on each Pricing Date. The 'flatRateAmount', If 'flatRate' is set to 'Fixed', is the actual value of the Flat Rate.

15.3.4 floatingLeg

Each 'floatingLeg' defines a series of financial payments for a commodity who's value is derived from a floating price source such as an exchange.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/FloatingPriceLeg.png

    • CommodityCalculationPeriods.model-The different options for specifying the Calculation Periods.
    • commodity-Specifies the underlying instrument. At this time, only underlyers of type Commodity are supported; the choice group in the future could offer the possibility of adding other types later.
    • CommodityNotionalQuantity.model-The different options for specifying the Notional Quantity. A flat notional for the term of the trade may be specified, or else the Notional Quantity per Calculation Period. In the latter case, there must be a notional quantity specified for each Calculation Period, regardless of whether the Notional Quantity changes or remains the same between periods.
    • calculation-Defines details relevant to the calculation of the floating price.
    • CommodityPaymentDates.model-The different options for specifying the Payment Date. This will consist of either a set of Payment Dates or else a Payment Date schedule.
    • CommodityFreightFlatRate.model-The Flat Rate, applicable to Wet Voyager Charter Freight Swaps.

As with the 'fixedLeg' they parties obligation to pay and receive the payments are explicitly indicated by the 'payerPartyReference' and 'receiverPartyReference' elements.

Two structures distinguish the 'floatingLeg' from the 'fixedLeg': the existence of the 'commodity' underlyer (see description above at the Commodity Underlyer section) and the 'calculation' structure within the floating leg.

15.3.4.1 calculation

The 'calculation' structure captures details relevant to the calculation of the floating price.

FloatingLegCalculation-A type to capture details relevant to the calculation of the floating price.

The structure is defined by the following elements:

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/FloatingLegCalculation.png

    • pricingDates- represent the dates on which prices are observed for the underlyer.
    • averagingMethod-The parties may specify a Method of Averaging where more than one pricing Dates is being specified as being applicable.
    • conversionFactor-If the Notional Quantity is specified in a unit that does not match the unit in which the Commodity Reference Price is quoted, the scaling or conversion factor used to convert the Commodity Reference Price unit into the Notional Quantity unit should be stated here. If there is no conversion, this element is not intended to be used.
    • rounding-Rounding direction and precision for price values.
    • In some trades, there may be a spread-No Annotation Available
    • If the spread is not constant over the life of the trade, spreadSchedule-No Annotation Available
    • spreadPercentage-No Annotation Available
    • fx-FX observations to be used to convert the observed Commodity Reference Price to the Settlement Currency.

15.3.4.1.1 pricingDates

CommodityPricingDates-The dates on which prices are observed for the underlyer.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/CommodityPricingDates.png

15.3.4.1.2 fx

fx-FX observations to be used to convert the observed Commodity Reference Price to the Settlement Currency.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/FloatingLegCalculation/fx.png

    • CommodityFx-A type defining the FX observations to be used to convert the observed Commodity Reference Price to the Settlement Currency. The rate source must be specified. Additionally, a time for the spot price to be observed on that source may be specified, or else an averaging schedule for trades priced using an average FX rate.
    • primaryRateSource-The primary source for where the rate observation will occur. Will typically be either a page or a reference bank published rate.
    • secondaryRateSource-An alternative, or secondary, source for where the rate observation will occur. Will typically be either a page or a reference bank published rate.
    • fxType-A type to identify how the FX rate will be applied. This is intended to differentiate between the various methods for applying FX to the floating price such as a daily calculation, or averaging the FX and applying the average at the end of each CalculationPeriod.
    • averagingMethod-The parties may specify a Method of Averaging when averaging of the FX rate is applicable.
    • fixingTime-No Annotation Available
    • fxObservationDates-No Annotation Available
    • PricingDays.model-The different options for specifying which days are pricing days within a pricing period. Unless a lag element is present, the pricing period will be the calculation period.
    • LagOrReference.model-Allows a Lag or a LagReference to be specified.
    • CommodityCalculationPeriodsPointer.model-Model group to enable users to reference a Calculation Periods schedule in the form of a series of actual dates in a calculationPeriods container or in the form of a parameterised schedule in a calculationPeriodsSchedule container.

15.3.5 weatherLeg

WeatherLeg-Weather Leg of a Commodity Swap defines Weather Index Swap transactions. Weather Index Swap transactions are OTC derivative transactions which settle financially based on an index calculated from observations of temperature and precipitation at weather stations throughout the world. Sub-Annex C of the 2005 ISDA Commodity Definitions provides definitions and terms for a number of types of weather indices. These indices include: HDD (heating degree days), CDD (cooling degree days), CPD (critical precipitation days). Weather Index Swap transactions result in a cash flow to one of the two counterparties each Calculation Period depending on the relationship between the Settlement Level and the Weather Index Level.
Weather Index transaction = weatherLeg/weatherLeg.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/WeatherLeg.png

15.3.5.1 weatherLeg - WeatherIndex

WeatherIndex-A type defining the Weather Index Level or Weather Index Strike Level.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/WeatherIndex.png

    • quantity-This is the Reference Level. The CDD, HDD or HDD Reference Level is specified as the number of (amount of) Weather Index Units specified by the parties in the related Confirmation.
    • unit-Weather Index Unit derived from one of the following variable methods of determination: Cooling Degree Day (CDD), Heating Degree Day (HDD), Critical Precipitation Day (CPD) as defined in Section 11.15 of the 2005 ISDA Commodity Definitions and User Guide.

15.3.5.2 weatherLeg - WeatherCalculationPeriod

schemaDocumentation/schemas/fpml-com-5-4_xsd/groups/WeatherCalculationPeriod.model.png

    • WeatherCalculationPeriods-The schedule of Calculation Period First Days and Lasts Days. If there is only one First Day - Last Day pair then the First is equal to the Effective Date and the Last Day is equal to the Termination Date.
      or
    • CalculationPeriodsReference-A pointer style reference to a calculation periods schedule defined elsewhere - note that this schedule consists of a series of actual dates in a calculationPeriods container.

15.3.5.3 weatherLeg - weatherNotionalAmount

weatherNotionalAmount-Defines the price per weather index unit.

schemaDocumentation/schemas/fpml-shared-5-4_xsd/complexTypes/NonNegativeMoney.png

15.3.5.4 weatherLeg - calculation

WeatherLegCalculation-A type to capture details relevant to the calculation of the Payment Amount on a Weather Index Transaction.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/WeatherLegCalculation.png

    • settlementLevel-The Settlement Level means either the cumulative number of Weather Index Units for each day in the Calculaiton Period (Cumulative) or the cumulative number of Weather Index Units for each day in the Calculation Period divided by the number of days in the Calculation Period (Average) or the maximum number of Weather Index Units for any day in the Calculation Period (Maximum) or the minimum number of Weather Index Units for any day in the Calculation Period.
    • referenceLevelEqualsZero-No Annotation Available
    • calculationDate-No Annotation Available
    • businessDays-No Annotation Available
    • dataCorrection-The date payment often revised after its publication, this indicates if the payment date could be recalculated.
    • correctionPeriod-If dataCorrection=true, this indicates how long after the publication of the date corrections could be made.
    • maximumPaymentAmount-Cups on total payment amount.
    • maximumTransactionPaymentAmount-Cups on payment amount that goes out in any particular calculation period.
    • rounding-Rounding direction and precision for price values.

15.3.5.5 weatherLeg - paymentDates

CommodityRelativePaymentDates-The Payment Dates of the trade relative to the Calculation Periods.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/CommodityRelativePaymentDates.png

15.3.5.6 weatherLeg - weatherIndexData

WeatherIndexData-No Annotation Available

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/WeatherIndexData.png

15.3.6 Physical Leg
15.3.6.1 Coverage

The support for physically-settled commodities trades includes,

  • Natural Gas
  • Oil
  • Electricity
  • Coal
  • Environmental
15.3.6.2 Product Representation

The product representation of physically-settled trades is done within the commoditySwap product element by adding a family of physical legs.

  • Fixed price transaction = xxxPhysicalLeg + fixedLeg
  • Floating price transaction = xxxPhysicalLeg + floatingLeg

Note: xxx gets replaced by oil, gas, electricity, and coal.

The following structures vary between all these commodities,

  • Delivery periods
  • Product
  • Delivery
  • Quantities
15.3.6.2.5 Environmental Physical Leg

EnvironmentalPhysicalLeg-No Annotation Available

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/EnvironmentalPhysicalLeg.png

    • numberOfAllowances-The number of allowances, certificates or credit to be transaction in the transaction.
    • environmental-The specification of the type of allowance or credit.
    • abandonmentOfScheme-For U.S. Emissions Allowance Transactions. Specifies terms which apply in the event of an Abandonment of Scheme event.
    • deliveryDate-The date on which allowances are to be delivery as specified in the related Confirmation.
    • paymentDate-No Annotation Available
    • BusinessCentersOrReference.model-No Annotation Available
    • eEPParameters-For EU Emissions Allowance Transactions. Contains a series of parameters controlling Excess Emissions Penalty payments.
    • failureToDeliverApplicable-For EU Emissions Allowance Transactions. Holds Failure to Deliver (Alternative Method) election. Used to determine how provisions in Part [7] Page 7 (B) Failure to Deliver Not Remedied are to be applied.

15.3.6.2.5.1 environmentalPhysicalLeg - numberOfAllowances

UnitQuantity-A quantity and associated unit.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/UnitQuantity.png

    • quantityUnit-Quantity Unit is the unit of measure applicable for the quantity on the Transaction.
    • quantity-Amount of commodity per quantity frequency.

15.3.6.2.5.2 environmentalPhysicalLeg - product

EnvironmentalProduct-A type defining the characteristics of the environmental product being traded in a physically settled environmental transaction.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/EnvironmentalProduct.png

    • productType-Specifies the type of environmental product. Examples include allowances or credit issued by a particular environmental trading scheme.
    • compliancePeriod-For E.U. Emissions Allowance Transactions. Describes Specified Compliance Period for which the Allowances are issued.
    • vintage-For U.S. Emissions Allowance Transactions. The year(s) of the applicable Emissions Product(s) as specified in an Emissions Transaction.
    • applicableLaw-For U.S. Emissions Allowance Transactions. Used to specify the Applicable Emissions Law when this is not defined in Emissions Product Definitions Exhibit.
    • trackingSystem-For U.S. Emissions Allowance Transactions. Used to specify the Tracking System when this is not defined in Emissions Product Definitions Exhibit.

15.3.6.2.5.3 environmentalPhysicalLeg - abandonmentOfScheme

abandonmentOfScheme-For U.S. Emissions Allowance Transactions. Specifies terms which apply in the event of an Abandonment of Scheme event.

15.3.6.2.5.4 environmentalPhysicalLeg - failureToDeliverApplicable

failureToDeliverApplicable-For EU Emissions Allowance Transactions. Holds Failure to Deliver (Alternative Method) election. Used to determine how provisions in Part [7] Page 7 (B) Failure to Deliver Not Remedied are to be applied.

15.3.6.2.5.5 environmentalPhysicalLeg - EEPParameters

EEPParameters-Excess Emission Penalty related parameters.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/EEPParameters.png

    • eEPApplicable-If Excess Emission Penalty is specified to be applicable in the Confirmation then the Excess Emission Penalty will be determined in the manner specified in the Confirmation (see other EEP paramters)
    • riskPeriod-Used to determine how provisions in Part [7] Page 7 (B) Failure to Deliver Not Remedied are to be applied.
    • equivalentApplicable-When "true" the EEP Equivalent is applicable. See Part [7] definition of EEP Equivalent.
    • penaltyApplicable-When "true" the Excess Emissions Penalty is applicable. See Part [7] definition of Excess Emissions Penalty.

15.3.6.2.5.6 environmentalPhysicalLeg - deliveryDate

deliveryDate-The date on which allowances are to be delivery as specified in the related Confirmation.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/EnvironmentalPhysicalLeg/deliveryDate.png

commodityOption-Defines a commodity option product.
The product support for financially-settled or physically-settled forward (for preciouse and non-preciouse metal) options in FpML is based on the creation of a 'commodityOption' product. The product references the 'commodity' underlyer in order to support the underlying asset of the option.

All FpML products inherit two optional elements from the Product type: 'productType' and 'productId'. The 'productType' defines a classification of the type of product. FpML defines a simple product categorization using a coding scheme. The 'productId' contains a product reference identifier allocated by a party. In this case, FpML does not define the domain values associated with this element.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/CommodityOption.png

    • CommodityOption-Commodity Option.
    • BuyerSeller.model-No Annotation Available
      The 'buyerPartyReference' and 'sellerPartyReference' contain references to the parties that buy or sell the instrument respectively. Buying the instrument means paying for the instrument and receiving the rights defined by it. On the other hand, selling the instrument means granting the rights defined by the instrument and in return receiving a payment for it.
    • CommodityFinancialOption.model-Items specific to financially-settled commodity options.
    • CommodityPhysicalOption.model-Items specific to financially-settled commodity options.
      For specifying physically-settled forward (preciouse and non-preciouse metal forward) options. NOTE: support for other physically-settled options within commodityOption was DEPRICATED. The commoditySwaption product, should be used instead.
    • CommodityWeatherOption.model-Described Weather Index Option component. Weather Index Option transactions are OTC derivative transactions which settle financially based on an index calculated from observations of temperature and precipitation at weather stations throughout the world. Sub-Annex C of the 2005 ISDA Commodity Definitions provides definitions and terms for a number of types of weather indices. These indices include: HDD (heating degree days), CDD (cooling degree days), CPD (critical precipitation days). Weather Index Option Transactions results in a cash flow to the buyer depending on the relationship between the Settlement Level to the Weather Index Strike Level.
    • premium-The option premium payable by the buyer to the seller.
    • CommodityContent.model-Items common to all Commodity Transactions.

The choice between 'CommodityFinancialOption.model', 'CommodityPhysicalOption.model' and 'CommodityWeatherOption.model' models allows to selecet the financially-settled commodity options, or physically-settled forward (preciouse and non-preciouse metal) options, or weather specific option and described below.

15.4.1 commodityOption - CommodityFinancialOption

CommodityFinancialOption.model-Items specific to financially-settled commodity options.

schemaDocumentation/schemas/fpml-com-5-4_xsd/groups/CommodityFinancialOption.model.png

    • commodity-No Annotation Available
      The 'commodity' underlyer component is specified using a reference to the 'commodity' asset (see description above at the Commodity Underlyer section).
    • CommodityOptionFeatures.model-Describes additional features within the option.
    • CommodityNotionalQuantity.model-The different options for specifying the Notional Quantity. A flat notional for the term of the trade may be specified, or else the Notional Quantity per Calculation Period. In the latter case, there must be a notional quantity specified for each Calculation Period, regardless of whether the Notional Quantity changes or remains the same between periods.
    • exercise-No Annotation Available
    • CommodityStrikePrice.model-The different options for specifying the Strike price per unit.
      Note that the intention is that a strike price per unit step should be specified for each Calculation Period in the trade, regardless of whether there is a change in value between two periods. This is so as to match the strike price schedule to the calculation periods as clearly as possible. The strike price per unit of the strike price per unit steps must be in chronological order (i.e the first step corresponds to the first Calculation Period, the last step to the last Calculation Period).
    • CommodityFloatingStrikePrice.model-The different options for specifying the average strike price per unit. These options are to specify a single average strike price per unit or to specify a schedule of average strike prices.

15.4.1.1 commodityOption - CommodityFinancialOption - CommodityOptionFeatures

CommodityOptionFeatures.model-Describes additional features within the option.

schemaDocumentation/schemas/fpml-com-5-4_xsd/groups/CommodityOptionFeatures.model.png

15.4.1.1.1 commodityOption - CommodityFinancialOption - CommodityOptionFeatures - CommodityAsian

CommodityAsian.model-Model group containing features specific to asian/averaging commodity options.

The following elements are specific to asian/averaging commodity options only:

schemaDocumentation/schemas/fpml-com-5-4_xsd/groups/CommodityAsian.model.png

    • The Calculation Periods are represented explicitly with the 'calculationPeriods' element or as a parametric representation with the 'calculationPeriodsSchedule' structure.
    • The 'pricingDates' element defines the dates on which the option will price.
    • The 'averagingMethod' is present if there is more than one 'pricingDates' element.

15.4.1.2 commodityOption - CommodityFinancialOption - CommodityNotionalQuantity

As with the 'commoditySwap', the notional amount of the 'commodityOption' is specified stating either the 'notionalQuantity' or if the notional changes over the life of the transaction, then the 'notionalQuantitySchedule' is specified. In addition, the 'totalNotionalQuantity' must be specified. Note that the intention is that a notional step should be specified for each Calculation Period in the trade, regardless of whether there is a change in value between two periods. This is so as to match the notional quantity schedule to the calculation periods as clearly as possible. The notional steps must be in chronological order (i.e the first step corresponds to the first Calculation Period, the last step to the last Calculation Period).

schemaDocumentation/schemas/fpml-com-5-4_xsd/groups/CommodityNotionalQuantity.model.png

    • CommodityNotionalQuantity.model-The different options for specifying the Notional Quantity. A flat notional for the term of the trade may be specified, or else the Notional Quantity per Calculation Period. In the latter case, there must be a notional quantity specified for each Calculation Period, regardless of whether the Notional Quantity changes or remains the same between periods.

15.4.1.3 commodityOption - CommodityFinancialOption - CommodityExercise

CommodityExercise-The parameters for defining how the commodity option can be exercised, how it is priced and how it is settled.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/CommodityExercise.png

    • americanExercise-No Annotation Available
    • europeanExercise-No Annotation Available
    • automaticExercise-Specifies whether or not Automatic Exercise applies to a Commodity Option Transaction.
    • writtenConfirmation-Specifies whether or not Written Confirmation applies to a Commodity Option Transaction.
    • settlementCurrency-The currency into which the Commodity Option Transaction will settle. If this is not the same as the currency in which the Commodity Reference Price is quoted, then an FX determination method should also be specified.
    • fx-FX observations to be used to convert the observed Commodity Reference Price to the Settlement Currency.
    • conversionFactor-If the Notional Quantity is specified in a unit that does not match the unit in which the Commodity Reference Price is quoted, the scaling or conversion factor used to convert the Commodity Reference Price unit into the Notional Quantity unit should be stated here. If there is no conversion, this element is not intended to be used.
    • CommodityPaymentDates.model-The different options for specifying the Payment Date. This will consist of either a set of Payment Dates or else a Payment Date schedule.

15.4.1.3.1 CommodityAmericanExercise

CommodityAmericanExercise-A type for defining exercise procedures associated with an American style exercise of a commodity option.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/CommodityAmericanExercise.png

15.4.1.3.2 CommodityEuropeanExercise

CommodityEuropeanExercise-A type for defining exercise procedures associated with a European style exercise of a commodity option.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/CommodityEuropeanExercise.png

15.4.2 commodityOption - CommodityWeatherOption

CommodityWeatherOption.model-Described Weather Index Option component. Weather Index Option transactions are OTC derivative transactions which settle financially based on an index calculated from observations of temperature and precipitation at weather stations throughout the world. Sub-Annex C of the 2005 ISDA Commodity Definitions provides definitions and terms for a number of types of weather indices. These indices include: HDD (heating degree days), CDD (cooling degree days), CPD (critical precipitation days). Weather Index Option Transactions results in a cash flow to the buyer depending on the relationship between the Settlement Level to the Weather Index Strike Level.

schemaDocumentation/schemas/fpml-com-5-4_xsd/groups/CommodityWeatherOption.model.png

effectiveDate is an effectiveDate of a Weather Index Option.

15.4.2.1 commodityOption - CommodityWeatherOption - WeatherCalculationPeriod

WeatherCalculationPeriod.model-Descriptions of a calculation period.

Weather Index Swap and Weather Index Option transactions are OTC derivative transactions which settle financially based on a index calculated from observations of temperature and precipitation at weather stations throughout the world. Sub-Annex C of the 2005 ISDA Commodity Definitions provides definitions and terms for a number of types of weather indices. These indices include: HDD (heating degree days), CDD (cooling degree days), CPD (critical precipitation days). Weather Index Swap transactions result in a cash flow to one of the two counterparties each Calculation Period depending on the relationship between the Settlement Level and the Weather Index Level. Weather Index Option Transactions results in a cash flow to to the buyer if depending on the relationship between the Settlement Level to the Weather Index Strike Level.

schemaDocumentation/schemas/fpml-com-5-4_xsd/groups/WeatherCalculationPeriod.model.png

15.4.2.1.1 WeatherCalculationPeriods

WeatherCalculationPeriods-The schedule of Calculation Period First Days and Lasts Days. If there is only one First Day - Last Day pair then the First is equal to the Effective Date and the Last Day is equal to the Termination Date.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/WeatherCalculationPeriods.png

15.4.2.3 commodityOption - CommodityWeatherOption - exercise

exercise-No Annotation Available

schemaDocumentation/schemas/fpml-com-5-4_xsd/groups/CommodityWeatherOption.model/exercise.png

    • Note: americanExercise-No Annotation Available
      - is not to be used with Weather Options
    • europeanExercise-No Annotation Available
    • settlementCurrency-The currency into which the Commodity Option Transaction will settle. If this is not the same as the currency in which the Commodity Reference Price is quoted, then an FX determination method should also be specified.
    • fx-FX observations to be used to convert the observed Commodity Reference Price to the Settlement Currency.

15.4.2.3.1 paymentDates

paymentDates-No Annotation Available

schemaDocumentation/schemas/fpml-com-5-4_xsd/groups/CommodityNonPeriodicPaymentDates.model/paymentDates.png

15.4.2.4 commodityOption - CommodityWeatherOption - weatherIndexStrikeLevel

weatherIndexStrikeLevel-No Annotation Available

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/WeatherIndex.png

    • quantity-This is the Reference Level. The CDD, HDD or HDD Reference Level is specified as the number of (amount of) Weather Index Units specified by the parties in the related Confirmation.
    • unit-Weather Index Unit derived from one of the following variable methods of determination: Cooling Degree Day (CDD), Heating Degree Day (HDD), Critical Precipitation Day (CPD) as defined in Section 11.15 of the 2005 ISDA Commodity Definitions and User Guide.

15.4.2.5 commodityOption - CommodityWeatherOption - calculation

calculation-No Annotation Available

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/WeatherLegCalculation.png

    • settlementLevel-The Settlement Level means either the cumulative number of Weather Index Units for each day in the Calculaiton Period (Cumulative) or the cumulative number of Weather Index Units for each day in the Calculation Period divided by the number of days in the Calculation Period (Average) or the maximum number of Weather Index Units for any day in the Calculation Period (Maximum) or the minimum number of Weather Index Units for any day in the Calculation Period.
    • referenceLevelEqualsZero-No Annotation Available
    • calculationDate-No Annotation Available
    • businessDays-No Annotation Available
    • dataCorrection-The date payment often revised after its publication, this indicates if the payment date could be recalculated.
    • correctionPeriod-If dataCorrection=true, this indicates how long after the publication of the date corrections could be made.
    • maximumPaymentAmount-Cups on total payment amount.
    • maximumTransactionPaymentAmount-Cups on payment amount that goes out in any particular calculation period.
    • rounding-Rounding direction and precision for price values.

15.4.2.6 commodityOption - CommodityWeatherOption - weatherIndexData

weatherIndexData-No Annotation Available

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/WeatherIndexData.png

15.4.2.6.1 WeatherStation

WeatherStation-Weather Station.

The same content applies to 'weatherStationFallback' and 'weatherStationSecondFallback'.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/WeatherStation.png

15.4.3 commodityOption - CommodityPhysicalOption

CommodityPhysicalOption.model-Items specific to financially-settled commodity options.

The approach is similar to that used for interest rate swaptions by embedding a physically-settled preciouse and non-preciouse metal forward transaction within the option transaction. So that the exercise of an option results in a new physically-settled forward transaction.

schemaDocumentation/schemas/fpml-com-5-4_xsd/groups/CommodityPhysicalOption.model.png

The 'commodityForward' component is described in the 'Commodity Forward' section below.

The 'physicalExercise' component is the same as for physically-settled commodity options described in the 'commoditySwaption' section below.

NOTE: support for other physically-settled options within 'commodityOption' is DEPRICATED. The 'commoditySwaption' product should be used instead.

The commoditySwaption is specific to physically-settled commodity options:

All FpML products inherit two optional elements from the Product type: 'productType' and 'productId'. The 'productType' defines a classification of the type of product. FpML defines a simple product categorization using a coding scheme. The 'productId' contains a product reference identifier allocated by a party. In this case, FpML does not define the domain values associated with this element.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/CommoditySwaption.png

15.5.1 commoditySwaption - CommoditySwapDetails

The approach is similar to that used for interest rate swaptions by embedding a physically-settled swap transaction within the option transaction. So that the exercise of an option results in a new physically-settled swap transaction.

schemaDocumentation/schemas/fpml-com-5-4_xsd/groups/CommoditySwapDetails.model.png

15.5.2 commoditySwaption - physicalExercise

physicalExercise-The parameters for defining how the commodity option can be exercised into a physical transaction.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/CommoditySwaption/physicalExercise.png

    • CommodityPhysicalExercise-The parameters for defining how the physically-settled commodity option can be exercised and how it is settled.
    • americanExercise-No Annotation Available
    • automaticExercise-Specifies whether or not Automatic Exercise applies to a Commodity Option Transaction.
    • writtenConfirmation-Specifies whether or not Written Confirmation applies to a Commodity Option Transaction.

15.5.3 commoditySwaption - premium

premium-The option premium payable by the buyer to the seller.
Should the premium differ over the course of an Asian options life (e.g. because delivery is per calendar day which is reflected in the premium), a premium schedule should be specified. Note that the intention is that a premium step should be specified for each Calculation Period in the trade, regardless of whether there is a change in value between two periods. This is so as to match the premium schedule to the calculation periods as clearly as possible. The premium steps must be in chronological order (i.e the first step corresponds to the first Calculation Period, the last step to the last Calculation Period).

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/CommoditySwaption/premium.png

15.5.4 commoditySwaption - CommodityContent

CommodityContent.model-Items common to all Commodity Transactions.
The 'commonPricing', 'marketDisruption', and 'rounding' elements are common across all commodity transactions. For a detailed description of them see the commoditySwap section.

schemaDocumentation/schemas/fpml-com-5-4_xsd/groups/CommodityContent.model.png

The commodityForward product element supports the representation of Precious and Non-Precious metal Forwards. Whilst some commodity forwards are booked as single period swaps, precious forwards are extremely basic trades and are confirmed under a different ISDA confirmation template

Even though the initial scope is limited to Precious and Non-Precious Forward, the intention of the working group is to allow support for other commodity classes should this be required.

schemaDocumentation/schemas/fpml-com-5-4_xsd/elements/commodityForward.png

15.6.1 commodityForward - fixedLeg

The fixed payment of the Commodity Forward product is represented using the fixedLeg element of type NonPeriodicFixedPriceLeg.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/CommodityForward/fixedLeg.png

    • PayerReceiver.model-No Annotation Available
    • fixedPrice-Fixed price on which fixed payments are based.
    • totalPrice-The total amount of the fixed payment for all units of the underlying commodity.
    • quantityReference-A pointer style reference to a quantity defined on another leg.
    • CommodityPaymentDates.model-The different options for specifying the Payment Date. This will consist of either a set of Payment Dates or else a Payment Date schedule.

15.6.2 commodityForward - averagePriceLeg

averagePriceLeg-No Annotation Available

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/CommodityForward/averagePriceLeg.png

The 'commodityForwardLeg' element is placeholder within commodityForward structure for the actual Precious and Non-Precious metal legs (e.g. bullionPhysicalLeg and metalPhysicalLeg).

15.6.3 commodityForward - bullionPhysicalLeg

The intention of the new leg is to re-use as many existing commodity components as possible to achieve a flexible implementation of a forward that will be adaptable for use with further commodity classes.

Consequently, the BullionPhysicalLeg component will be a member of a choice group such that further commodity types can be added over time.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/BullionPhysicalLeg.png

BullionPhysicalLeg-Physically settled leg of a physically settled Bullion Transaction.

15.6.4 commodityForward - metalPhysicalLeg

metalPhysicalLeg-Physically settled metal products leg.

schemaDocumentation/schemas/fpml-com-5-4_xsd/elements/metalPhysicalLeg.png

    • MetalPhysicalLeg-Physically settled leg of a physically settled Metal transaction.
    • metal-The specification of the Metal Product to be delivered.
    • conversionFactor-If the Notional Quantity is specified in a unit that does not match the unit in which the Commodity Reference Price is quoted, the scaling or conversion factor used to convert the Commodity Reference Price unit into the Notional Quantity unit should be stated here. If there is no conversion, this element is not intended to be used.
    • deliveryConditions-No Annotation Available
    • CommodityFixedPhysicalQuantity.model-The different options for specifying a fixed physical quantity of commodity to be delivered.
    • conversionFactor-If the Notional Quantity is specified in a unit that does not match the unit in which the Commodity Reference Price is quoted, the scaling or conversion factor used to convert the Commodity Reference Price unit into the Notional Quantity unit should be stated here. If there is no conversion, this element is not intended to be used.

15.6.4.1 commodityForward - metalPhysicalLeg - metal

metal-The specification of the Metal Product to be delivered.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/Metal.png

    • material-No Annotation Available
    • shape-No Annotation Available
    • brand-No Annotation Available
    • grade-No Annotation Available

15.6.4.2 commodityForward - metalPhysicalLeg - deliveryPeriods

deliveryPeriods-The period during which delivery/deliveries of Metal may be scheduled.

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/CommodityDeliveryPeriods.png

    • periods-No Annotation Available
    • periodsSchedule-No Annotation Available
    • CommodityCalculationPeriodsPointer.model-Model group to enable users to reference a Calculation Periods schedule in the form of a series of actual dates in a calculationPeriods container or in the form of a parameterised schedule in a calculationPeriodsSchedule container.

15.6.4.3 commodityForward - metalPhysicalLeg - deliveryConditions

deliveryConditions-No Annotation Available

schemaDocumentation/schemas/fpml-com-5-4_xsd/complexTypes/MetalDelivery.png

    • MetalDelivery-The physical delivery conditions for the transaction.
    • deliveryLocation-No Annotation Available
    • risk-"Risk of loss" may also be used, equivalently, on confirmation documents.
    • totalQuantityTolerance-The +/- percent tolerance in seller's option which applies to the total quantity delivered over all shipment periods.
    • periodQuantityTolerance-The +/- percentage quantity tolerance in seller's option which applied to each shipment period.
    • title-Describes how and when title to the commodity transfers.

15.6.4.4 commodityForward - metalPhysicalLeg - CommodityFixedPhysicalQuantity.model

CommodityFixedPhysicalQuantity.model-The different options for specifying a fixed physical quantity of commodity to be delivered.

schemaDocumentation/schemas/fpml-com-5-4_xsd/groups/CommodityFixedPhysicalQuantity.model.png

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