FpML Support for New ISDA Definitions in 2021
In 2021 ISDA is introducing many new definitions, including supplements to the 2006 ISDA Definitions to address new features such as new calculated rates, new Floating Rate Option (a.k.a floating rate index) definitions, and a completely redesigned ISDA Definitions handbook, the 2021 ISDA Definitions. These Definitions are scheduled to begin being used on Oct. 4, 2021. FpML is addressing these changes in several ways. The FpML standard is being enhanced to support several new features, including:
- New cash settlement provisions such as “mid-market valuation” and “replacement value”.
- These features are represented in example form in Interest Rate Derivative product examples #46-4
- Modular calculated rates such as Lookback Compound, Observation Shift Compound, and Lockout Compound, along with daily averaged calculations.
- These features are represented in example form in Interest Rate Derivative product examples #38-45
- Messaging support for representing when rates have fallen back and how to price those rates.
- These features are represented in example form in Interest Rate Derivative product example #50, with more examples to come in the Trial Recommendation
These features are being developed in the latest version of FpML 5.12, and were published in Last Call Working Draft form on May 17, 2021.
- A Trial Recommendation including some minor cleanups and new examples is planned for July 15, 2021
- A Recommendation including additional examples, improved annotations, and any necessary corrections is planned for mid September, 2021.
These specific features will also be supported in FpML version 4.2, 4.3, and 5.5, as described below:
- An updated Version 4.2 has been published as an LCWD and will be published as a Trial Recommendation and a Recommendation.
- Updated versions of 4.3 and 5.5 will be published as a Recommendation
- Implementers wishing to add these features to other older versions of FpML are encouraged to follow the guidelines here [link to the paper on how to upgrade the version].
- ISDA will be supporting legacy versions of FpML as described here.
FpML is also developing a comprehensive set of new reference data for the new ISDA Floating Rate Options, providing information about topics such as
- which Definition version as supported,
- mappings between FRO names, and
- various calculation fields
Publicly available reference data for FROs will be enhanced compared to previous information, and in addition value-added information will be available with enhanced metadata.
Frequently Asked Questions
- Do I need to upgrade to a new version of FpML by Oct. 4, 2021? Not necessarily. Please see the outreach presentation to find out more about whether you will need to upgrade to a new version of FpML.
- Will I need to use the new FRO names? Almost certainly you will need to be ready to accept new FRO names from some services starting Oct. 4, 2021. You may be able to continue to submit trades using the old FRO names for some transition period. See the outreach presentation for more details. The FpML reference data will provide guidance on the name transition.
- If I’m on an older version of FpML, will I need to upgrade to 5.12 to use the new features? Not necessarily. As discussed above and in the outreach presentation, the new features will be added to selected legacy version as an aid to transition, at least for a limited time.
- Where can I find examples of the new features? The examples discussed in the section above will be available in all the versions that we publish (4.2, 4.3, 5.5, 5.12) on the timelines discussed above. They are located in “confirmation view” in the “product/interest-rate-derivatives” folder.
- FpML has developed this Outreach Presentation to help developers understand the motivation and impact of these changes in more detail
- FpML will be developing a webinar/presentation, targeted for mid to late July, to provide more detailed information about this material
- The FpML Cross-Asset Product Working Group [XAPWG] is where these changes are being discussed. Please feel free to join that group for more detailed updates.
- Naming Convention Guidelines – click HERE to view the latest version “FpML FRO Naming Convention 20210207.pdf”
- Discussion paper – click HERE to view the latest version “FpML IR 2021 Definitions Work Stream v0_26.pdf”
- Work has begun to incorporate the new FpML 5.12 features listed above into ISDA’s Common Domain Model. We anticipate that the CDM will included a reference implementation of the new modular compounded rates.
- Please see the ISDA 2021 Implementation page for more information about the new definitions