FpML Issues Tracker

651: FRA Changes Proposal

March 14, 2008

closed

Major

Always

Interest Rate Derivatives

philipleach

h_mcallister

Summary

Attached is a proposal to bring the FpML FRA model into line with the ISDA 2006 Definitions.

Attachments

  • FRA Proposal.zip

    • Notes:

  • mgratacos

    02/06/20 1:07 pm

    AWG 2020-02-06

    • We need to check with Harry on the FRA proposal since the attachments are not accessible anymore.

  • mgratacos

    10/26/20 7:55 am

    AWG 2020-10-15

    Agreement not to move this issue to the XAPWG.
    We looked in detail at the proposal and we think most of the proposed changes are already covered or are not required from a business perspective.
    • It doesn’t make sense for a Forward Rate Agreement to support a Spread.
    • Usually FRAs are six or nine month contracts so there is no need to specify the termination date as an unadjusted date.
    • The group didn’t see a need to have Non Deliverable Settlement in FRAs.
    There are two outstanding actions triggered from the proposal:
    • Make fra/calculationPeriodNumberOfDays optional – the group never understood why this element was required originally.
    • Check with Guy Gurden whether Markit sees any Early Termination Clause in FRAs.

  • mgratacos

    11/04/20 4:02 am

    Hi Marc,

    We don’t support early termination clauses on FRAs in MarkitWire and I just did a quick query and couldn’t find any client requests for adding such support.

    As FRAs are generally short dated in nature and reset and settle on the effective (value) date they wouldn’t typically trigger a credit risk position far out enough for parties to require a form of early termination provision if the FRA remains as a bilateral non-cleared transaction. While most are forward starting they still tend to all have a value date within say a 2 year horizon.

    Many FRAs today are also centrally cleared and fall under mandatory clearing mandates in various jurisdictions.

    In summary, while technically a early termination clause could be applied to a non-cleared FRA the nature of how they are typically traded means it’s unlikely to be required in practice. The only argument I could see for supporting them in the FRA FpML model is for consistency with all other interest rate derivative products.

    Regards

    Guy

  • mgratacos

    11/04/20 4:33 am

    Made fra/calculationPeriodNumberOfDays optional as agreed by the AWG.

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