Equity Derivatives Working Group
Mission: Implement part of the 2011 Equity Derivative Definitions, published by ISDA and close the gap in the product coverage under the 2002 definitions.
Chairs of Working Group
Mary Kwok (MarkitSERV), Andrew Parry (Bloomberg)
See section 1 of a particular Recommendation for the list of contributors.
Scope: The ISDA Equity Steering Committee in February 2015 decided to commence implementation of the 2011 Equity Derivative Definitions. In an initial phase Volatility Swaps are targeted. Priorities beyond Volatility Swaps are not yet set, however it is expected that additional products will follow the implementation of the Volatility Swaps. In addition, the group will cover volatility swaps under the 2002 definitions. It is expected that volatility swaps will be traded under both sets of definitions initially. The scope of this working group is limited to version 5.9 of the FpML standard. Version 5.9 is expected to become a Recommendation in Q1 2016. The Equity Derivatives FpML working group will develop the FpML confirmation view and examples, coding schemes, and supporting documentation covering:
- Volatility swap coverage under the 2002 definitions [ - covered in WD1]
- Volatility Swaps coverage under the 2011 definitions. The General Terms Confirmation, and Relationship Supplement, part of the 2011 Definitions framework will be referenced. Whether an electronic representation of the General Terms Confirmation and Relationship Supplement is necessary will be considered by the working group and added to the scope if so required. [- covered in WD1]
- Additional items such as the representation of valuation at close of morning trading session (required in the Japanese Market). A full list if additional items will be agreed with the working group during the initial meetings. [- covered in WD1]
- Changes to the Reporting View for Volatility Swaps are not part of the scope.
- Accumulators/Decumulators: a share accrual/offloading trade typically between a bank and a client, which allows the buyer to “accumulate” shares at an agreed price over the course of a set number of periods.
Any expansion of the scope beyond the above mentioned will require Standards Committee approval. Risks: The 2011 Equity Definitions Volatility Swap Legal Documentation is not yet finalized. Delays beyond May will impact the timing of the FpML work. Meeting Schedule: Weekly meetings; conference calls primarily Rules of Operation: The working group will adopt the FpML Working Group Rules of Operation. These outline best-practices for meetings, managing member participation, reaching group consensus and voting. Estimated time commitment from Participants: Members should be prepared to commit approximately 4 hours per week for meeting participation and document review. Full members must have the agreement and support of their management before signing up to the Working Group.