FpML/XML Payload Definition for IRS & CDS (Pre-Trade)

Transcription

1 FpML/XML Payload Definition for IRS & CDS (Pre-Trade) Date: 30 Apr, 2012 Version 5.0 Draft Page 1

2 Agenda Objectives Requirement Summary FIX and FpML Integration Requirements Glossary Modelling Approach Decision Definition Approach - IRS IRS Samples - Fixed Vs. Floating Single Currency - Fixed Vs. Floating Cross Currency - OIS Schema Proposal - Examples Timeline Next Meeting Page 2

3 Objectives 1. Creation of a lite version of the XML Schema to define IRS & CDS for use in pre-trade based on existing FpML Standards initiatives 2. Convene working group of FICWG, SEFs and FpML task force to make rapid progress (months) 3. Do not create any dependencies on successful completion of other initiatives such as UPI Page 3

4 Requirement Summary Deliverable XML payload definitions for pre-trade to be used within FIX messages to define IRS and CDS (Technically: XML schema) Requirements Leverage the FpML data representation protocol for OTC derivatives in order to provide an electronic reference (a.k.a. canonical) representation in the form of XML documents for each of the distinct derivatives products (of type: IRS or CDS) that are eligible for electronic execution through SEFs Detailed business requirements can be defined by Swap Execution Facilities (SEFs) that support RFQ XML schema representation limited to products that are traded by SEFs through RFQ Priorities Outright vanilla IRS Outright vanilla CDS Timelines There is an urgency in the industry to deliver this initiative rapidly (measured in few months) Page 4

5 FIX and FpML Integration Requirements Best Practices Guide for IRS and CDS Recommends The definition of a Standard Outright Instrument should be supplied within a SecurityXML component block of a Securities Reference Data message using an XML payload FIX Trading Message (e.g., Quote or Order) Instrument-1 +Header SecurityID= SecurityIDSource=M... Price=99.86 OrderQty=100 Side=Buy +Trailer FIX Reference Data Message (e.g., SecurityDefinition) Outright Instrument-1 +Header SecurityID= SecurityIDSource=M SecurityType=IRS SecurityXMLLen=Length SecurityXML= SecurityXMLSchema= +Trailer FpML Payload <FpML xmlns=......<buyer>to Be Decided </Buyer>...<Seller>To Be Decided </Seller>...<Price>1</Price>...<Amount>1</Amount>... </FpML> FIX values override FpML Values Potential task for 2012 Specify the attributes required with in the XML payload for the pre-trade messages Page 5

6 FIX and FpML Integration Requirements Best Practices Guide for IRS and CDS Recommends The definition of a Standard Multi-leg Instrument should be supplied within the InstrumentLeg components. The reference to each leg of the instrument needs to be supplied in LegSecurityID(602) Potential task for 2012 Trading Message (e.g., Quote/Order) Multi-leg Instrument +Header SecurityID= SecurityIDSource=<req>... Price=99.86 OrderQty=100,000 Side=Buy +Trailer Reference Data Message (e.g., SecurityDefinition) Multi-leg Instrument +Header SecurityID= SecurityIDSource=<req> SecurityType=MLEG NoLeg=3 > LegSecurityID= > LegSecurityIDSource=<req> > LegFactor=0.5 > LegSide=Buy > LegSecurityID= > LegSecurityIDSource=<req> > LegRatioQty=1 > LegFactor=1.0 > LegSide=Sell > LegSecurityID= > LegSecurityIDSource=<req> > LegFactor=0.5 > LegSide=Buy +Trailer +Trailer Specify the attributes required with in the XML payload for the pre-trade messages Reference Data Message (e.g., SecurityDefinition) Outright Instrument-2 +Header SecurityID= SecurityIDSource= SecurityType=CDS SecurityXMLLen=Length SecurityXML= +Trailer Reference Data Message (e.g., SecurityDefinition) Outright Instrument-3 +Header SecurityID= SecurityIDSource= SecurityType=CDS SecurityXMLLen=Length SecurityXML= +Trailer <FpML xmlns=......<buyer>to Be Decided </Buyer>...<Seller>To Be Decided </Seller>...<Amount>1</Amount>...<Price>1</Price>... </FpML> <FpML xmlns=......<buyer>to Be Decided </Buyer>...<Seller>To Be Decided </Seller>...<Amount>1</Amount>...<Price>1</Price>... </FpML> Reference Data Message (e.g., SecurityDefinition) Outright Instrument-4 +Header SecurityID= SecurityIDSource= SecurityType=CDS SecurityXMLLen=Length SecurityXML= <FpML xmlns=......<buyer>to Be Decided </Buyer>...<Seller>To Be Decided </Seller>...<Amount>1</Amount>...<Price>1</Price>... </FpML> Page 6

7 FIX and FpML Integration Requirements Best Practices Guide for IRS and CDS Recommends The first trading message (QuoteRequest) of a Non-standard instrument must contain instrument definition in an XML payload and also must supply an associated SecurityID(48) Standard Instrument Non- Standard Instrument Standard Instrument +Header SecurityID= SecurityIDSource=M SecurityType=MLEG Potential task for 2012 QuoteResponse / QuoteRequest message Multi-leg Instrument NoLeg=3 > LegSecurityID= > LegSecurityIDSource=M > LegRatioQty=1 > LegSide=Buy > LegSecurityID= > LegSecurityIDSource=M > LegRatioQty=2 > LegSide=Sell > LegSecurityXMLLen= > LegSecurityXML= > LegSecurityXMLSchema= > LegSecurityID= > LegSecurityIDSource=M > LegRatioQty=1 > LegSide=Buy +Trailer <FpML xmlns=......<buyer>to Be Decided </Buyer>...<Seller>To Be Decided </Seller>...<Amount>1</Amount>...<Price>1</Price>... </FpML> Reference Data Message (e.g. SecurityDefinition) Standard Outright Instrument-2 +Header SecurityID= SecurityIDSource=M SecurityType=CDS SecurityXMLLen=N SecurityXML= +Trailer Reference Data Message (e.g. SecurityDefinition) Standard Outright Instrument-3 +Header SecurityID= SecurityIDSource=M SecurityType=CDS SecurityXMLLen=N SecurityXML= +Trailer Specify the attributes required with in the XML payload for the pre-trade messages <FpML xmlns=......<buyer>to Be Decided </Buyer>...<Seller>To Be Decided </Seller>...<Amount>1</Amount>...<Price>1</Price>... </FpML> <FpML xmlns=......<buyer>to qq Be Decided </Buyer>...<Seller>To Be Decided </Seller>...<Amount>1</Amount>...<Price>1</Price>... </FpML> Page 7

8 Glossary Term Description Examples Outright Vanilla IRS Following types of IRS required to be covered initially Fixed vs. Float single CCY (G8) Fixed vs. Float cross CCY (G8) OIS (G8) Exclude Inflation Non G8 IRS Floating rate benchmark : LIBOR 1M/3M/6M, and OIS. Tenor: 1-10Y, 12Y, 15Y, 20Y, 25Y, 30Y and 40Y for LIBOR 1M/3M/ 6M. 1-6M, 9M and 12M for OIS. IRS EUR Floating rate benchmark: EURIBOR 1M/3M/6M/12M and OIS EONIA Tenor:, 1-20Y, 25Y, 30Y, 40Y and 50Y for EURIBOR 3M/ 6M. 3-12M, 15M, 18M and 24M for EURIBOR 1M. 2-10Y, 12Y, 15Y, 20Y, 25Y and 30Y for EURIBOR 12M and OIS EONIA (long). 1-3W, 1-12M and 15M for OIS EONIA (short). IRS GBP Floating rate benchmark: LIBOR 3M/6M and OIS SONIA Tenor: 1-20Y, 25Y, 30Y, 40Y and 50Y for LIBOR 3M/6M. 1-3W, 1-12M and 15M for OIS SONIA IRS JPY Floating rate benchmark: LIBOR 6M Tenor: 18M, 1-10Y, 12Y, 15Y, 20Y, 25Y, 30Y and 40Y Outright Vanilla CDS TBC TBC Page 8

9 Modelling Approach Decision Decide approach for modelling - A or B? (Required / Optional / Not Required) A. Complete Model Definition approach Explicit Schema definition of pre-trade version of IRS and CDS B. Variance Approach Provide a reference to the original standard Instrument (reference product) and a list of attributes the can be modified by the user List of attributes that can be changed for IRS (as supported by Execution Venues today) Effective date, Maturity date, Day Count convention (e.g.: 30/360, ACT/365 etc.), Payment Frequency (e.g.: Annual, Semi, Quarterly), Roll day convention (e.g.: IMM, FRN), Compound (e.g. None, Flat, Straight) and Floating Spreads Decision was made to start with the Complete Model Definition approach (16/Apr/2012) Page 9

10 Full Model Definition Approach - IRS Steps for Defining the Full Approach for IRS a) Define the products required by execution venue based on the business attributes Fixed Vs. Float Single Currency IRS Fixed Vs. Float Cross Currency IRS OIS b) Identify the business attributes of IRS (classified under outright vanilla IRS) c) Map business attributes to corresponding FpML attributes Define the XML schema based on the input from execution venue d) Final review of the Schema by the task force e) Sign off by FpML task force Page 10

11 IRS Example 1: Standard IRS, Fixed Vs. Floating Single Currency Pretrade Product Attribute Description Tenor Type Sample 1 = IRS 5Y vs 3M LIBOR Sample 1 = IRS 5Y vs 3M LIBOR 5 Years SWAP Fixed Start Date 23/04/2012 Fixed Start Date Adjustment Fixed End Date 23/04/2017 Fixed End Date Adjustment Fixed End Date Business Days Fixed Calculation Period End Dates Adjustment Fixed Calculation Period and Payment Business Days Fixed Calculation and Payment Frequency 6M Fixed Payment Dates Adjustment Fixed Currency Fixed Day Count Convention 30/360 Roll Convention 23 Float Start Date 23/04/2012 Float Start Date Adjustment Float End Date 23/04/2017 Float End Date Adjustment Float End Date Business Days Float Calculation Period End Dates Adjustment Float Calculation Period and Payment Business Days Float Calculation and Payment Frequency 3M Float Payment Date Adjustment Float Currency Float Day Count Convention ACT/360 Reset Frequency 3M Roll Convention 23 Fixing Date Determination 2 London Business Days prior to each Reset Date Floating Rate Index 3-Month -LIBOR-BBA Products that can be covered IRS Floating rate benchmark : LIBOR 1M/3M/6M Tenor: 1-10Y, 12Y, 15Y, 20Y, 25Y, 30Y and 40Y for LIBOR 1M/3M/6M. IRS EUR Floating rate benchmark: EURIBOR 1M/3M/6M/12M Tenor: 1-20Y, 25Y, 30Y, 40Y and 50Y for EURIBOR 3M/ 6M. 3-12M, 15M, 18M and 24M for EURIBOR 1M. 2-10Y, 12Y, 15Y, 20Y, 25Y and 30Y for EURIBOR 12M IRS JPY Floating rate benchmark: LIBOR 6M Tenor: 18M, 1-10Y, 12Y, 15Y, 20Y, 25Y, 30Y and 40Y IRS GBP Floating rate benchmark: LIBOR 3M/6M Tenor: 1-20Y, 25Y, 30Y, 40Y and 50Y Page 11

12 IRS Example 2: Standard IRS, Fixed Vs. Floating Cross Currency Pretrade Product Attribute Description Tenor Type Sample 1 = IRS GBP 5Y vs 3M LIBOR Sample 2 = IRS GBP 5Y vs 3M LIBOR 5 Years SWAP Products that can be covered Currencies:, EUR, GBP, JPY Fixed Start Date 23/04/2012 Fixed Start Date Adjustment Fixed End Date 23/04/2017 Fixed End Date Adjustment Fixed End Date Business Days Fixed Calculation Period End Dates Adjustment Fixed Calculation Period and Payment Business Days Fixed Calculation and Payment Frequency 6M Fixed Payment Dates Adjustment Fixed Currency GBP Fixed Day Count Convention ACT/360 Roll Convention 23 Float Start Date 23/04/2012 Float Start Date Adjustment Float End Date 23/04/2017 Float End Date Adjustment Float End Date Business Days Float Calculation Period End Dates Adjustment Float Calculation Period and Payment Business Days Float Calculation and Payment Frequency 3M Float Payment Date Adjustment Float Currency Float Day Count Convention ACT/360 Reset Frequency 3M Roll Convention 23 Fixing Date Determination 2 London Business Days prior to each Reset Date Floating Rate Index 3-Month -LIBOR-BBA Page 12

13 IRS Example 3: Standard OIS Pretrade Product Attribute Sample 3 =OIS 1M vs Fed Funds Effective Description Sample 3 = OIS 1M vs Fed Funds Effective Tenor 1 Month Type OIS Fixed Start Date 25/04/2012 Fixed Start Date Adjustment Fixed End Date 25/05/2012 Fixed End Date Adjustment Fixed End Date Business Days Fixed Calculation Period End Dates Adjustment Fixed Calculation Period and Payment Business Days Fixed Calculation and Payment Frequency 1 Day Fixed Payment Dates Adjustment Fixed Currency Fixed Day Count Convention ACT/360 Roll Convention None Products that can be covered IRS Floating rate benchmark : Fed Funds Effective Tenor: 1-6M, 9M and 12M IRS EUR Floating rate benchmark: EONIA Tenor: 1-3W, 1-12M and 15M IRS GBP Floating rate benchmark: SONIA Tenor: 1-3W, 1-12M and 15M Float Start Date 25/04/2012 Float Start Date Adjustment Float End Date 25/05/2012 Float End Date Adjustment Float End Date Business Days Float Calculation Period End Dates Adjustment Float Calculation Period and Payment Business Days Float Calculation and Payment Frequency 1 Day Float Payment Date Adjustment Float Currency Float Day Count Convention ACT/360 Reset Frequency 1 Day, Preceding Roll Convention None Fixing Date Determination 2 London Business Days prior to each Reset Date Floating Rate Index -Federal Funds-H.15-OIS-COMPOUND Page 13

14 IRS Example 4: Initial Stub Pretrade Product Attribute Sample 4 = IRS 4Y+ OFF BMK vs 3M LIBOR Description Sample 4 = IRS 4Y+ OFF BMK vs 3M LIBOR Tenor 4+ Years Type SWAP Fixed Start Date Adjustment Fixed End Date 23/04/2017 Fixed End Date Adjustment Fixed End Date Business Days Fixed Calculation Period End Dates Adjustment Fixed Calculation Period and Payment Business Days Fixed Calculation and Payment Frequency 6M Fixed Payment Dates Adjustment Fixed Currency Fixed Day Count Convention 30/360 Roll Convention 23 Example for modified effective day Products that can be covered Fixed Vs. Floating Single Currency Fixed Vs. Floating Cross Currency Float Start Date 25/04/2012 Float Start Date Adjustment Float End Date 23/04/2017 Float End Date Adjustment Float End Date Business Days Float Calculation Period End Dates Adjustment Float Calculation Period and Payment Business Days Float Calculation and Payment Frequency 3M Float Payment Date Adjustment Float Currency Float Day Count Convention ACT/360 Reset Frequency 3M Roll Convention 23 Fixing Date Determination 2 London Business Days prior to each Reset Date Floating Rate Index 3-Month -LIBOR-BBA Start Regular period day 23/07/ Month -LIBOR-BBA Initial Stub, Floating Rate Index 3-Month -LIBOR-BBA Page 14

15 IRS Example 5: Modified termination day Pretrade Product Attribute Sample 4 = IRS 4Y+ OFF BMK vs 3M LIBOR Description Sample 4 = IRS 4Y+ OFF BMK vs 3M LIBOR Tenor 4+ Years Type SWAP Fixed Start Date 23/04/2012 Fixed Start Date Adjustment Fixed End Date 22/04/2017 Fixed End Date Adjustment Fixed End Date Business Days Fixed Calculation Period End Dates Adjustment Fixed Calculation Period and Payment Business Days Fixed Calculation and Payment Frequency 6M Fixed Payment Dates Adjustment Fixed Currency Fixed Day Count Convention 30/360 Roll Convention 23 Float Start Date 23/04/2012 Float Start Date Adjustment Float End Date 22/04/2017 Float End Date Adjustment Float End Date Business Days Float Calculation Period End Dates Adjustment Float Calculation Period and Payment Business Days Float Calculation and Payment Frequency 3M Float Payment Date Adjustment Float Currency Float Day Count Convention ACT/360 Reset Frequency 3M Roll Convention 23 Fixing Date Determination 2 London Business Days prior to each Reset Date Floating Rate Index 3-Month -LIBOR-BBA Example for modified termination day Products that can be covered Fixed Vs. Floating Single Currency Fixed Vs. Floating Cross Currency Start Regular period day 22/07/ Month -LIBOR-BBA Initial Stub, Floating Rate Index 3-Month -LIBOR-BBA Page 15

16 IRS Example 6: Compounding Pretrade Product Attribute Sample 1 = IRS 5Y vs 3M LIBOR Description Sample 1 = IRS 5Y vs 3M LIBOR Tenor 5 Years Type SWAP Fixed Start Date 25/04/2012 Fixed Start Date Adjustment Fixed End Date 25/04/2017 Fixed End Date Adjustment Fixed End Date Business Days Fixed Calculation Period End Dates Adjustment Fixed Calculation Period and Payment Business Days Fixed Calculation and Payment Frequency 6M Fixed Payment Dates Adjustment Fixed Currency Fixed Day Count Convention 30/360 Roll Convention 25 Example for compounding Products that can be covered Fixed Vs. Floating Single Currency Fixed Vs. Floating Cross Currency Float Start Date 25/04/2012 Float Start Date Adjustment Float End Date 25/04/2012 Float End Date Adjustment Float End Date Business Days Float Calculation Period End Dates Adjustment Float Calculation Period and Payment Business Days Float Calculation Frequency 3M Payment Frequency 6M Float Payment Date Adjustment Float Currency Float Day Count Convention ACT/360 Reset Frequency 3M Roll Convention 25 Fixing Date Determination 2 London Business Days prior to each Reset Date Floating Rate Index 3-Month -LIBOR-BBA Compounding method Flat Page 16

17 Step a: Identify the business attributes of IRS Attributes of Outright Vanilla IRS products For each leg (either Fixed or Floating): Effective payment date Either absolute or relative day Calculation for the effective day Date adjustments Termination payment date Either absolute or relative day Calculation for the effective day (& adjustments) Date adjustments Periodic payments First periodic payment day Last periodic payment day Date adjustments Calculations for the periodic payment Calculations adjustments Stubs Currency Rate calculations (Floating only) Day Count Benchmark Compounding Provisions: Early termination Supported IRS instruments: Fixed vs. Float single CCY (G8) Fixed vs. Float cross CCY (G8) OIS (G8) Page 17

18 Schema Proposal Removed features from Original FpML 5.2 Confirmation Schema General Section: ProcessingIndicator.model onbehalfof originatingevent tradeheader pricenotation portfolio PartiesAndAccount.model Product Section: bondoption brokerequityoption bulletpayment capfloor commodityforward commodityoption commodityswap correlationswap creaditdefaultswapoption dividentswaptransactionsupplement equityforward equityoption equityoptiontransactionsupplemnt equityswaptransactionsupplemnt fra fxdigitoption fxoption fxsingleleg fxswap instrumenttradedetails returnswap Strategy swaption termdeposit varianceoptiontransactionsupplemnt varianceswap varianceswaptransactionsupplemnt Non-Product (trade) Section: otherpartypayment brokerpartyreference calculationagent.model determiningparty hedgingparty collateral documantation governinglaw allocations CDS Section: buyerseller.model IRS Section: Suggest to remove: PayerReceive.model initialvalue (multiple occurrences) stepvalue (multiple occurrences) notionalstepamount notionalsteprate amount initialrate Page 18

19 Schema Proposal Examples Example-1: IRS 5Y vs 3M LIBOR Example-2: IRS GBP 2Y vs 3M LIBOR Example-3: OIS 1M vs Fed Funds Effective Example-4: Initial Stub Example-5: Modified Termination Date Example-6: Compounding Page 19

20 Timeline? End of Apr/ First draft of XML schema for IRS outright identifiers should be available? End of Apr/ First draft of XML schema for CDS outright identifiers should be available? May/ XML schema for IRS & CDS outrights identifiers should be presented for ratification process - Discuss this in the FpML/FPL Working group for ratification Page 20

21 Next Meeting Monday 7 th May 17:00 18:00 BST (12:00 13:00 EDT) Page 21