FpML® Financial product Markup Language Recommendation 10 September 2015

Version: 4.10

This version: http://www.fpml.org/spec/fpml-4-10-2-rec-1

Latest version: http://www.fpml.org/spec/fpml-4-10-2-rec-1

Previous version: http://www.fpml.org/spec/fpml-4-9-5-rec-1/

Errata for this version: http://www.fpml.org/spec/fpml-4-10-2-rec-1/html/fpml-4-10-errata.html

Build Number: 2; Document built: Mon 08/24/2015 0:59:03.43

Copyright (c) 1999 - 2015 by International Swaps and Derivatives Association, Inc.

Financial Products Markup Language is subject to the FpML® Public License.

FpML® is a registered trademark of the International Swaps and Derivatives Association, Inc.

A copy of this license is available at http://www.fpml.org/license/license.html



The FpML specifications provided are without warranty of any kind, either expressed or implied, including, without limitation, warranties that FpML, or the FpML specifications are free of defects, merchantable, fit for a particular purpose or non-infringing. The entire risk as to the quality and performance of the specifications is with you. Should any of the FpML specifications prove defective in any respect, you assume the cost of any necessary servicing or repair. Under no circumstances and under no legal theory, whether tort (including negligence), contract, or otherwise, shall ISDA, any of its members, or any distributor of documents or software containing any of the FpML specifications, or any supplier of any of such parties, be liable to you or any other person for any indirect, special, incidental, or consequential damages of any character including, without limitation, damages for loss of goodwill, work stoppage, computer failure or malfunction, or any and all other commercial damages or losses, even if such party shall have been informed of the possibility of such damages.



1 INTRODUCTION AND OVERVIEW

1.1 STATUS OF THIS DOCUMENT

This is the FpML 4.10 for Loans - Recommendation for review by the public and by FpML members and working groups.

The FpML Working Groups encourage reviewing organizations to provide feedback as early as possible. Comments on this document should be sent by filling in the form at the following link: http://www.fpml.org/issues. An archive of the comments is available at http://www.fpml.org/issues/

There are also asset class-specific mailing lists; you can join them at the following link:

Join a Working Group at FpML

A list of current FpML Recommendations and other technical documents can be found at

http://www.fpml.org/spec

This document has been produced as part of the FpML 4.10 activity and is part of the Standards Approval Process.

1.2 ORGANIZATION OF THE DOCUMENTATION

The FpML documentation is organized into a number of subsections.

This section provides an overview of the specification.

1.2.1 Schema Reference

These are automatically generated reference documents detailing the contents of the various sections in the FpML schema.

1.2.2 Other Documents in the Specification

1.2.3 Diagram Notation

Most diagrams in this specification come from TIBCO's XML Turbo application which is used to batch generate the pictures in the documentation. The notation follows the pattern:

  • No bubble indicates a mandatory element or attribute
  • A '?' indicates an optional element or attribute
  • A '*' indicates an occurrence of zero or many
  • A '+' indicates an occurrence of one or many
  • A '..' bubble with numbers above and below indicates specific range
  • A '1' in a bubble indicates the presence of a nested sequence or choice group
  • Diagonal lines indicate a choice group (< shape)
  • Non-diagonal lines indicate a sequence ([ shape)
  • A 'D' in a bubble indicates an attribute with a default value

images/main/BaseType.jpg

images/main/DerivedType.jpg

1.3 WORKING GROUP MEMBERS AND ACKNOWLEDGEMENTS

This document was produced by the following working group:

1.3.1 Syndicated Loan Working Group

  • Bhavik Katira (TenDelta), chair
  • Derek Butler (FNF)
  • Chris Childs (DTCC)
  • Ellen Hefferen (LSTA)
  • Nicole Jolliffe (Swift)
  • Ken Katz (Misys)
  • Derek LaSalle (JPMorgan)
  • Scott MacLaughlin (Goldman Sachs)
  • Robert Murray (Bank of America)
  • Henri Pegeron (MarkitSERV)
  • Solomon Roytshteyn (Deloitte)
  • Sreedhar Segu (DTCC)
  • Jeffrey Studer (JPMorgan)
  • Sarah Wagner (JPMorgan FCS Corp)
  • Irina Yermakova (ISDA)
  • Lyteck Lynhiavu (ISDA)
  • Karel Engelen (ISDA)
  • Marc Gratacos (ISDA)

1.4 FpML INTRODUCTION

The Financial Products Markup Language (FpML) is the industry standard enabling e-business activities in the field of financial derivatives and structured products. The development of the standard, controlled by ISDA (the International Swaps and Derivatives Association), will ultimately allow the electronic integration of a range of services, from electronic trading and confirmations to portfolio specification for risk analysis. All types of over-the-counter (OTC) derivatives will, over time, be incorporated into the standard.

FpML is an application of XML, an internet standard language for describing data shared between computer applications.

1.5 REQUESTED FEEDBACK

1.5.1 Loan Updates (Tax Withholding and Letter of Credit Purpose)

The FpML Loan Working Group has defined support for tax withholding amounts associated with any notification. Certain tax withholding legislation is being enforced (as of January 2015), requiring agent banks to communicate this information on most notifications to lenders. Agent banks must now specify the amount of tax withholding that is being exercised, for each lender, against any cash-flow producing events occurring against a syndicated loan.

In addition, a pre-existing enumeration used to define the purpose of a Letter of Credit was updated. When communicating Letter of Credit information, it is necessary for agent banks to define the purpose for which the borrowing was originated. One of the purposes required by the agent banks, ‘Documentary’, was missing from the LcPurposeEnum enumeration, and has now been added.

The group has produced a schema representation aiming to cover the notifications in this business process, examples, and documentation. The FpML Standards Committee invites comments on these proposed materials including schemas (see CashPayable structure), examples (see loan ex-20, ex-21, ex-22), and documentation.

NOTE: FpML version 4.10 "for Loans" does not affect any 4.9 product representation, messages or shared components. Firms using earlier 4.x versions do not need to upgrade to 4.10 if they do not plan to use the loans enhancements described above. Firms looking to implement FpML for the first time should instead use the most recent version (e.g., 5.8 as of this writing).

1.5.2 Providing Feedback

Comments on this document should be sent by filling in the form at the following link: http://www.fpml.org/issues .

1.6 CHANGES IN THIS VERSION

1.6.1 Changes compared to FpML 4.9 Recommendation 2011-02-17

  • NOTE: FpML version 4.10 "for Loans" does not affect any 4.9 product representation, messages or shared components. Firms using earlier 4.x versions do not need to upgrade to 4.10 if they do not plan to use the loans enhancements described below. Firms looking to implement FpML for the first time should instead use the most recent version (e.g., 5.8 as of this writing).
  • Loans (Tax Withholding and Letter of Credit Purpose)
    • The FpML Loan Working Group has defined support for tax withholding amounts associated with any notification. Certain tax withholding legislation is being enforced (as of January 2015), requiring agent banks to communicate this information on most notifications to lenders. Agent banks must now specify the amount of tax withholding that is being exercised, for each lender, against any cash-flow producing events occurring against a syndicated loan.
    • In addition, a pre-existing enumeration used to define the purpose of a Letter of Credit was updated. When communicating Letter of Credit information, it is necessary for agent banks to define the purpose for which the borrowing was originated. One of the purposes required by the agent banks, ‘Documentary’, was missing from the LcPurposeEnum enumeration, and has now been added.
    • The group has produced a schema representation aiming to cover the notifications in this business process, examples, and documentation. The FpML Standards Committee invites comments on these proposed materials including schemas (see CashPayable structure), examples (see loan ex-20, ex-21, ex-22), and documentation.
  • The following PDF document describes in detail the loan-specific changes introduced by the FpML Loan Working Group in version 4.10 LoanWG-FpML-version-4-10-for-loans-changes.pdf

    View PDF for details on schema changes

    View PDF for details on validation rules changes

  • Coding Schemes:
    • The following scheme has been added:
      • withholdingTaxReasonScheme
1.6.1.1 Incompatible changes compared to FpML 4.9

None.

1.7 SCOPE

The scope of FpML 4.10 includes broadened BusinessProcess/Messaging coverage and additional product support, specifically:

1.7.1 Architecture Framework

The various Working Groups have developed FpML 4.10 within the FpML Architecture 2.2 Specification defined by the Architecture Working Group. This document defines that standards and principles on which the FpML grammatical definitions are based.

The FpML Architecture 2.2 builds upon the earlier FpML Architecture specifications and the conventions of FpML 1.02b before that. The refinement of the FpML architecture is an evolutionary process bought about by changes in the XML technology upon which it is based and the requirements of the standard as its scope expands.

1.7.2 Business Process Scope

The FpML Messaging Working Group was formed to define a messaging framework and sample messages for selected business processes. The Business Process Working Group has continued the work and additional business processes have been added. The business processes currently supported include:

  • Trade Affirmation
  • Trade Confirmation
  • Request for Quote
  • Novations
  • Terminations
  • Increases
  • Amendments
  • Allocations
  • Cash Flow Matching
  • Contract notifications to faciliate communication between asset managers and custodians.
  • Portfolio Reconciliation

To support these business processes, a number of messages have been defined. Please see the "Business Process Architecture" section for more information.

1.7.3 Validation Scope

The Validation Working Group provides semantic, or business-level validation rules for FpML 4.10. These validation rules, which are aimed at normalizing the use of elements within FpML, are issued as part of the FpML Specification in the validation section of this document.

The validation working group publishes with its releases:

  • A set of rules described in English
  • A technical description written in XQuery for each rule
  • Positive and negative test case documents for each rule
  • Non-normative reference implementations

The current specification includes a set of rules for Interest Rate Derivatives, Equity Derivatives, Credit Derivatives, Loans, FX, and for shared components. The rules for the different asset classes will be further enhanced in future versions.

1.7.4 IRD Scope

In FpML 4.10 for Loans - Recommendation the following Interest Rate Derivative products are covered:

  • Single and Cross-Currency Interest Rate Swap
  • Forward Rate Agreement
  • Interest Rate Cap
  • Interest Rate Floor
  • Interest Rate Swaption (European, Bermuda and American Styles; Cash and Physical Settlement)
  • Extendible and Cancelable Interest Rate Swap Provisions
  • Mandatory and Optional Early Termination Provisions for Interest Rate Swaps
  • FX Resetable Cross-Currency Swap

1.7.5 Credit Derivatives Scope

In FpML 4.10 for Loans - Recommendation the following Credit Derivative products are covered:

  • Credit Default Swap
  • Standard Coupon Credit Default Swap
  • Credit Default Swap Index
  • Tranche on Credit Default Swap Index
  • Credit Default Swap Basket
  • Credit Default Swap on a Mortgage
  • Credit Default Swap on a Loan
  • Option on Credit Default Swap
  • Credit Event Notice

1.7.6 FX Scope

In FpML 4.10 for Loans - Recommendation the following FX products are covered:

  • FX Spot
  • FX Forward (including non-deliverable forwards, or NDFs)
  • FX Swap
  • FX Options (European and American; barriers, digitals, binaries, average rates; cash and physical settlement)
  • Option Strategies (multiple simple options)

In addition, support for the following money market instrument is also provided:

  • Term Deposits
  • Dual Currency Deposits combining an FX Option and a Term Deposit within a Strategy component.

1.7.7 Equity Derivative Options and Forwards Scope

The EQD Products Working Group has extended the FpML standard to cover the following Equity Derivative products

  • Broker Equity Options;
  • Long Form Equity Forwards;
  • Long Form Equity Options;
  • Short Form Equity Options represented as Transaction Supplements under ISDA Master Confirmation Agreements.

1.7.8 Return Swaps Scope

FpML provides generic Return Swaps support including "long form" Equity Swap representations, as well as Total Return Swaps. A separate product element called equitySwapTransactionSupplement supports "short form" Equity Swap Transaction Supplement.

Return-type Swaps have 1-to-many Legs, all of which must be derived from the ReturnSwapLeg type. Instances of Legs are returnLeg and interestLeg. Other Leg types may be derived from ReturnSwapLeg at will, to allow for private extensions to support whatever type of Generic Return Swap is desired.

The scope of this FpML representation for return swaps is to capture the following types of swaps that have equity-related underlyers:

  • Single stock swaps as well as basket swaps (i.e. swaps with multiple underlyers);
  • Swaps that have a different types of underlying assets (equity, index, mutual funds, exchange-traded funds, convertible bond, futures), or a combination of these;
  • 2-legged swaps with a combination of an equity leg and a funding leg, as well as swaps that either have only one leg (e.g. fully funded or zero-strike swap) or multiple equity legs (e.g. outperformance swaps);
  • Total Return Swaps, a type of swap in which one party (total return payer) transfers the total economic performance of a reference obligation to the other party (total return receiver).
  • Swaps that have specific adjustment conditions, such as execution swaps or portfolio rebalancing swaps;
  • Swaps that involve the exchange of principal cashflows;
  • Swaps that have inital and final stubs;
  • Swaps which can be represented as Transaction Supplements under ISDA Master Agreements;
  • Contract For Difference (CFD) transactions;
  • Variance Swaps (deprecated, a separate varianceSwap product element has been created - See Variance Product Architecture)

Extraordinary Events terms have been incorporated, to take into consideration the release of the 2002 ISDA Definitions for Equity Derivatives.

Trigger swaps, in which equity risk morphs into a fixed income risk once a certain market level is reached, may be supported in a subsequent release.

1.7.9 Correlation Derivatives Scope

The Equity Derivative Working Group extended FpML to cover:

  • Correlation Swaps

1.7.10 Variance Derivatives Scope

The Equity Derivative Working Group extended FpML to cover:

  • Variance Swaps, a type of volatility swap where the payout is linear to variance rather than volatility, therefore the payout will rise at a higher rate than volatility;
  • Short Form Variance Options represented also as Transaction Supplements under ISDA Master Confirmation Agreements.

1.7.11 Dividend Derivatives Scope

The Equity Derivative Working Group extended FpML to cover:

  • Dividend Swap Transaction Supplement

1.7.12 Commodity Derivative Product Scope

The Commodities Working Group will extend the FpML standard to include trade types and products for the OTC commodities markets, following the structure and coverage of the 2005 ISDA Commodity Definitions. The following are included in version 4-10:

  • Support for financially settled swaps, options and spreads
  • Support for physically-settled swaps/forwards, options
  • Natural Gas, Oil, Electricity, Coal as the underlying Commodity product

Business Process is including Confirmations, Valuations, Reporting

1.7.13 Syndicated Loan Product Scope

The Syndicated Loan Business Working Group collectively decided to focus on designing one-way borrower-centric notifications. These notifications comprise most of the manual traffic that both agent banks and lenders must process on a daily basis.

The Syndicated Loan Working Group extended FpML to cover:

  • Syndicated Loan Notifications between Agent Bank and Lenders, including:
    • Facility Level Notifications
      • Scheduled Principal Repayment Notice
      • Unscheduled Mandatory and Voluntary Principal Repayment Notice
      • On-Going Fee Notice
      • One-Off Fee Notice
      • Letter of Credit Balance Notice
      • Letter of Credit Termination Notice
      • Letter of Credit Issuance Notice
      • Pricing Change Notice
      • Repayment Notice
      • Rollover Notice
    • Loan Contract Level Notifications
      • Drawdown Notice
      • Rate Set Notice
      • Interest Payment Notice
      • One-Off Fee Notice

In order to fully describe the notifications, it was necessary to design the following supporting object types, all of which are embedded within various notification types:

  • "Short-form" Product Definitions. These are summary objects which, in the future, will form the foundation for defining the 'long-form' loan product:
    • Deal Summary
    • Facility Summary
  • Loan Contract and Letter of Credit (Funded and Unfunded Loan) Definitions. These objects describe the value of outstanding loan contracts at a given point in time. The outstanding loan balance fluctuates over the life of a facility. There are two variations designed: the short-form summary and the long-form version of the loan contract:
    • Loan Contract Summary
    • Loan Contract
    • Letter of Creditt
    • L/C Summary
  • Lender Position Definitions. These objects describe the amount of a facility and loan contract that a single lender owns at a given point in time:
    • Facility Commitment Position
    • Loan Contract Position
  • Changes in version 4.10 (See the Loan Architecture, section 14, for more information)
    • Inclusion of a standard structure which will outline the tax withholding amounts associated with any notification.
    • Addition of an entry as part of a pre-existing enumeration used to define the purpose of a Letter of Credit.

1.7.14 Pricing and Risk Scope

The Pricing and Risk scope for FpML 4.10 for Loans - Recommendation is:

Valuation and basic risk on the following products:

  • Vanilla IR Swaps (single and dual currency fix/float swaps, non-CMS/CMT)
    • Valuation reporting (trades only)
    • Market Data (Yield Curves, FX spot rates)
    • Market risk reporting (Delta Risk vs. Curve Inputs, FX exposures) for trades
  • Credit Default Swaps
    • Valuation reporting for trades
    • Market Data (ir curves, credit spread, recovery rate, probability of default)
    • Market risk reporting (risk with respect to. the above variables) for trades
  • IR Caps/Floors/ EuropeanSwaptions, and corresponding risk types
    • Valuation reporting for trades
    • Market data (volatility surfaces)
    • Market risk reporting
      • Volatility/Vega Risk
      • Convexity/Gamma Risk (applies to all products)
      • Time Decay/Theta (applies to all products)
  • Portfolio level valuation and risk
    • Valuation
    • Risk reporting

The Pricing and Risk Working Group has also provided some definitions that might be useful for other types of valuation and risk reporting.

1.8 CHARACTER ENCODING AND CHARACTER REPERTOIRE

1.8.1 Character Encoding

Producers of FpML documents intended for interchange with other parties must encode such documents using either UTF-8 or UTF-16. Consumers of FpML documents must be able to process documents encoded using UTF-8, as well as documents encoded using UTF-16. For more information, see

http://www.w3.org/TR/REC-xml#charencoding

1.8.2 Character Repertoire

Unrestricted FpML elements may use any valid XML characters. For more information, see

http://www.w3.org/TR/REC-xml#charsets

Certain elements and attributes (such as scheme URIs) are defined with more restrictive types, such as xsd:normalizedString, xsd:token, or xsd:anyURI. For these types, please see the relevant data type definition in the XML Schema datatypes specification:

http://www.w3.org/TR/xmlschema-2/

1.9 TOOLS AND VALIDATION

1.9.1 Schema and Example Validation

The schema files and examples in this document have been validated with XercesJ (v.2.2.1 and v.2.6.2) and HandCoded's Toolkit for FpML Processing (version Java 1.1 Alpha 2).

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