# FpML Financial product Markup Language Trial Recommendation 10 September 2021

## Version: 4.2

#### This version: http://www.fpml.org/spec/fpml-4-2-13-tr-6

#### Latest version: http://www.fpml.org/spec/fpml-4-2-13-tr-6

#### Previous version: https://www.fpml.org/spec/fpml-4-2-12-rec-2/

#### Errata for this version: http://www.fpml.org/spec/errata/fpml-4-2-13-tr-6-errata.html

Build Number: 13; Document built: Thu 09/09/2021 16:55:16.36

Copyright (c) 1999 - 2007 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/documents/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 4.2 Trial 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 4.2 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 document, "FpML-4-2-intro", provides overviews 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.

- Main Components
- Doc Components
- Shared Components
- Shared Enumeration definitions
- Asset Components
- Equity Shared Components
- Equity Derivative Options Components
- Return Swaps Components
- FX Components
- Interest Rate Components
- Credit Derivative Components
- Base Pricing and Risk Components
- Valuation Result Sets and Related Components
- Valuation Reporting Messages
- Market Environment Data Components
- Valuation and Sensitivity Results
- Messaging Components
- Pre-trade Components
- Trade Execution Components
- Post-trade Components
- Cash Flow Matching Components
- Index and cross-reference of definitions
- Schema and Example files - Provides zip file with FpML schemas and examples.

#### 1.2.2 Other Documents in the Specification

- Examples - Provides sample FpML for each section.
- Scheme Definitions - Describes standard FpML schemes, and the values that they can take.

#### 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 a zero or many repeatition
- A '+' indicates a one or many repeatition
- A '..' bubble with numbers above and below indicates specific range
- A '1' in a bubble indicates the presence of a nested sequence
- 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

### 1.3 WORKING GROUP MEMBERS AND ACKNOWLEDGEMENTS

This document was produced by the following working groups:

#### 1.3.1 Architecture Working Group

- Andrew Jacobs (HandCoded Software), chair
- Anthony B. Coates (Miley Watts)
- Igor Dayen (Object Centric Solutions)
- Daniel Dui (UBS and University College London)
- Marc Gratacos (ISDA)
- Simon Heinrich (IONA Technologies)
- Andrew Parry (JP Morgan Chase Bank)
- Raj Patel (HSBC)
- Henri Pegeron (DTCC)
- Matthew Rawlings (JP Morgan Chase Bank)
- John Weir (Goldman Sachs)
- Irina Yermakova (ISDA)

#### 1.3.2 Business Process Working Group

- Marc Gratacos (ISDA), chair
- Andrew Jacobs (HandCoded)
- Puneet Jain (Citadel)
- Pierre Lamy (Goldman Sachs)
- Angela Lannin (IBT)
- Brian Lynn (Global Electronic Markets)
- Bela Maranhas (DerivaSys)
- Philip Nikolov (Goldman Sachs Asset Management)
- Henri Pegeron (DTCC)
- Marc Teichman (T-Zero)
- Irina Yermakova (ISDA)

#### 1.3.3 Validation Working Group

- Simon Heinrich (IONA Technologies), chair
- Daniel Dui (UBS)
- Marc Gratacos (ISDA)
- Andrew Jacobs (HandCoded Software)
- Christian Nentwich (ModelTwoZero)
- Henri Pegeron (DTCC)
- Irina Yermakova (ISDA)
- Dominique McKenzie (BGI)

#### 1.3.4 IRD Products Working Group

- Harry McAllister (BNP Paribas), chair
- John Aldridge (JP Morgan Chase Bank)
- Marc Gratacos (ISDA)
- Robert Green (DTCC)
- Guy Gurden (Swapswire)
- Pierre Lamy (Goldman Sachs)
- Philippe Negri (Sungard)
- Jamie Orme (Goldman Sachs)
- Andrew Parry (JP Morgan Chase Bank)
- Marty Ross-Trevor (Bank of Tokyo-Mitsubishi)
- Marc Teichman (T-Zero)
- Jeff Valentino (Bank of America)
- Irina Yermakova (ISDA)

#### 1.3.5 Credit Derivatives Working Group

- Ben Lis (T-Zero), chair
- Kathy Andrews (Bank of America)
- Milla Bouklieva (Goldman Sachs)
- Karel Engelen (ISDA)
- Piers Evans (SwapsWire)
- Marc Gratacos (ISDA)
- Robert Green (DTCC)
- Guy Gurden (Swapswire)
- Tony Kao (Goldman Sachs)
- Pierre Lamy (Goldman Sachs)
- Anna Lukasiak (Goldman Sachs)
- Andrew Parry (JPMorgan Chase Bank)
- Henri Pegeron (DTCC)
- Mark Perry (Goldman Sachs)
- Marc Teichman (T-Zero)
- Irina Yermakova (ISDA)
- Shel Xu - (Goldman Sachs)

#### 1.3.6 FX Working Group

- Rick Schumacher (Wall Street Systems), chair
- Lee Buck (Morgan Stanley)
- Fred Burge (JP Morgan Chase)
- Marcello Davanzo (KPMG)
- Alexander Ernst (RiskTrak Financial)
- Gary Goldberg (FXPress)
- Rahul Gupta (FXAll)
- Lee Haines (Reuters)
- Richard Hall (Evolution)
- Antoine Hurstel (BNP Paribas)
- Bruce Kenney (Mizuho Capital Markets)
- Dan Kolner (UBS)
- Anna Lukasiak (Goldman Sachs)
- Tim Madeley (Cognotec)
- Francoise Massin (SWIFT)
- Donna McCollum (SunGard Trading Systems)
- Ned Micelli (Reuters)
- Justin Oglethorpe (Citigroup)
- Hugues Planzol (BNP Paribas)
- Frank Smith (Atriax)
- Gavin Smith (RCP Consultants)
- Bill Specht (Currenex)
- Tony Spraggs (Reuters)
- Viral Tolat (Integral)
- Jayesh Vira (SunGard Trading Systems)

#### 1.3.7 Equity Derivatives Working Group

Voting Members

- Andrew Parry (JP Morgan Chase Bank), Chair
- Piers Evans (Swapswire)
- Robert Green (DTCC)
- Guy Gurden (Swapswire)
- Shabbir Irfani (Goldman Sachs)
- Pierre Lamy (Goldman Sachs)
- Robert Masri (DTCC)
- Coner Mongey (Citadel Group)
- Tolu Mumuni (Swapswire)
- Bin Shen (Goldman Sachs)
- Marc Teichman (T-Zero)

Non-Voting Members

- Jim Bonner (ML)
- Karel Engelen (ISDA)
- Philip Franz (Bank of America)
- Steve Goswell (Barclays Global)
- Marc Gratacos (ISDA)
- Mark Harthan (Liffe)
- Lucio Iida (Barclays Global)
- Ayesha Kaljuvee (DTCC)
- Gareth Lee (Goldman Sachs)
- Jianan Li (Citadel Group)
- Gaurav Makhija (Citadel Group)
- Mark Parris (UBS)
- Dharmender Rai (Lehman)
- Irina Yermakova (ISDA)

#### 1.3.8 Pricing and Risk Working Group

- Brian Lynn (Global Electronic Markets), chair
- Michael Di Stefano (Integrasoft)
- Amod Dixit (Standard Chartered Bank)
- Marc Gratacos (ISDA)
- Mahmood Hanif (Bank of America)
- Eugene Kagansky (JPMorgan Chase)
- Pierre Lamy (Goldman Sachs)
- Philippe Negri (Sungard)
- Henrik Nilsson (TriOptima)
- Robert Stowsky (Brookpath Partners)
- Vlad Efroimson (Bank of America)
- Irina Yermakova (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 Cash Flow Matching

The FpML Business Process Working Group has defined support for Cash Flow Matching. The group has produced a schema representation aiming to cover the messages exchanged in this business process, examples, and documentation. The FpML Standards Committee invites comments on these proposed materials including schemas, examples, and documentation.

#### 1.5.2 nthToDefault element within IndexReferenceInformation

The Credit Derivatives Working Group has decided not to include nth-to-default support within the current Credit Default Swap Index product representation (IndexReferenceInformation complex type). The FpML Standards Committee invites comments to know whether this would be a valuable feature to support.

#### 1.5.3 TradeAmended

As requested by some hedge funds, the new AllocationAmended message includes information about the original trade (allocation) that has been amended. This is not consistent with the existing TradeAmended message which only includes details of the amended trade. The FpML Standards Committee invites comments on this implementation approach.

#### 1.5.4 Allocations - Collateral Information

The "short-form" representation of allocations requires independent amount information. This required information may be an issue for listed instruments. The FpML Standards Committee invites comments on this implementation approach.

#### 1.5.5 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 4.2 Trial Recommendation 2006-12-15

- Equity Derivatives:
  - Improved support for Asia Excluding Japan Interdealer Master Confirmation.
- Coding Schemes:
  - Floating Rate Index scheme has been updated.
  - Contractual Supplement scheme has been updated.
  - Contractual Definitions scheme has been updated.
  - Day Count Fraction scheme has been updated.
  - Inflation Index Source scheme has been updated.
  - Master Confirmation Type scheme has been updated

View PDF for details

#### 1.6.2 Incompatible changes compared to FpML 4.1

In previous versions of FpML one of the most frequent uses of the 'equitySwap' element was for representing multiple types of Total Return Swaps, which could not be described as equities. The EquitySwap product type coped admirably with these but was misnamed. This was very confusing for implementers so the FpML Standards Committee decided that the EquitySwap types should be renamed ReturnSwap and that the equitySwap element should be deprecated and substituted by a new returnSwap element.

The equitySwap element will be removed in the next major FpML version. It will still be represented in the 4.x versions for backward compatibility reasons.

### 1.7 SCOPE

The scope of FpML 4.2 includes all of the FpML 4.1 scope plus broadened BusinessProcess/Messaging coverage and additonal Credit Derivatives products. FpML 4.2 includes support for Allocations, Accounts, Roles representation, CDS Baskets, and Tranches on CDS Index.

#### 1.7.1 Architecture Framework

The various Working Groups have developed FpML 4.2 within the FpML Architecture 2.1 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 2.1 builds upon the earlier FpML Architecture 2.0 and FpML Architecture 1.0 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 Business Process and Messaging Working Groups have extended the FpML 4.1 standard to cover Allocations, Accounts, Roles, and Cash Flow Matching.

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.

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 4.2. These validation rules, which are aimed at normalizing the use of elements within FpML, are issued separately from the main working draft document at a URL defined in the validation section of this document.

The validation working group publishes with its releases:

- A set of rules described in English
- 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 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 4.2 Trial 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 4.2 Trial Recommendation the following Credit Derivative products are covered:

- Credit Default Swap
- Credit Default Swap Index
- Tranche on Credit Default Swap Index
- Credit Default Swap Basket
- Credit Event Notice

#### 1.7.6 FX Scope

In FpML 4.2 Trial 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

#### 1.7.7 Equity Derivative Options and Forwards Scope

The EQD Products Working Group has extended the FpML 4.0 standard to cover the following Equity Derivative products

- Broker Equity Option
- Equity Option Transaction Supplement
- Equity Swap Transaction Supplement

Support for long form Equity Forwards has been introduced

#### 1.7.8 Return Swaps Scope

FpML provides generic Return Swaps support including "long form" Equity Swap representations, as well as Total Return Swaps, and Variance 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, interestLeg, and varianceLeg. 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;
- 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.

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 Pricing and Risk Scope

The Pricing and Risk scope for FpML 4.2 Trial 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

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