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Stockman Comments on FpML-BP minutes bpwg call 2010-05-14

Title: Stockman Comments on  FpML-BP minutes bpwg call 2010-05-14
Mark:

Reading through the minutes I thought I would add some detail related to the discussion around settlement.  I agree that there are already message standards for cash movement and securities movement.  However, for OTC commodities derivatives settlement messaging goes beyond these two actions and includes all the pre-settlement matching of invoices, invoice line items, taxes and cash-flows done manually today.  It may resembles the cash-flow matching done for equity derivatives.   It should be noted that the European Federation of Energy Traders (EFET) working with LEAP (Leadership in Energy Automated Processing) has created its own set of XML standards for invoice matching (but not cashflow matching).  I expect that but some of these may be support already.

>From a business process support point of view, I think there are three important pieces of scope we could address in the settlement process area


The other, and separate, settlement process area was discussed on the call and has been noted in the minutes: messaging to support the exchange and management of information required to move physical commodity between counterparties to OTC commodity derivative trades (i.e. physical settlement).  The standards that exist for securities movement and delivery will not likely help here.  LEAP has been working on XML standards for portions of this business process (e.g. eTickets) but nothing comprehensive has been done that I am aware of.

Finally, I would encourage those who will be making the decisions about the scope of various working groups to make these decisions based on the similarity or dissimilarity in the business process which requires messaging support rather than the similarities in the data view used by the business process.  I say this because, a priori, it is not clear what data view best suits a given business process.  This determination is a result of the analysis not an input to the analysis.  Different views of the data that have already been created are resources that can be used by a working group analyzing the message requirements of a particular business process and need not be restricted to one.


Peter


Peter




On 5/17/10 8:35 AM, "Marc Gratacos" <MGratacos@xxxxxxxx> wrote:

Participants
------------
Chris Funck (Chatham Financial)
Peter Stockman (DTCC)
John Avery (Sungard)
Santanu Chakraborty (Citigroup)
Lucio Iida (BlackRock)
Chito Jovellanos (ForwardLook)
Jonathan Viljoen (Standard Bank)
John Whelan (LCH)
Sreedhar Segu (DTCC)
Christian Unger (BBH)
MP Dumont (SWIFT)
Harry McAllister (BNPParibas)
Marc Gratacos (ISDA)

Apologies
----------
Martin Sexton (London Market Systems)
Brian Lynn (GEM)


Logistics
---------
If anyone is interested in chairing the Business Process Working Group, please let me know.

The conference calls will be biweekly at 11 h NYT. This was the usual schedule of the Modeling Task Force.

Review of charter
------------------
Marc updated that Option Exercise (and Expiry) is one of the processes that will be discussed in the upcoming meetings. There has been a proposal outstanding for a long time, that now with the new messaging framework in place, should be added to the standard.
There were comments on the addition of the following processes to the charter:
* Peter Stockman suggested the addition of physical dispatch of physical commodities as process to cover. There isn't a standard for the moment for this process.
* Securities transfering and resets were also mentioned as processes to be covered (I forgot to mention that the Reporting WG created a message for rate reset. This is published in version 5.0)
* There was some discussion around settlement but FpML has always been kept outside the settlement scope. FpML may contain all the information to calculate the payment but doesn't contain any messages for the actual payments. There are other standards that cover such processes.

Scope of WGs
---------------
There was some discussion regarding the scope of the working group and whether cash flow matching, portfolio reconciliation should be covered by the BPWG or the Reporting WG. There may be some overlap of scope.

As the current charter stands, the BPWG takes care of the Confirmation view processes and the Reporting WG takes care of the reporting view processes. However, Cash flow matching and Portfolio rec are not really reporting processes.

Marc will check with Brian and Karel to see if this needs to be reviewed.

Cash Flow Matching Issue
---------------------------
DTCC wants to include a reference to the trade (tradeId) within the GrossCashflow complex type. This is part of the Cash Flow Matching messages. The proposal needs to be reviewed by the appropriate working group, either the Business Process or the Reporting WG.


Please let me know if I missed anything.

Thanks and Regards,
Marc

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