Proposal attached RE: FpML-CD Adding support for Fixed Recovery Swaps -- Call for Comments Closes Monday, June 23rd

[andrew.p.parry@xxxxxxxxxxxx]

Henri

We can confirm the build date at the
co-ordination committee meeting on Monday, I hope that FpML-4-4-TR-2 can
be released by the end of this month

Please find attached which adds recovery
factor and consistent entity type support as we discussed on the CDWG call
yesterday. Zip file includes proposal document, schema branched from FpML-4-4-TR-1,
and sample xml files



Regards



Andrew Parry
+44 20 7325 1486
Exotics and Hybrids Architecture
JP Morgan

Henri Pegeron <hpegeron@xxxxxxxx>
Sent by: cdwg@xxxxxxxx

18/06/2008 20:42

Please respond to
cdwg@xxxxxxxx

To	cdwg@xxxxxxxx
cc
Subject	RE: FpML-CD Adding support for Fixed Recovery Swaps -- Call for Comments Closes Monday, June 23rd

Ben/All,
Apologies for not being to attend this weeks call but I'm glad we were
able to come to a consensus on the Fixed Recovery Swap proposal.

Did we happen to discuss an expected date for the next Trial Recommendation
build for 4.4?

Regards, 
Henri Pegeron 
------------------------------------------------------------
The Depository Trust & Clearing Corporation 
DTCC Deriv/SERV : Business Analysis & Design
55 Water Street - New York, NY 10041
Phone: + 1 (212) 855 1682
Fax: + 1 (212) 855 1020

"Ben Lis" <Ben.Lis@xxxxxxxxx>
Sent by: cdwg@xxxxxxxx

06/18/2008 10:30 AM

Please respond to
cdwg@xxxxxxxx

To	<cdwg@xxxxxxxx>
cc
Subject	RE: FpML-CD Adding support for Fixed Recovery Swaps -- Call for Comments Closes Monday, June 23rd

We discussed support for Fixed Recovery Swaps on today’s CDWG call. 
  
The consensus on that call was that we should move forward in an expedited
manner with the proposal that Jamie has submitted to the CDWG (see first
mail on the stream below). To the point that Henri raises, the consensus
of the members on the call was to go with option (1) making it explicit
in the annotation that the currency will be derived from the Floating Rate
Payer Calculation Amount. 
  
Pending Coordination Committee approval, we will publish this change out
in the second trial recommendation of FpML 4.4 
  
If you have outstanding questions or concerns on the proposal for adding
support for Fixed Recovery Swaps, please raise them on this e-mail stream
before close of business Monday, June 23rd 2008. If no unaddressed
concerns are raised by this time, we will move forward with this change.
  
Thanks, 
  
Ben Lis 
Head of Product Management & Integration 
T-Zero 
  
212.323.6041 
www.tzero.com

---

From: cdwg@xxxxxxxx [mailto:cdwg@xxxxxxxx] On Behalf Of Henri
Pegeron
Sent: Tuesday, June 10, 2008 10:03 PM
To: cdwg@xxxxxxxx
Subject: Re: FpML-CD Adding support for Fixed Recovery Swaps
  

Jamie,
This proposal looks good - DTCC has also gotten feedback that CDS Recovery
Swaps will need to be supported in FpML and this field would allow users
to submit confirms with a fixed recovery as opposed to an explicit cash
settlement amount.  

One comment I have is around the existing "currency" component
of the cashSettlementAmount.  Right now, FpML is allowing the cashSettlementAmount
to have a currency that is different than that of the Notional amount.
 If we allow a choice between the amount or a fixed recovery factor,
we should consider either: 
1.        making it explicit in the annotation that
the currency will also be derived from the Floating Rate Payer Calculation
Amount. 
2.        making "recoveryFactor" a complexType
and include both the rate and the currency. 
I believe option one would be easier to implement and probably less contentious
(since the 2nd would involve making or reusing a type).

Any thoughts? 

Regards,
Henri Pegeron
------------------------------------------------------------
The Depository Trust & Clearing Corporation 
DTCC Deriv/SERV : Business Analysis & Design
55 Water Street - New York, NY 10041
Phone: + 1 (212) 855 1682
Fax: + 1 (212) 855 1020

"Orme, Jamie" <Jamie.Orme@xxxxxx>
Sent by: cdwg@xxxxxxxx

06/10/2008 03:44 PM

Please respond to
cdwg@xxxxxxxx

To	<cdwg@xxxxxxxx>
cc
Subject	FpML-CD Adding support for Fixed Recovery Swaps

 

CDWG,

We would like to update the creditDefaultSwap schema to fully support
Fixed Recovery swaps.

Currently the cashSettlementTerms only allows for Fixed Recovery
where an amount is specified:

<cashSettlementTerms>
      <cashSettlementAmount>
              <currency>USD</currency>
              <amount>1500.0</amount>
      </cashSettlementAmount>
</cashSettlementTerms>

We would like to extend this so that a "recovery factor", if
applicable, could be included instead.  The factor is a fraction that
will then be used to calculate the amount of recovery on a Credit Event.

Within our paper flows, we currently confirm this as follows:

1.Settlement Terms:

Terms Relating to Cash Settlement:

Settlement Method: Cash Settlement

Settlement Currency: The currency of denomination of the Floating Rate
Payer Calculation Amount

Recovery Factor [0.50]

Cash Settlement Amount (1 minus the Recovery Factor) multiplied by the
Floating Rate Payer Calculation Amount

Therefore, we propose to use a new 'FixedRecovery.model' group that
will provide a choice between a fixed settlement amount or a recovery factor:

Based on our confirm "snippet", this would then be modelled in FpML as follows:

<cashSettlementTerms>
     <recoveryFactor>0.5</recoveryFactor>
</cashSettlementTerms>

To see this change in context, please see the attached schema change.

Could we get together to discuss the above?

Many Thanks

Jamie

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Attachment: FpML-4-4-7-CDWG-r4019.zip
Description: Zip archive