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RE: FpML-Com Minutes of 2008-05-30 call
Piers, I'll miss the call this Friday but still hope to send through the
example trades and clear my other actions...
Hugh Brunswick
Managing Director
EFETnet B.V.
Keizersgracht 62-64
1015 CS Amsterdam
Tel: +31 (0) 20 - 301 13 98
Mob: +44 (0) 7767 27 27 26
Fax: +31 (0) 20 - 520 75 10
www.efetnet.org
h.brunswick@xxxxxxxxxxx
-----Original Message-----
From: commwg@xxxxxxxx [mailto:commwg@xxxxxxxx] On Behalf Of Piers Evans
Sent: 03 June 2008 11:02
To: commwg@xxxxxxxx
Subject: FpML-Com Minutes of 2008-05-30 call
* Present
Hugh Brunswick, EFET
Hans Ellis, SWIFT (Co-Chair)
Piers Evans, Markit Wire (Co-Chair)
Mar Gratacos, ISDA
Raphael Iyageh, Goldman Sachs
Chito Jovellanos, Forward Look
Brian Lynn, GEM
Bulent Ozkan, Triple Point
John Solder, UBS
Chuck Witter, Morgan Stanley
* Apologies
Luis Fierro, Deutsche Bank
Owen King, Markit Wire
* Review actions from last meeting 1500 LDN 16 May 2008
>> PE to ask EC why deliveryLocation existed in the original GS proposal
and review how often it is used by ISDA to define Commodity Reference
Prices.
EC has been very busy and thus hard to get hold of. PE to try again this
week.
>> HB to investigate need for deliveryLocation in underlyer
representation.
Group agreed that this is a requirement. BL said that pipeline capacity
can lead to different prices at different locations. PE will review how
to add this to the model.
>> CW to obtain an example financial power confirmation for the group
showing peak vs. off-peak in use.
CW did submit a proposal of how to model this and this was discussed on
the call.
>> PE to add a 'QuarterHourly' value to the
SettlementPeriodDurantionEnum.
Complete.
>> PE to revise model for settlementPeriod to be FpML compliant.
Complete.
>> PE to contact EC to establish why holidayCalendar and timeZone were
in the model originally.
As above.
>> PE to review options for modelling the concept of delivery dates
needing to reference the expiring / new front month contract on the last
trading day.
See minutes for full details.
>> HB to look for examples of how delivery dates including / excluding
the expiring contract are confirmed currently.
HB unable to get examples but will try to have some for the next call.
* Minutes
1. Discussion of modelling the concept of delivery dates needing to
reference the expiring / new front month contract on the last trading
day.
PE stated that no one at the banks could think of when this might change
and that ISDA have not foreseen this in the legal definitions.
HB said that Gas swaps do make use of this and that this should be
reviewed in the light of examples.
BL thought that this could be relevant for more than just the final
trading day of the contract - in gas, trades used to switch over on as
much as 5 business days prior.
HB will investigate further and come back to the group to discuss how
this could be modelled.
2. Discussion of CW's email on possible power implementations.
CW said it was common to have to set out exactly what was meant on a
trade in terms of delivery times. There are established conventions in
the market, but not many.
BO said that in Triple Point's experience it was better to specify the
schedule for all trades even where there is an established convention as
it was possible for people to have different understandings of what
those conventions mean.
CW said that many conventions are clear in the market and sent
supporting links to contract definitions on the ICE and the Nymex.
HB said that in EFET's experience, there is only a need to include the
delivery schedule in a physically-settled swap transaction where power
is delivered against a floating payment.
The group debated whether these transactions should be included but
elected to put this off until a later date given that it would require
full schema support for physical delivery.
CW and BO still felt it would be a requirement to specify the schedule
on cash-settled trades.
PE to review CW's proposal and see how this can be included in the
existing underlyer definition.
3. HB completed the explanation of his answers on the commodity
underlyer questions.
IndexCap and IndexFloor are in the EFET schema for physically-settled
swap transactions when the floating price may be capped. Given that the
schema will not support these trades in the first phase, these elements
will not be included in the underlyer model.
CRCapacityConversionRate is to convert the units of one commodity to
another where these don't match. This will need to be modelled but
discussion as to whether this was a leg-specific component or a
trade-level item. HB indicated that with basket transactions, it would
be important to have this at the basket level. PE to review options.
PhysicalIndexPricingDates - relates to physically-settled index deals
and so will be omitted initially.
FXInformation - used for any FX conversion. Some discussion on 3
currency trades - e.g. a cross-currency basis swap with final settlement
in a 3rd. HB said ISDA have published guidelines on how this should work
- the legs would be valued first and then converted into the settlement
currency. HB also said that FX can be averaged sometimes too. PE to
review how this could be modelled - this is most likely a trade-level
component and so will be covered in the product discussion for swaps.
SpreadInformation - The EFET approach is to have all basis swaps
modelled as float / float regardless of how they are originally
captured. One leg would carry the relevant spread. Generally this is a
currency amount - e.g. Crude - USD 17, but group was not sure if these
could also be stated in terms of basis points. Group to review how
spreads can be expressed.
CalculationPeriod - used to allow a calculation period in the past; the
settlement period might be monthly but the pricing dates could start to
be applicable prior to the start of the trade. The group will review
this idea when implementing the swap model.
PricingFxPeriods - to model FX as an index rather than a reference price
source.
CommodityReferencePrice - this is mandatory in EFET as they prefer to
have the user specify what is meant by the commodity reference price on
confirmations to ensure that both sides agree.
The FpML approach is to have this component optional, but this is in
line with schema design guidelines - if some systems prefer to rely on
just the commodity reference price (some banks claim that they do this
now), then this is achievable whilst those implementers who consider it
should be mandatory can make it so using business validation rules.
* Decisions
Physically-settled index deals will be excluded from the first cut of
the schema given the complexity of physical settlement.
IndexCap, IndexFloor, PhysicalIndexPricingDates from the EFET schema
will not be included in the underlyer model initially.
FX and calculation periods will be reviewed in the swap model discussion
paper.
The group will aim to validate the new Underlyer proposal next week as
far as possible before moving on to the swap model.
Next meeting 1500 LDN Fri 6th June 2008
* Actions
PE to ask EC why deliveryLocation existed in the original GS proposal
and review how often it is used by ISDA to define Commodity Reference
Prices.
PE to contact EC to establish why holidayCalendar and timeZone were in
the model originally.
PE will review how to add deliveryLocation to the underlyer model.
HB to look for examples of how delivery dates including / excluding the
expiring contract are confirmed currently and suggest how this could be
modelled.
PE to review CW's electricity proposal and see how this can be included
in the existing underlyer definition.
PE to review options for modelling conversion factor on basis trades.
Group to review how spreads can be expressed - cash amount only or can
these be in basis points?
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