All, Please note that there is a call tomorrow to discuss the attached. AGENDA: 1. Review outstanding actions An updated commodity underlyer is attached - I have included deliveryLocation as an optional type within the CommodityProduct.model in the light of last week's discussions. This will need to be validated by the group. I have also made the default scheme for CommodityUnit point to an existing FpML scheme - price-quote-units-1-1 (attached). This will need to be looked at to ensure it is up to date but will save us creating our own scheme that risks duplicating work done by other groups such as Brian Lynn's reconciliation / cash flow matching group. If you could review and comment on missing units that would be appreciated. 2. Commodity Swaps Discussion Paper. For those that cannot receive zips, you can get the attachments here: http://www.fpml.org/_wgmail/_commwgmail/threads.html Dial in details: US: 1 888 481 3032 UK: 0 800 904 7961 Intl: 1 617 801 9600 Participant Code: 751365 Note that the minutes to the last call are included below. Regards, Piers Evans ***************** * Present Hugh Brunswick, EFET Hans Ellis, SWIFT (Co-Chair) Piers Evans, Markit Wire (Co-Chair) Marc 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? The content of this e-mail is confidential and may be privileged. It may be read, copied and used only by the intended recipient and may not be disclosed, copied or distributed. 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price-quote-units-1-1.xml
Description: price-quote-units-1-1.xml
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Commodity Underlyer 2008-06-05.zip
Description: Commodity Underlyer 2008-06-05.zip