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FpML-Com Reminder: FpML Commodity Working Group call today (Friday 02 October) at 15:00 LON / 10:00 NYC

All,

Please note that there is a call today at 15:00 London / 10:00 New York.


AGENDA:

1. Minutes / Actions from last call (attached)

2. Physical Options

  - Review of physical options proposal (attached)

    + How appropriate is the use of PeriodicDates for multiple
expiration dates? (References to calculation)?
    + Expiration Date(s) could be relative to the "nomination deadline".
How could this best be modelled?
    + strikePricePerUnit and fixedPrice are the same - is there value in
maintaining these separately?

3. Change of leg selection in Commodity Swap from choice group to
substitution group.

4. AOB


Dial in details:

US: 1 888 481 3032

UK: 0 800 904 7961

Intl: 1 617 801 9600

Participant Code: 52016709


Regards,

Owen King
+44 20 3367 0347
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All,
 
Please find attached a revised proposal to add support for physically-settled options to the FpML commodities schema.
 
As discussed by the group previously, this proposal takes the approach that a physical option will result in a new physical forward transaction when exercised.
 
The schema (fpml-com-4-7.xsd) and supporting files are attached within a zip file. An example confirmation message representing a multiple-expiry natural gas option and an associated paper confirmation are also attached.
 
If you are planning to attend the scheduled call tomorrow, it would be appreciated if you could review this proposal prior to then.
 
Many thanks,
 
Owen King
+44 20 7071 0137

Attachment: com-ex23-physical-gas-option-multiple-expiration.doc
Description: com-ex23-physical-gas-option-multiple-expiration.doc

Attachment: com-ex23-physical-gas-option-multiple-expiration.xml
Description: com-ex23-physical-gas-option-multiple-expiration.xml

Attachment: fpml-com-4-7.zip
Description: fpml-com-4-7.zip


--- End Message ---
--- Begin Message --- 
* Present
Marc Gratacos, ISDA
Owen King, MarkitSERV (Chair)
Farzad Moshfeghi, Barcap
Irina Yermakova, ISDA
William Wise, MarkitSERV

* Apologies
Peter Stockman, DTCC


* Review outstanding actions

>> MG to clarify the intended use of RelativeDates/scheduleBounds
MG had not been able to do this. FM said he would also be able to
investigate the use of this element.

To summarise the original question, what is the intended use of the
scheduleBounds element within RelativeDates type? It would appear to be
of use in defining the start and end of the date sequence but since
RelativeDates contains the mandatory dateRelativeTo element and neither
unadjustedFirstDate nor unadjustedLastDate have an id attribute that
could be referenced by it, dateRelativeTo will have to reference an
external date.

>> RI to try and provide a confirmation for a daily expiring
physically-settled option
RI has supplied an example confirm.
[Closed]

>> FM to propose an alternative structure for physically settled options
that uses the existing commodityOption type
OK noted that the proposed schema had changed significantly since this
action was assigned and FM said that he was broadly in agreement with
the current proposal.
[Closed]

>> DM to propose an alternative structure for physically settled options
that uses the existing commodityOption type
DM was not on today's call [Carried forward]


* Minutes

1. Physical Options

  - Review of feedback received for physical options survey 

    + OK said that he had received feedback directly from one transactor
who indicated that they did trade options with quantities or strike
prices that varied during the term of the trade. Further validation from
other firms would be appreciated.

    + The group was broadly comfortable with the schema (pending further
feedback to the survey). OK will complete outstanding items and
distribute the schema and a test trade to the group. 

2. Addition of optional totalPrice element to CommodityFixedPrice.model

  - FM asked whether this meant the final price is known at the time of
execution. OK explained that for many physical commodities this would be
the case when a trade is "Firm". It is not anticipated that this element
will be widely used as the total price is simply the product of the
total quantity and fixed price. However, for very bespoke power trades
where the price differs by load shape and by period, counterparties may
include the total price on a confirmation due to the relative complexity
of the calculation.

  - OK asked when this change could be included. MG noted the WD1 of
FpML 4.7 should be available next week and the change could be added to
these schemas for inclusion in the subsequent release.

3. Total Return Swaps on Commodity Indices

  - OK asked the group for their thoughts on modelling TRS on commodity
indices in FpML and expressed the hope the returnSwap element could be
used for this. FM suggested that the initial area of focus should be on
the underlyer.

  - OK explained that the ISDA Commodity Index Working Group were aiming
to produce standardised documentation in this area but had not yet
produced a confirmation template.

* Actions

[New] FM to clarify the intended use of RelativeDates/scheduleBounds

[Carried Forward] MG to clarify the intended use of
RelativeDates/scheduleBounds

[Carried Forward] DM to propose an alternative structure for physically
settled options that uses the existing commodityOption type


* Next meeting 15:00 UK / 10:00 US Fri 2nd October 2009

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