FpML-IM-Custodian FW: [fpml-coord] minutes 2007-12-03

["Marc Gratacos" <MGratacos@xxxxxxxx>]

FYI. See below.

-----Original Message-----
From: coord@xxxxxxxx [mailto:coord@xxxxxxxx] On Behalf Of Marc Gratacos
Sent: Thursday, December 06, 2007 6:41 AM
To: coord@xxxxxxxx
Subject: [fpml-coord] minutes 2007-12-03
Importance: High

Participants:
Irina Yermakova (ISDA)
Brian Lynn (GEM)
Lyteck Lynhiavu (ISDA)
Harry McAllister (BNPParibas)
Pierre Lamy (Goldman Sachs)
Andrew Parry (JPMorgan)
Bhavik Katira (chair Loan WG)
Henri Pegeron (DTCC)
Marc Gratacos (ISDA)

Apologies:
Ben Lis (T-Zero)
Karel Engelen (ISDA)

1.	Cancellation of Contract events (see attached)
1.1.	Andrew Parry asked about the issues that were raised in the
previous Coordination Call:
a.	The message introduces confusion between cancellation of a
message and cancellation of business event. Theoretically, in FpML you
could send multiple messages for the same event. The purpose of this
message is to cancel the business event. In the CUG, they are equivalent
but this is not true for other implementations.
Marc's Answer to a.) The proposal has been modified to specify the
cancellation of a business event instead of a message. This is
consistent with FpML 4.x

b.	There shouldn't be a single message covering all business event
cancellations. In the FpML 4.x series there is a message type per
business event, these cancellation messages should follow the same
pattern for consistency and there should have a message per type of
cancellation (ContractPartialTerminationCancelled,
ContractNovationCancelled,...).
Marc's Answer to b.) A message per event cancellation has been
introduced. Instead of a single message, 4 cancellation messages are
proposed.

c.	The additionalData structure is not a good construct to report
the original even that is being cancelled since there isn't control over
its content. The content of the business event may be referenced
optionally.
Marc's Answer to c.) The additionalData structure has been removed
accordingly. Instead, each message includes optionally the event that is
cancelled.

d.	The proposal should be reworked accordingly.
Marc's Answer to d.) Done by the IM-Custodian Working Group.

In addition, Andrew Parry asked about the definition of conversation and
the use of event messages to offset transactions instead of cancellation
messages.

Marc's Answer to these two points:
- The IM-Custodian participants use the conversation Id to link together
messages for a single event. So event notifications, modifications, and
cancellations are linked together by the conversation id. The concept of
event id would probably be more appropriate for this usage but it was
not introduced in the 4.2 messages and the IM-Custodian participants
don't want to create private extensions to those messages.
- The IM-Custodian WG suggests the Modeling Task Force to clearly define
conversation id and event id so it gets easier to understand and
implement.

- The IM-Custodian participants expressed multiple times in previous
working group meetings that the use of event messages to offset
transactions doesn't fit their current business practices neither their
current systems. The assumption that these are final state messages is
not currently the case, there are multiple modifications that take place
between the asset manager and the custodian.

Andrew Parry asked about the transaction aspect of the messages: when a
cancellation of an event can be performed?
- The IM-Custodian expressed that in terms of their current
implementations, initially they won't be able to process a cancellation
of an event if a subsequent event has happened to the contract.
- Pierre Lamy stated that the suggested approach as standard should be
that cancellation of messages could happen after subsequent events have
happened to the contract and that transactions should be rolled back. 

Participants in the Coordination Committee felt that they needed more
time to review the proposal so a week was given to send any feedback
about it. If approved, these messages will be introduced in the next
working draft for version 4.4.


2. Issues
http://www.fpml.org/issues/view.php?id=362
The group felt that this issue should be tackled by the Credit
Derivatives WG since members of that group have more busines expertise
on the area.
The CreditCurveCharacteristics structure from the Pricing and Risk area
should be considered since it introduces some of these concepts as
distinct elements.
A suggested approach by Andrew Parry was to introduce new elements for
tier (positiveInteger) and secured (boolean) to simplify the code
composition (avoiding being a composite key) and make it more consistent
with Pricing and Risk.

http://www.fpml.org/issues/view.php?id=520
The id attribute in the tradeId has no usage currently in FpML so the
Coordination Committee decided that it should be deprecated in the
current 4.x versions and removed in the next major version.

3. Decoupling between publication of schemes and schema 
There was a discussion within the Credit Derivatives Working Group on
whether there could be some decoupling between the publication of the
schemes and the publication of the specifications.
Participants were interested in the idea.
Henri mentioned that he submitted a proposal to the AWG for
consideration http://www.fpml.org/issues/view.php?id=283 and a paper was
supposed to be published and it hasn't happened yet.
Marc said that he'll put that on the agenda for the next AWG meeting.

Loan Working Group Update
Bhavik gave an update on the work developed by the Loan Working Group.
The group has been focused on the main "pain" point in terms of
automation of the Loan business which is the draw down notifications.
That's why the representation of a Loan product and Loan underlyer was
referred to a second phase by the working group.
Andrew Parry has sent a complete set of comments to Bhavik for review
with suggested solutions. Bhavik has reviewed and it will be dicussed in
the next Loan Working Group.


Please, let me know if I missed anything.

Best regards,
Marc


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