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FpML-IM-Custodian FpML IM-Custodian 2008-06-25 call minutes
FpML IM-Custodian WG conference call minutes - Wed June 25 noon Eastern.
Attendees:
ISDA - Marc Gratacos
ISDA - Karel Engelen
Western - Penny Morgan
Western - Mark Soussan
State Street - Michael Dever
SS IMS - Randy Magdaluyo
BNY Mellon - Michael Burg
BNY Mellon - Robert Dawson
Brook Path Partners - Robert Stowsky
Northern - Scott Hyatt
BGI - Lucio Iida
Others?
Please send your corrections and additions. Thanks to Penny Morgan and
Western for their notes.
Also, please provide the names of participants that are not listed
above.
Agenda and minutes:
1) Continue discussion of priorities.
A) As background, a quick recap of the first business-oriented
call on May 28 was made by the group.
a) Presentation of new call structure:
Business-oriented calls will identify and prioritize IM-Custodian
business issues and set target agenda for next 6 months. Technical
calls will address the issues emerging from the business calls.
b) Initial draft of business issues to be discussed and
prioritized:
i) Follow-up on commitments in letter to the
Fed, especially novation automation by end of 2008.
ii) IM-Custodian recon
iii) Allocations to be provided by end of day on
T+0.
iv) Priority of additional product coverage in
FpML.
o CFD is a high priority according to
participants.
o I recall other recommended swap
products were variance, loans, syndicated loans, repos, and other
instruments traded outside ISDA masters.
o Western suggested detailing specific
fields required to for each product. These details and proposed
priorities can be sent to this group by email.
c) Payment enhancements
d) Bringing a wider audience to the calls, to include
all major players.
e) Encourage vendors to enhance their products in line
with high priorities.
B) Participants added their viewpoints.
a) Western proposed support for ABS/ABX swaps by
including monthly paydown factors in FpML.
b) The above led to a brief discussion on notifications
of contract events other than trade-related ones. e.g. paydown factor
updates on ABS, credit events, periodic payments, final resets, option
expirations, final exchange of principal.
2) Discussion of proposal to enhance FpML payment details with interest
purchased/sold (presented by Michael Burg of BNY Mellon at ISITC).
A) The case was published in this space on June 18 for the
provision of explicit interest purchased/sold, MV, possibly commissions
and fees, in the upfront/termination/maturity fee information of trade
notifications. It is proposed for CDS/CDX/CTX and IRS and the object is
to facilitate STP. It is a 40-Act requirement and Mellon's three
largest IMs provide it.
B) Penny Morgan from Western asked whether the 40-Act
requirement was for custodians or IMs. Western's position is that it
will only provide the required economic details and will not provide
them simply to accomodate bank accounting requirements.
C) The issue has at least two aspects:
a) The addition of optional fields in FpML. There was
agreement to go forward with this. There is a question of where they
could be added. Possible options are:
i) As fields separate from the product
definitions. One technical solution implemented as an FpML extension by
SS IMS was contributed by Randy Magdaluyo and is attached. It was noted
that the requested payment breakdown could already be expressed in FpML
in the generic <otherPartyPayment> field. Also, new explicit fields
could be added as peers of <otherPartyPayment>.
ii) As explicit fields in the relevant product
definitions.
b) The discussion and agreement on the MP related to the
new explicit fields. This topic will be added to the agenda of the next
calls of this WG and also of the ISITC OTC Derivatives WG.
D) Marc Gratacos suggested collecting the technical solution
proposals, possibly including his draft, and to discuss them. Please
send proposals to this working group address. It looks like we have a
topic for the next technical conference call.
3) Swap cash payment instructions (raised by Michael Burg). Three
options were noted and discussed.
A) Enhancement of the existing FpML contract notification
messages with cash settlement details of the payments so that a separate
cash instruction message would not be required. This could simplify
implementations on SwiftNet FpML (no telling yet in which FpML version)
and probably reduce the costs associated with separate messages. An
argument against the proposal, raised in earlier CUG meetings, is that
any notification corrections would complicate the cash settlement
process. Another potential problem is that the settlement instructions
given in the contract notifications may need to change over the years.
B) Use the ISO20022 Payment Initiation (PAIN) messages as
proposed in the SwiftNet FpML User Group. This would require new
concurrent development between sending and receiving parties, but would
likely be processed by existing payment systems. They have the business
processes and controls built into them: regulatory (e.g. OFAC
compliance), credit and risk. It continues the separation of FpML,
generally, from settlement processes. Usage of PAIN messages allows the
netting of payments, accompanied by the associated account credit/debit
details.
C) Creation of separate FpML payment messages. This would
provide some of the benefits of B) and solve some of the problems listed
in A).
It was agreed to discuss this further in this WG and the ISITC
OTC Derivative WG.
4) The next call will be Wed July 23 at noon Eastern. In the interim,
an ISITC OTC Derivative WG call will be scheduled to pick up on these
topics.
Attachment: SS IMS extension to FpML that includes settlement details.
Thanks Randy.
<<FpML-IM-Custodian Interest purchased/sold proposal>>
Thanks
Lucio
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--- Begin Message ---
Lucio,
As mentioned in this morning's SWIFT CUG call, here is the example of the settlement details that State Street have extended. At the 6/25 FpML IM-Custodian meeting, let's discuss this as a possible solution to the issue Mike Burg raised concerning the subject above.
___________________________
Randy C. Magdaluyo
Vice President
Investor Technology Services
State Street Corporation
Irvine, CA
W: +1.949.932.1644
M: +1.949.232.5330
E: rcmagdaluyo@xxxxxxxxxxxxxxx
________________________________
From: Balagurusamy, Sudhakar
Sent: Thursday, June 12, 2008 12:37 PM
To: Magdaluyo, Randy C
Cc: Wood, David H; Sullivan, Kevin F
Subject: RE: SN FpML next conf call: postponed until 19 June
Hi Randy
Here is the schema definition for OTC HUB Settlement details section.
<xsd:complexType name="SettlementDetails">
<xsd:annotation></xsd:annotation>
<xsd:sequence>
<xsd:element name="account" type="Account" minOccurs="0" maxOccurs="unbounded">
<xsd:annotation>
<xsd:documentation>custodian account information</xsd:documentation>
</xsd:annotation>
</xsd:element>
<xsd:element name="settlementPayment" type="PaymentToAccount" minOccurs="0" maxOccurs="unbounded">
<xsd:annotation>
<xsd:documentation xml:lang="en">defines the settlement payment</xsd:documentation>
</xsd:annotation>
</xsd:element>
</xsd:sequence>
</xsd:complexType>
<xsd:complexType name="ContractCreated">
<xsd:annotation>
<xsd:documentation xml:lang="en"> Notification that a Contract has been Created </xsd:documentation>
</xsd:annotation>
<xsd:complexContent>
<xsd:extension base="NotificationMessage">
<xsd:sequence>
<xsd:element name="tradeReference" type="PartyTradeIdentifiers" minOccurs="0"/>
<xsd:element name="contract" type="Contract"/>
<xsd:element name="party" type="Party" minOccurs="2" maxOccurs="unbounded"/>
<xsd:element name="settlementDetails" type="SettlementDetails" minOccurs="0"/>
<xsd:element name="tradeDetails" type="TradeAccountDetails" minOccurs="0"/>
<xsd:element name="tradeReportDetails" type="TradeReportDetails" minOccurs="0"/>
<xsd:element name="validationMessages" type="ValidationMessages" minOccurs="0"/>
</xsd:sequence>
</xsd:extension>
</xsd:complexContent>
</xsd:complexType>
<settlementDetails>
<settlementPayment>
<payerPartyReference href="Party_1"/>
<receiverPartyReference href="Party_2"/>
<paymentAmount>
<currency>GBP</currency>
<amount>2738923.4900</amount>
</paymentAmount>
<adjustedPaymentDate>2008-06-18</adjustedPaymentDate>
<paymentType>CostProceeds</paymentType>
<payOrReceive>Pay</payOrReceive>
</settlementPayment>
<settlementPayment>
<payerPartyReference href="Party_1"/>
<receiverPartyReference href="Party_2"/>
<paymentAmount>
<currency>GBP</currency>
<amount>156091.4400</amount>
</paymentAmount>
<adjustedPaymentDate>2008-06-18</adjustedPaymentDate>
<paymentType>Interest_Bought_Sold</paymentType>
<payOrReceive>Pay</payOrReceive>
</settlementPayment>
<settlementPayment>
<payerPartyReference href="Party_1"/>
<receiverPartyReference href="Party_2"/>
<paymentAmount>
<currency>GBP</currency>
<amount>2895014.93</amount>
</paymentAmount>
<adjustedPaymentDate>2008-06-18</adjustedPaymentDate>
<paymentType>NetPayment</paymentType>
<payOrReceive>Pay</payOrReceive>
</settlementPayment>
</settlementDetails>
--- End Message ---