FpML Supports OTC Trading of Financial Derivatives as Financial Institutions and Vendors Incorporate Standard into Processes

FpML.org Plans Broader Coverage of OTC Derivatives Trading Standard

CHICAGO, July 26 - Financial products Markup Language, the XML-based e-Commerce standard for OTC trading of financial derivatives, is being adopted by financial institutions to support internal and external processes, reports Saurabh Narain, Managing Director of Global Derivatives Products at Bank of America. "Several vendors are also rolling out products and services incorporating elements of FpML," he told delegates to the Electronic Derivatives Trading Systems Conference here.

Mr. Narain, a member of the FpML.org Board of Directors, said that the not-for-profit- consortium "is extending the asset classes supported by the freely licensed standard. It also open to moving beyond derivatives as demand grows," he said. "There is particular interest in structured products including convertible bonds, along with combining derivatives and their underlying cash instrument."

• developing an Internet based IRD system for institutional clients
• exchanging data from vendor systems into company systems
• deploying FpML for FRAs/Swaps as part of net-based financial confirmations
• performing FRA confirmations via a web-browser
• developing tools to exchange confirmations with other banks.
• integrating between browser-based trade capture, pricing and risk management systems

"There are several developments within the vendor community as well," Mr. Narain said. "Examples include an online trading and negotiation network with swap dealers where trade representation is sent to each party electronically in FpML, an NTM/FpML converter to enable connectivity with a product suite, and a Java toolkit for FpML that supports loading and generation of FpML documents. Other vendors are using FpML in their various product offerings or by building interfaces to existing systems," he said

In a progress update Mr. Narain said FpML version 1.0, covering interest rate swaps and forward rate agreements, was released as a recommendation in May while Version 2.0, covering interest rate options such as caps, floors and swaptions, is in development. "Version 3.0 focusing on FX and equity derivatives will shortly have working drafts in place, while future versions may cover credit and energy derivatives, interest rate exotics and hybrids," he said. "All classes of OTC derivatives will eventually be supported by the standard."

In concluding his remarks, Mr. Narain said "FpML.org takes its guidance from the industry and relies strongly on volunteer participation to advance the standard." He noted that some 34 financial, technology and consulting firms, together with vendors and other interested parties, participate on the Board, the Standards Committee and in several Working Groups. "We're looking to expand membership in the consortium with additional dealers, banks, exchanges, vendors, buy-side firms and consortia," he said. "We simply need to embrace a standard quickly and direct developmental efforts around it to reduce the cost of processing OTC derivatives - a common goal."

Organizations and individuals wishing to participate in the standard's development are invited to visit www.fpml.org and volunteer to serve on working groups. Current groups are focusing on Foreign Exchange Products, Equity Derivatives, Interest Rate Derivatives and the standard's Business Messaging Architecture.