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ISDA® Publishes FpML Recommendation for OTC Derivatives
Practical Law Legal Update 8-574-1286 (Approx. 4 pages)
ISDA® Publishes FpML Recommendation for OTC Derivatives
by Practical Law Finance
| Published on 15 Jul 2014 • USA (National/Federal) |
ISDA published its Recommendation for Financial product Markup Language (FpML) version 5.7, which includes wider coverage of important information from earlier versions. FpML provides support for trade data reporting requirements in different jurisdictions and facilitates standardization by allowing the representation of legal documents in an electronic format.
On July 9, 2014, ISDA® published a recommendation for Financial product Markup Language (FpML) version 5.7. FpML provides support for OTC derivatives trade data reporting requirements in different jurisdictions and facilitates standardization by allowing the representation of legal documents in an electronic format. With the release of version 5.7, certain enhancements have been made to the standard electronic communication platform, including:
- Support for the execution of package transactions, which impacts existing credit limit check messages and clearing messages.
- Support for reporting requirements in different jurisdictions.
- Electronic representation of the ISDA Standardized Credit Support Annex (SCSA) (for more information, see Practice Note, ISDA Documents: Overview (US): The Standard Credit Support Annex (SCSA)).
- Integration of the ISDA 2014 Credit Derivatives Definitions (see Practice Note, Introduction to the 2014 ISDA Credit Derivatives Definitions).
FpML is an open source standard for electronic information sharing which facilitates the dealing and processing of OTC derivatives. It is based on extensible markup language (XML), which is the standard for data sharing between applications. FpML is not a method of confirming trades, an application or a service, but rather a means to provides a standardized set of data points that are used to exchange derivatives transactions electronically. FpML is completely open source, and anyone may join working groups to further its development, described at the FpML website.
In addition to data points, FpML defines a set of business processes and descriptions of data that needs to be exchanged for each process, for example:
- Requests for quote.
- Confirmations and affirmations.
- Novations.
- Terminations.
- Increases.
- Amendments.
- Credit event notices, allocations.
- Cash flow matching.
- Portfolio reconciliation.
Companies that engage in these activities use FpML as a standard for electronic message communication. FpML support covers a variety of products, including:
- Interest rate derivatives, including interest swaps, swaptions, FRA’s, caps and floors, inflation swaps and bullet payments.
- Foreign exchange derivatives, including spots, foreign exchange swaps, forwards and FX options.
- Credit derivatives, including credit default swaps, credit default indexes, and baskets.
- Equity derivatives, including equity swaps, equity options, variance swaps and total return swaps.
- Commodity derivatives, including commodity underlyer, commodity swaps, commodity options.
- A broad group of underlying assets, which can be underlying assets to the derivative transaction or can be used for pricing and risk purposes.
- A description of loans and deposits.
To explore how to create, edit or modify FpML documents and to learn more about how FpML works, visit the FpML Editor.
"ISDA" is a registered trademark of the International Swaps and Derivatives Association, Inc. (ISDA). ISDA is not a sponsor of Practical Law and had no part in the development of this resource.