ISDA has published FpML 5.11 Second Working Draft

The International Swaps and Derivatives Association, Inc. (ISDA) has published the Second Working Draft for Financial products Markup Language (FpML) version 5.11.

FpML 5.11 Highlights

The main enhancements compared to version 5.10 are:

• Regulatory Reporting Redesign (Recordkeeping View)
• Refactoring of syndicated loan processes and notifications. Redefined business validation rules. (Confirmation View)
• Added support for Security Lending product
• Support for Inflation Rate linked Asset Swap product as an extension of the Inflation Rate model.

FpML 5.11 Second Working Draft is available on the FpML website in the Specifications section at: www.fpml.org/spec/fpml-5-11-2-wd-2

Changes in version 5.11 WD2 compared to FpML 5.11 First Working Draft (published 16 October 2018) are:

• Cross Asset Class Product Framework
  • Added support for Security Lending product. The coverage for Security Lending includes:
    • Security Lending against Cash
    • Security Lending against Equity, Bonds, Government Securities, or a Letter of Credit of value equal to or greater than the loaned securities.
    • Multiple Collateral
    • Tri-party terms.
  • Extended Inflation Rate model to support Inflation Rate linked Asset Swap product. In an Inflation Rate linked Asset Swap, the economics of the inflation leg are inherited directly from an inflation linked bond such that all cash-flows of the bond are mirrored in the asset swap.
• Redesigned Regulatory Reporting Framework (Recordkeeping View)
  • In the Second Working Draft (WD2), we made the following enhancements:
    • Refined the regulatoryDisclosure message:
      • Payment: Now uses NonNegativePayment instead of the more complex Payment.
      • Change in size: Now done using ReportingNotionalChange.model instead of the very detailed sizeChange.
      • Split regulations contained in applicableRegulation/dfa into distinct regulation blocks (e.g. applicableRegulation/dfaCftc).
      • Developed coding schemes for regulatoryDisclosure/trade/tradeHeader/partyTradeIdentifier/linkedTrade and regulatoryDisclosure/eventType.
    • Developed additional sample products and use cases
    • Developed XSLT scripts for conversion from existing FpML formats to the new reporting format. Products can be represented using either the detailed FpML products representation or using the generic product. (Scripts are contained in folder "scripts", and can be run using included batch command scripts).
    • Introduction of "general reporting product". The design is still under discussion and is subject to change prior to publication as a Recommendation.
    • Representation of regulatory regime information. ( We are looking specifically for feedback on this representation)
      • Questions to consider include:
        • Should the granularity of the applicable regulation element be broad (e.g. Dodd-Frank Act, as currently implemented in 5.11 WD2) or narrow (e.g. 17CFR Part 43)?
        • How should shared data elements across regulators be represented (e.g. duplicated within each regulation or reused in shared functional buckets)?
  • A more detailed description of the reporting redesign work can be found in Section 18 of the online documentation.
• Syndicated Loan (Confirmation View)
  • User Manuals – user manuals for version 5.11 are still under construction at this time. The user manuals that accompany 5.10 are no longer valid. Anticipated changes to the user manuals include:
    • Data element tables will be replaced by schema diagrams. This will provide the end-user with greater clarity as to the relationships between elements. Important points will be called out in sections directly below each diagram.
    • All user manuals will be combined into a single manual.
    • Timelines, as found in the user manual related to loan trading notifications, will be incorporated into other notification type discussions. This will provide the end-user with a clearer understanding of the business use case for each notification.
  • Schema Changes - the Loan FpML schema has been significantly changed, as compared to version 5.10.
    • The Loan framework includes non-backward compatible changes in version 5.11 compared to 5.10 Recommendation
      • More details can be found in the Loan changes in WD1 and Loan changes in WD2.
      • We encourage feedback in particular on the non-backward compatible changes.
    • IMPORTANT: The working group recommends that versions 5.8 and 5.10 for the sake of the loan asset class NOT be implemented, due to the nature of the reimagining of the loan schema architecture. Version 5.11 corrects substantial design holes in previous versions, and a significant amount of 5.11 is not backward compatible. See the ‘FpML-5-11-loan-coverage(WD1)’ and ‘FpML-5-11-loan-coverage(WD2)’ for additional detail.
  • Business validation rules - the business rules have been redefined according to the new schema changes and business requirements.
    • Invalid test cases have been provided for each business rule.
  • Next Steps
    • The working group will continue its focus on revising user manuals and supporting documentation to accompany XML examples.
    • There is a potential to add additional business validation rules with the introduction of the changes to the ParentEventIdentifier described above.

A more detailed overview of the changes in version 5.11 can be found in Section 18 of the online documentation.

Thank you

The FpML Team