FpML Issues Tracker
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Business Process
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mgratacos
Summary
How do I know which leg of a Swap a partial termination notional applies to? And how do I know the remaining notional on the other leg?
What happens when the Swap is cross-currency, or notionals are unbalanced, or legally balanced but economically unbalanced, etc.
Notes:
cnentwich2
10/16/08 4:13 pm
I have recently encountered this problem with a client (a fund manager). They have standardised message flows internally around FpML, including terminations.
They are now unable to accurately represent partial terminations of cross-currency swaps. It would be good if this issue was addressed.
FpML could either add a second notional, or perhaps consider a generic, repeating structure that allows any id-able amount (option number, notional, etc) to be reduced.
mgratacos
10/17/08 9:15 am
Christian, would be possible for you to put a proposal together based on your experience? A brief doc with the alternatives and diagrams showing them would be great.
h_mcallister
10/17/08 10:30 am
Agreed: the partial termination model is deficient with respect to cross-currency swaps, as it supports a decrease on (only) a single notional amount & currency (I think the observation has been made before).
I’d be cautious about introducing a “generic, repeating structure”, without some constraints on content type – we should prevent instance documents being produced with (for example) a decrease on a notional amount AND a decrease in a quantity of options.
Question: are we happy with the current Termination pattern, offering a choice between a “full” flag, and a “partial” structure (or structures) – or is there any appetite for creating a dedicated PartialTermination message type?
cnentwich2
10/17/08 10:36 am
I agree, Harry, I would also lean towards a stricter structure.
Marc, I’m happy to look into this and come up with a proposal. I’ll try to look across asset classes currently covered and see what might work.
I don’t have an opinion on the messaging bit in particular, other than to point out that more people (DTCC…) use the termination structure in their own flows than use the messaging framework. Taking the partial/full choice out would invalidate the message flows of such services.
matthewdr
10/20/08 10:32 am
The problem continues to affect me, as it did whe I first raised it. If a solution is agreed I will gratefully adopt it.
h_mcallister
10/20/08 10:37 am
Looks like a job for the Interest Rate Derivatives Working Group
– I’ll raise it on the ird-wg mailing list
cnentwich2
10/21/08 8:40 am
Harry, Marc,
based on Harry’s last note, please let me know if you still want me to propose something. If yes, I would like to take a look this week.
We should probably cross-check the commodity definitions, etc, just to make sure that this cross-asset class structure works for everything we need it to work for.
mgratacos
09/10/19 6:40 am
This issue was solved with the introduction of the sizeChange element within the termination event https://www.fpml.org/spec/fpml-5-11-4-lcwd-2/html/confirmation/schemaDocumentation/schemas/fpml-business-events-5-11_xsd/complexTypes/TradeNotionalChange/sizeChange.html