A communiqué from Karel Engelen (FpML Project Manager) announces ISDA's call for participation in two new working groups for the Financial Products Markup Language (FpML) standard. FpML "is the XML-based, freely licensed, e-commerce standard supporting OTC trading of financial derivatives." The new FpML Validation Working Group will work to "enable the extension of the FpML product definitions to include semantic or business validation rules through the use of a validation rule language. A Business Rule Definition effort will build on the standards definition work in each of the FpML product working groups to start the plain English definition of the relevant business rules for each version of the FpML standard. A related Rule Language Definition activity will document the requirements for a FpML validation rule language and describe unambiguous business validation rules for the different versions of the FpML standard." The new Energy Derivatives Working Group will "extend the product coverage of the FpML standard to include products for the following energy markets while ensuring that the design will accommodate other commodities. The scope includes Financial Oil, Financial Natural Gas, Physical Natural Gas, Financial Power, and Physical Power." FpML is "a business information exchange standard for electronic dealing and processing of financial derivatives instruments. It establishes the industry protocol for sharing information on, and dealing in, complex financial products over the Internet. It is based on XML (Extensible Markup Language), the standard meta-language for describing data shared between applications. Currently focusing on interest rate derivatives, FX, equity derivatives and credit derivatives, FpML will eventually cover all categories of privately negotiated derivatives."
FpML Validation Working Group. The goal of this WG is to "enable the extension of the FpML product definitions to include semantic or business validation rules through the use of a validation rule language. It covers all versions of the FpML standard; this will ensure coverage of all FpML products and users. The Working Group will have two threads, which should be able to work in parallel. The two threads will be able to use the FpML validation proposal submitted in June 2002 by UBS Warburg, University College London and Systemwire as a starting point for their work.
Business Rule Definition: This thread will build on the standards definition work in each of the FpML product working groups to start the plain English definition of the relevant business rules for each version of the FpML standard. These plain English rules will be implemented in a rule language to be selected by the second thread. These rules will be those roles that are required for an FpML document to make sense (e.g., terminationDate is after effectiveDate) but not any organisation specific rules. The set of rules developed will cover each asset class but will not be comprehensive. The aim being to provide enough rules to validate the language definition and provide momentum to specify further rules.
Rule Language Definition: This thread will document the requirements for a FpML validation rule language and review the different possible approaches taking into account the requirements. They will then select an approach that is best suited to the FpML standard. This approach will then be used to describe unambiguous business validation rules for the different versions of the FpML standard. The work of the first thread will be used in creating these descriptions.
The initial FpML validation proposal [UBS Warburg, University College London, and Systemwire] determined that validation "should focus on semantic or business validation. It was assumed that XML parsers are used for XML syntax validation based on the FpML DTD/schema (for both well-formedness and syntactic validation). There was a preference for an XML based predicate or rule definition, as tools can be built to process such rules. This includes GUI tools to enable business analysts to formulate and update the rules. The provision of a simple API to allow callout for programmed validation was discussed as an alternative. FpML could supply validation rules with each version of FpML for community wide' issues. It is hoped that this proposal will help to facilitate this... [Several approaches were considered:] xlinkit, attribute grammars, OCL (OMG's Object Constraint Language), XSLT, and Schematron. They were evaluated against a number of key requirements, including: Semantic Validation, XML-based Definition, GUI tools to formulate and update rules, Multiple distributed rule sets, Comparison to external data sources, Check against non-FpML languages, Distributed data sources, Declarative rule language, Domain-specific operators, Ease of comprehension, Rule structuring mechanisms, human and machine readable representation, Classification of FpML product types, W3C compliance, Efficient Execution. The xlinkit approach was judged the most promising approach and selected for a more detailed assessment."
FpML Energy Derivatives Working Group. This WG will "extend the FpML standard to include energy markets:
The Energy Derivatives Working Group will extend the product coverage of the FpML standard to include products for the following energy markets while ensuring that the design will accommodate other commodities: (1) Financial Oil; (2) Financial Natural Gas; (3) Physical Natural Gas; (4) Financial Power; (5) Physical Power. In order to allow the group to meet its time schedule, the initial priority will be on deal-time confirmation rather than on information required for settlement or physical delivery.
The group will liaise with the Architecture working group and other product working groups to ensure consistency with the rest of the standard. The group's deliverables will be in the form of an XML Schema together with supporting documentation. The group will also make a recommendation as to which other energy markets should be included in the standard. This will be used to form the scope of any future Energy Markets working groups.
Energy proposals relevant to the FpML Energy Working Group have been submitted by Reuters and IntercontinentalExchange:
The Commodities and Energy Products proposal from Reuters "leverages the existing FpML specification as a basis to establish a standard XML format for exchanging trade data between energy companies. This proposal extends the FpML Version 3.0 Working Draft specification to incorporate both physical and financial commodity derivatives. Existing FpML components are reused where possible." It is "a draft proposal to incorporate commodities and energy products into FpML Version 4.0 and is intended to be a starting point for an energy working group. The primary focus of the document is on energy commodities with the intention that these products may potentially be extended in the future to other commodities such as metals and agricultural products. Specific details of some of the products herein are still being defined (e.g., tiered and formula pricing, and cash- and physical-settlement). Some element, entity and scheme definitions are still stubbed..."
The ICE document Energy Markets Proposal embodies "a proposal for the integration of IntercontinentalExchange's eConfirm XML Schema into the FpML Standard... IntercontinentalExchange respectfully submits this document to The FpML Standards Committee to encourage the inclusion of IntercontinentalExchange's eConfirm XML Schema into the FpML Standard. IntercontinentalExchange provides this information and suggests that it be used by an FpML Working Group whose purpose is to produce a version of FpML to include energy markets. The scope of this document is inclusive of the following Energy Market Types: Physical Natural Gas, Financial Natural Gas, Physical Power, Financial Power, Financial Oil & Refined Products... IntercontinentalExchange developed the XML schema for the five energy market types listed [above] by working closely with eight of the energy industry's leading energy trading entities over a ten-month period. Once developed, the XML schema was implemented in IntercontinentalExchange's eConfirm system, which is a live and operational electronic trade confirmation system. Since the eConfirm service launch on April 29, 2002, eConfirm participants have confirmed over 35,000 energy trades online. The document entitled 'Content Model Diagram' contains IntercontinentalExchange's eConfirm XML schema for energy markets..."
Also from the announcements:
ISDA has scheduled its first ever FpML conferences for November 19, 2002 in New York and December 13, 2002 in London. The conferences will provide an overview of all developments that have taken place on the FpML front since the second half of 2001 as well as the challenges FpML faces ahead. A panel discussion on industry standards and on the practical application of FpML will also be held. The afternoon sessions will consist of detailed information on the current specifications in the different asset classes as defined in version 3.0 and version 4.0. The complete conference agenda is available on the ISDA web site.
FpML is ISDA's most significant new initiative, holding the potential to transform the derivatives business just as its documentation has done over the years. Developed by market participants for market participants, this new standard facilitates the trading and processing of an increasingly wide range of derivative transactions. Since ISDA took over the FpML initiative, the pace of development has quickened. The number of active working groups has grown as the current and planned coverage of FpML has expanded to cover interest rate, currency, credit, equity and energy derivatives...
ISDA is the global trade association representing leading participants in the privately negotiated derivatives industry. ISDA was chartered in 1985, and today has more than 590 member institutions from 46 countries on six continents. These members include most of the world's major institutions that deal in privately negotiated derivatives, as well as many of the businesses, governmental entities and other end users that rely on over-the-counter derivatives to manage efficiently the financial market risks inherent in their core economic activities.
- Announcement 2002-10-10: "ISDA Issues Call for Participation for FpML Energy and Validation Working Groups. Schedules Fall FpML Conferences."
- FpML Validation Working Group
- FpML Validation Proposal. Edited by Bryan Thal. Joint proposal from UBS Warburg, University College London, and Systemwire. 62 pages. [cache]
- FpML Energy Derivatives Working Group
- Reuters Commodities and Energy Products Proposal. Proposal for Incorporation into FpML Version 4.0. Reference: Commodities and Energy Proposal v0.10-2002-09-16. September 16, 2002. 48 pages. The distribution package includes six XML schemas. [ZIP source, cache]
- Energy Markets Proposal Draft Prepared for FpML Standards Committee. From IntercontinentalExchange, Inc. (ICE). September 3, 2002. 8 pages. See also the Energy Markets Data Dictionary. [ZIP source, cache]
- FpML Working Groups
- FpML Proposals
- FpML Tools Workshop Objectives and Deliverables
- FpML FAQ document
- News from ISDA
- International Swaps and Derivatives Association (ISDA) website
- "Financial Products Markup Language (FpML)" - Main reference page.