FpML Version 5.0 to help with standardization and automation of derivatives processing and reporting pre- and post-trade.
XML standardization may eventually automate and integrate financial information exchange across all markets front-to-back. ISDA continues to move OTC derivatives markets in this direction with the release of Version 5.0 of its Financial products Markup Language (FpML).
This represents FpML’s first major update since 2004; and, with additional post-trade processing schemas, it is well-timed to aid development of the next-generation of OTC clearing and settlement systems to cope with post-reform derivatives markets. Hopefully, all market participants will be on the same page when it comes to standards to handle the evolving mix of standardized, CCP-cleared, and custom, non-CCP cleared instruments in an integrated and automated fashion.
Version 5.0 covers mainly interest-rate, credit, equity and commodity derivatives. Version 5.1, expected to be out at the end the year, will cover FX and syndicates loans, as well as incorporate recommendations of the collateral working group.
For the instruments covered, version 5.0 provides mark-up to help automate, for example, the following post-trade processes:
- Execution notification (for platforms to report order fills)
- Execution advice (to report executions and settlement info to service providers)
- Allocation (expanded for version 5)
- Confirmation
- Consent negotiation
- Clearing (new for version 5)
- Status reporting
As treasurers consider systems and service provider alternatives to support derivatives use, post-market reform, they should inquire about the status of vendor offerings with regard to FpML.