CDM Derivatives Products and Business Events Working Group - May 22nd, 2024
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CDM Derivatives Products and Business Events Working Group Minutes
Meeting Host: David Shone, ISDA
May 22nd, 2024 - 11:30 am EST / 4:30 pm BST
Untracked attendees
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Meeting notices
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Agenda
- Convene & roll call (5mins)
- Display FINOS Antitrust Policy summary slide
- Review Meeting Notices (see above)
- Approve Past Meeting Minutes
- FRAGMOS - minor fix for portfolio swap #2910 @JBZ-Fragmos
- FRAGMOS – remove condition "PrincipalAmount" that forces PrincipalAmount to exist inside PrincipalPayment #2163 PR: #2930 @lolabeis
- fixedPricePayout- continuation of discussion on usage [see comments from email to DPBE dist pasted in first meeting comment below] @JBZ-Fragmos
- commodityPayout- does "delivery" need refactoring? [see comments from email to DPBE dist pasted in first meeting comment below] @JBZ-Fragmos
- AOB, Q&A & Adjourn (5mins)
Minutes
- Meeting admin successfully completed. No changes to previous minutes
- Fix for portfolio swap.
- @lolabeis summarised feedback (see the PR). For proposals 1 & 3 it was agreed that these could be submitted (@JBZ-Fragmos to re-submit without change 2). For item 2 there is an investigation into the DSL, and it will be fixed at that level.
- Principal Amount. This has been reviewed by @lolabeis- see PR for detail. Reset attribute was removed and PR submitted- will be approved
- fixedPricepayout- this item will be resolved within the Asset Refactoring Taskforce
- commodityPayout- @JBZ-Fragmos went through his points (see comments and pictures below). The reason behind these modelling decisions was elaborated upon by a commodities SME.
- For point one on schedules @JBZ-Fragmos will take away and consider whether there is indeed an improvement possible once discontinuous schedules have been taken into account (effectively custom schedules are why the model is currently the way it is
- For points 2 & 3 no further action is to be taken. SME explained that for regulatory reporting reasons, in which equivalent delivery periods must be reported even for finanially settled transactions, as well as reporting some physical commodity attributes at the derivative contract level, has resulted in the model being the way it is. It was agreed that rather than risk breaking something that currently works, no further action to be taken at this point
Action Items
Zoom info
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For @JBZ-Fragmos agenda points- the following comments were made to the DPBE distribution list
Continue previous discussion about “fixedPricePayout”
Details :
• have reviewed some fpml samples (have not received any termsheets so far)
o but still believe Underlier(Asset) shall be an attribute of fixedPricePayout because the fact it is associated with another Payout leg with such attribute does not create any clean referencing about the Underlier at stake ; more to the point, assuming any payout shall have a meaning per se, I mean when used stand-alone, then moreover in this case I cannot imagine not having Underlier(Asset) defined for it
• as explained by Participant during last meeting, current distribution is using fixedPricePayout with another payout (say dividendPayout or commodityPayout, etc.) for the purpose of reflecting the termsheet structure when it is specifying 2 legs formula, say 1 leg for FixedAmount payout terms, (cf. fixedPricePayout) and other 1 separately for FloatingAmount payout terms (cf. commodityPayout) – that make sense and I understand/agree current modeling logic using 2 Payout legs;
o yet for the same reason, whenever termsheet is describing the payout as 1 leg net formula = Quantity x (FixedPrice minus FloatingPrice), then we want to reflect this as well, thus we need 1 leg Payout for that, and unless missing something I cannot see it, so would propose creating it, which name could be differentialPricePayout
Raise to the group questions/remarks about “commodityPayout”
Details :
• understand rationale and/or see if potential overlaps I see about the concept of “delivery” may effectively need refactoring : will share on screen many places/attributes where the word “delivery” appears in the name, that being starting point for the discussion
• another point : based on generic remark that in terms of modelling, whenever feasible, would recommend not to restrict the application area of payout terms to a particular asset class (notwithstanding 2 exceptions I agree with : interestRatepayout=OK and creditDefaultSwap=OK), since each payout ideally describes an “F(X)” by fosucing on “F()” per se, not on what is “X”…
o as an example, performancePayout is fine, because related Underlier may be of any asset class e.g. performancePayout is “F(X)” without restricting “X” to be any particular Asset Class – hence problem statement : why having commodityPayout “”F(X)” = “observable(Commodity)” ?
o proposal : have instead “differentialPricePayout” (as proposed above)
that could be then applied to any “X” = any Underlier as appropriate e.g. Commodity, Equity, etc.
importantly, this proposal would encompass, accommodate for both termsheet situations mentioned above : 2 legs by using both fixedPricePayout and priceDifferentialPayout (where fixedPricre should not be defined), else 1 net formula leg by using only priceDifferentialPayout (where fixedPrice should be defined)
Hajnal/Regnosys
Leo Labeis / REGnosys
Manuel Carrera / TradeHeader
jonathan/jpmc
Lionel Smith-Gordon / REGnosys
Marc Gratacos / TradeHeader
Roger Guitart / TradeHeader
Elias El-Ramy / Société Générale
Bo Huang / Bloomberg
Eleonora / ISDA
JB Ziade - FRAGMOS