18 Nov 2002: SwapsWire Launches With FpML for Trading, Confirmation

Having overcome months of delays due to regulatory issues and technical hitches, SwapsWire, an electronic transaction and confirmation system for interest-rate swaps, this month went live. The system uses XML – specifically the FpML schema for financial products – to help automate the trading and confirmation process in the hopes of reducing errors for participants.

So far, some 14 banks have begun placing their interest-rate swaps trades through the system. SwapsWire was founded by a consortium of 23 banks. By providing a way to reduce transaction errors through automation, SwapsWire’s backers believe the system can help participating banks and brokers substantially reduce their operating costs in this area.

According to a spokesman, “SwapsWire uses FpML to communicate trade details to participating banks and brokers through an application programming interface (API). Front-office staff use an application to confirm transaction details onscreen. After confirmation, the data is made available through the API, so that the bank’s internal systems can be updated immediately.”

When a trade is executed through participating brokers, usually by telephone, “the broker sends the trade data to SwapsWire in FpML format,” the spokesman says. “The data is then presented to the banks onscreen, allowing them to review and agree the details.” So far, one broker – ICAP – has signed up to trade through SwapsWire.

The SwapsWire spokesman says it was “a logical choice for SwapsWire to use FpML, as many of the banks that founded SwapsWire were also involved in the creation of FpML as a standard. To succeed, we needed a data format that was going to be broadly acceptable to the industry, based on industry input, and one which was both flexible and rich enough to represent a wide array of derivative instruments.”

FpML, for Financial Products Markup Language, is an XML-based schema designed to support trading in financial products, or derivatives. SwapsWire further wraps the FpML-based messages in an XML wrapper, which it calls SWML, that contains additional information specific to the SwapsWire services but which is not included in the FpML standard.

SwapsWire believes its adoption of FpML will help promote the standard more widely in the marketplace. “SwapsWire has been a strong supporter of FpML since its inception,” says the spokesman. “We certainly hope that the success of SwapsWire will contribute to the success of FpML as a standard, and its use will become widespread.”

SwapsWire’s backers include Bank of America, Bank of Tokyo-Mitsubishi, Barclays Bank, Bayerische Hypo-und Vereinsbank, BNP Paribas, Citigroup, Credit Agricole Indosuez, Credit Lyonnais, Credit Suisse First Boston, Goldman Sachs, HSBC and UBS Warburg. Participants JP Morgan Chase and ICAP are already processing 100% of their eligible trades through the system.