28 Feb 03: ISDA Releases Recommendation for V2.0 of FpML Schema

The International Swaps and Derivatives Association (ISDA) has released its recommendation for Version 2.0 of the Financial products Markup Language (FpML), XML-based standard supporting trading in over-the-counter derivatives.

The recommendation for version 2.0 covers interest-rate derivatives. However, the working group is working on upcoming versions that will focus on equity and credit derivatives, as well as messaging, according to Robert Pickel, executive director and CEO of ISDA.

FpML Version 2.0 extends interest rate product coverage to include interest rate options, including swaptions, caps and floors. It also extends the swap definition to include FX resets, cancelables and early termination provisions.

ISDA began work on the messaging support in June 2002 when it issued a call for participation. The group plans to extend the FpML standard to include messages supporting business processes relating to pricing, trading, risk management and credit checking. At about the same time, a credit derivatives working group was established to focus on credit default swaps. This work will form part of Version 4 of the standard.

The latest recommendation reflects consensus within FpML as represented by approval from the Standards Committee. The Standards Committee considers that the ideas and technology specified by a recommendation are appropriate for widespread deployment and promote the mission of FpML.

The full text of the recommendation is available at  http://www.fpml.org/spec/index.asp.

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, financial swaps, derivatives and structured products over the Internet. FpML will eventually cover all categories of privately negotiated derivatives. FpML users include UBS Warburg, which has built pricing tools based on the standard, and JP MorganChase, which has developed a prototype interest-rate swap application.

ISDA is the global trade association representing leading participants in the privately negotiated derivatives industry. ISDA was chartered in 1985, and has more than 600 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.