Fpml Fallback Bond Element Proposal

FpML™ Fallback Bond Element Proposal

Version 0.1

Prepared by:

Philip Leach - DTCC

Published August 09, 2007

Last Update August 09, 2007

Overview:

The 2006 ISDA Inflation Derivatives Definitions define the concept of a “Fallback Bond” in addition to a “Related Bond” and more crucially the ability for “Fallback Bond: Not applicable” to be specified in the confirmation. As of the latest working draft (July 30th 2007) this is not supported in FpML 4.3.

Proposal:

Add an optional element to <inflationRateCalculation> to specify the applicability of a Fallback Bond.

E.g.

<!-- Inflation Rate Calculation -->

<inflationRateCalculation>

<floatingRateIndex floatingRateIndexScheme="

<inflationLag> <periodMultiplier>3</periodMultiplier>

<period>M</period>

</inflationLag>

<indexSource>UKRPI</indexSource>

<mainPublication>ONS</mainPublication>

<interpolationMethod>LinearZeroYield</interpolationMethod>

<fallbackBond>NotApplicable</fallbackBond>

</inflationRateCalculation>

Changes Required:

fpml-ird-4-3.xsd:

Add <fallbackBond> element to <InflationRateCalculation>.

<xsd:complexType name="InflationRateCalculation"

<xsd:annotation>

<xsd:documentation xml:lang="en"A type defining the components specifiying an Inflation Rate Calculation</xsd:documentation>

</xsd:annotation>

<xsd:complexContent>

<xsd:extension base="FloatingRateCalculation"

<xsd:sequence>

<xsd:element name="inflationLag" type="Offset"

<xsd:annotation>

<xsd:documentation xml:lang="en"an offsetting period from the payment date which determines the reference period for which the inflation index is onserved.</xsd:documentation>

</xsd:annotation>

</xsd:element>

<xsd:element name="indexSource" type="RateSourcePage"

<xsd:annotation>

<xsd:documentation xml:lang="en"The reference source such as Reuters or Bloomberg.</xsd:documentation>

</xsd:annotation>

</xsd:element>

<xsd:element name="mainPublication" type="MainPublication" minOccurs="0"

<xsd:annotation>

<xsd:documentation xml:lang="en"The current main publication source such as relevant web site or a government body.</xsd:documentation>

</xsd:annotation>

</xsd:element>

<xsd:element name="interpolationMethod" type="InterpolationMethod"

<xsd:annotation>

<xsd:documentation xml:lang="en"The method used when calculating the Inflation Index Level from multiple points - the most common is Linear.</xsd:documentation>

</xsd:annotation>

</xsd:element>

<xsd:element name="initialIndexLevel" type="xsd:decimal" minOccurs="0"

<xsd:annotation>

<xsd:documentation xml:lang="en"initial known index level for the first calculation period.</xsd:documentation>

</xsd:annotation>

</xsd:element>

<xsd:element name="fallbackBond" type="fallbackBondEnum" minOccurs="0">

<xsd:annotation>

<xsd:documentation xml:lang="en">The applicability of a fallback bond</xsd:documentation>

</xsd:annotation>

</xsd:element>

</xsd:sequence>

</xsd:extension>

</xsd:complexContent>

</xsd:complexType>

fpml-enum-4-3.xsd:

Add new enum for <fallbackBond> values.

<xsd:simpleType name="FallbackBondEnum"

<xsd:annotation>

<xsd:documentation source=" xml:lang="en"If a fallback bond should be used</xsd:documentation>

</xsd:annotation>

<xsd:restriction base="xsd:token"

<xsd:enumeration value="Applicable"

<xsd:annotation>

<xsd:documentation source=" xml:lang="en"A fallback bond should be used.</xsd:documentation>

</xsd:annotation>

</xsd:enumeration>

<xsd:enumeration value="NotApplicable"

<xsd:annotation>

<xsd:documentation source=" xml:lang="en"No fallback bond should be used.</xsd:documentation>

</xsd:annotation>

</xsd:enumeration>

</xsd:restriction>

</xsd:simpleType>