SWIFTNet FpML

FpML (Financial products Markup Language) is the business information exchange standard for electronic dealing and processing of financial derivatives instruments. Sponsored by the ISDA, it is an XML based standard and establishes a new protocol for the sharing of information and the transmission of details of deals in swaps, derivatives and structured products. It is planned that all categories of over-the-counter (OTC) derivatives will eventually be incorporated into the standard.

History

Since the first version of the standard was announced in 1999, FpML has grown and developed through the work of a series of working groups selected from market participants. It now covers the areas of

• Interest rate derivatives
• FX products
• Equity derivatives
• Credit derivatives

Issues

The global derivative market has been evolving over the past 20 years. During this time various attempts have been made to standardize the communication relating to the dealing, matching and settlement of derivative deals. The result is that we now have many different ways of communicating the details of derivative deals. SWIFT and many of their members have put substantial efforts into the MT3xx message standard. These can be used with the Accord matching service for the processing of their trades. Elsewhere various proprietary and XML based standards exist. So, a client who wishes to benefit from the FpML standard has to realize that not all of their counterparts will be able to process FpML. They will also need to be aware that, over time, different versions of the FpML standard will co-exist and different communication channels will be used by the counterparts.

Solution

With the INCENTAGE SWIFT FpML enabler, you can put your business in the center of the FpML implementation. Instead of coding FpML into the application, you can make use of the business data representation already existing in your application.

The INCENTAGE SWIFT FpML solution takes care of the respective standard, data format and communication channel to be used while the application can process the business transactions based on the complete data set available in the application itself.

The INCENTAGE solution incorporates the concepts of a flow agreement. A Flow agreement is specified for each counterparty – and indicates the format that each counterparty expects – per instrument type. It also specifies any variation to a standard that a counterparty may require. So, it would be possible to specify that a counterparty X in Germany expects FpML v4 for Interest Rate Swaps – but expects a MT340 to be delivered over the SWIFT network for FRAs.

The INCENTAGE solution is a very flexible and configurable system. It already has data dictionaries that enable it to process and validate industry standards such as SWIFT (FIN and XML), FIX and various XML based standards. We have also added support for all versions of FpML – so, with the combination of flow agreements and the industry standard specific data dictionaries, it is possible for our clients to maintain a very flexible communication paradigm.