February 22, 2018 - What is FpML, how has it changed – and why is this going to make my life better? Loan Financial Products Mark-up Language is an open source data exchange standard, developed by the consensus of loan market participants.
The LSTA is pleased to announce the publication of of FpML version 5.10 which includes, without limitation, core business events and asset structures related to syndicated loan trading. The 5.10 enhancements will allow market participants to further retire archaic communication methods that have created immeasurable inefficiencies, as well as operational risk. The hard work of the FpML Syndicated Loan Working Group – comprised of banks, custodians and technology vendors, and chaired by Bhavik Katira and Chad Freeburg of Ten Delta – will allow for the electronic delivery of standardized data across the loan market. In other words, it will make loan market participants’ lives better, by making processes more accurate and more efficient.
Some of the core characteristics of the syndicated loan trade lifecycle that are covered by the 5.10 standard include:
- The communication of intent to transfer an asset. A related ‘confirmation’ notification allows parties to acknowledge the trade initiation systematically.
- The communication of tasks that are pre-requisites to the settlement of a loan trade.
- The process of sub-allocating trades to portfolios or funds.
- The coordination of the settlement date. Parties can express specific dates or date ranges on which they are available to settle, ‘no settle’ periods (e.g. agent ‘freezes’ or CLO blackout periods), required lead days, and cut-off times.
- The conveyance of details of the transfer of the asset between parties, including cash settlement details, assignment fees, etc. Agents also can communicate information about loan contracts and letters of credit outstanding.
In addition, 5.10 allows parties to share contact and settlement instructions; it also can combine servicing transactions (e.g. ‘rollovers’ and ‘repayments’) into a single ‘bulk’ notification. Acknowledgement (‘ACK’) and rejection/error (‘NACK’) messages allow recipients to inform the sender of the recipient’s state so that the sender can adjust accordingly, if necessary. A retraction message allows the sender to retract a previously-sent notification.
Want more FpML 5.10 information? You’re in luck! A complete set of user manuals for all notifications has been developed to provide users with a more detailed understanding of the business application for all notifications. User manuals also include detailed descriptions of all data elements, which can assist the user in data mapping. ADetails related to the Loan FpML 5.10 standard, including complete schema and full documentation, can be found at: http://www.fpml.org/spec/fpml-5-10-5-rec-1/html/confirmation/index.html by selecting ’15 LOAN PRODUCT ARCHITECTURE’ in the left menu. (A final note: These documents are not for the uninitiated!)