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United States Patent
6347307
Sandhu , ; et al.
February 12, 2002
Title
System and method for conducting web-based financial transactions in capital markets
Abstract
The present invention provides a system and method that enables users, such as institutional investors and financial institutions, to engage in capital market transactions, including the trading of Over-the-Counter financial products, via the Internet (including the World Wide Web). The system includes a variety of servers, applications, and interfaces that enable users to interactively communicate and trade financial instruments among one another, and to manage their portfolios. Interactive communications supported by the system include: requesting price quotes, monitoring and reviewing quote requests, issuing price quotes, monitoring and reviewing price quotes, negotiation between users, acceptance of price quotes, reporting, portfolio management, analysis of financial information and market data, calendaring, and communications among users and/or system administrators, including e-mail, chat, and message boards. The present invention also supports communications with the server side in an automated manner via an automated processor. Such automated communications enable connectivity with users' internal, back-end systems to execute automated, straight-through processing, including transaction pricing, payment scheduling and journaling, derivatives trading, trade confirmation, and trade settlement. Such communications are facilitated using a novel XML-based syntax (FinXML.TM.) and XSL-based processing language (FinScript.TM.). FinXML provides a standard data interchange language for capital market transactions and supports a broad set of elements and attributes that represent a wide variety of financial transactions, reference data, and market data. The common description of the FinXML syntax can be used for all aspects of straight-through-processing, including deal creation, confirmation, settlement, payment, risk management, and accounting.
Inventors:
Sandhu; Harpal S.
(Palo Alto,
CA
)
, Tolat; Viral V.
(Menlo Park,
CA
)
, Rees; Stephen
(Sneyd Park,
GB
)
Assignee:
Integral Development Corp.
(Mt. View,
CA
)
Appl. No.:
593324
Filed:
June 13, 2000
Current U.S. Class:
705/36R
705/37
Current International Class:
G06Q 40/00 (20060101)
Field of Search:
705/35,36,37
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July 1998
Potter et al.
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June 1999
Motoyama
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Walsh et al.
6012098
January 2000
Bayeh et al.
6049783
April 2000
Segal et al.
6125391
September 2000
Meltzer et al.
6144990
November 2000
Brandt et al.
6167448
December 2000
Hemphill et al.
6182029
January 2001
Friedman
6205433
March 2001
Boesch et al.
Foreign Patent Documents
10222581
Aug., 1998
JP
Other References
FinXML.org web page located at http://www.finxml.com/default.asp. Last visited on Jun. 27, 2001. p. 1.
Primary Examiner:
Hafiz; Tariq R.
Attorney, Agent or Firm:
Chou; Chien-Wei (Chris) Oppenheimer Wolff & Donnelly LLP
Parent Case Text
CROSS-REFERENCE TO RELATED APPLICATIONS
This is a continuation-in-part application of: (i) U.S. Provisional Patent Application Ser. No. 60/139,113 filed Jun. 14, 1999, entitled "SYSTEM AND METHOD FOR AN XML VOCABULARY FOR CAPITAL MARKETS"; and (ii) U.S. Provisional Patent Application Ser. No. 60/162,873 filed Nov. 1, 1999, entitled "METHOD AND APPARATUS FOR WEB-BASED MANAGEMENT OF FINANCIAL RISK AND PRICING AND TRADING OF FINANCIAL PRODUCTS". This application incorporates by reference U.S. Provisional Patent Application Nos. 60/139,113 and 60/162,873.
Claims
What is claimed is:
1. A system for facilitating transactions involving the exchange of financial instruments, the system comprising:
(a) a transaction data parser that can extract transaction data describing a transaction conducted using the system, wherein the transaction data can include:
(i) a type of the transaction;
(ii) a plurality of parties to the transaction, including a member user and a provider user selected by the member user from a plurality of provider users;
(iii) a payment schedule pursuant to which a first party to the transaction will make one or more payments to a second party to the transaction; and
(iv) rate information which can include information relating to an interest rate or an exchange rate that can affect the calculation of the amount of one or more of the payments made pursuant to the payment schedule;
(b) a reference data parser that can extract profile information about the parties to the transaction; and
(c) a market data parser that can extract market data provided to the system, the market data including market interest rates or currency exchange rate.
2. The system of claim 1 wherein the type of the transaction is a foreign exchange spot.
3. The system of claim 1 wherein the type of the transaction is a foreign exchange forward.
4. The system of claim 1 wherein the type of the transaction is an interest rate fixed-float swap.
5. The system of claim 1 wherein the type of the transaction is an interest rate float-float swap.
6. The system of claim 1 wherein the type of the transaction is an interest rate cap.
7. The system of claim 1 in which the type of the transaction is an interest rate floor.
8. The system of claim 1 wherein the type of the transaction is a fixed deposit.
9. The system of claim 1 wherein the type of the transaction is a fixed loan.
10. The system of claim 1 wherein the type of the transaction is a float deposit.
11. The system of claim 1 wherein the type of the transaction is a float loan.
12. The system of claim 1 wherein the type of the transaction is a foreign exchange option.
13. The system of claim 1 wherein the type of the transaction is a foreign exchange swap.
14. The system of claim 1 wherein the type of the transaction is a cross currency fixed-fixed swap.
15. The system of claim 1 wherein the type of the transaction is a cross currency fixed-float swap.
16. The system of claim 1 wherein the type of the transaction is a cross currency float-float swap.
17. The system of claim 1 wherein the type of the transaction is a forward rate agreement.
18. The system of claim 1 wherein the type of the transaction is a customized trade.
19. A system for facilitating transactions involving the exchange of financial instruments, the system comprising:
(a) a member client node that can be used by a member user of the system to conduct a transaction;
(b) a provider client node that can be used by a provider user of the system to conduct the transaction with the member user; and
(c) a server node that facilitates the exchange of messages among the member client and provider client nodes, including a transaction message that includes information describing the transactions between the member user and the provider user, the server node including:
(i) an interactive trading mechanism that enables the member user to select the provider user from a plurality of provider users and to interactively negotiate the terms of the transaction with the selected provider user; and
(ii) an automated messaging system that facilitates the automated exchange of the transaction message between the server node and the provider client node.
20. The system of claim 19 wherein the messages whose exchange is facilitated by the server node can include:
(a) transaction data describing the transaction, including:
(i) a type of the transaction;
(ii) a plurality of parties to the transaction, including the member user and the provider user;
(iii) a payment schedule pursuant to which the member user will make one or more payments to the provider user; and
(iv) rate information which can include information relating to an interest rate or an exchange rate that can affect the calculation of the amount of one or more of the payments made pursuant to the payment schedule;
(b) reference data, including profile information about the parties to the transaction; and
(c) market data, including market interest rate or currency exchange rates.
21. The system of claim 19 wherein the negotiated terms include pricing of the transaction.
22. The system of claim 19 wherein the negotiated terms include acceptance of the pricing of the transaction.
23. The system of claim 19 wherein the negotiated terms include settlement of the transaction.
24. The system of claim 19 wherein both the member client node and the provider client node are physically remote from the server node.
25. An automated financial object conversion and messaging system for exchanging messages describing transactions involving the exchange of financial instruments between a provider user of the system and one or more other member users of the system, the system comprising:
(a) a server node that can convert a first set of internal objects, representing the terms of a transaction between the provider user and a member user of the system, into a transaction message employing a standard format for representing the transaction, wherein the first set of internal objects employs any format that can be utilized by a back-end system of the member user;
(b) a provider node that can convert the transaction message into a second set of internal objects, wherein the second set of internal objects employs any format that can be utilized by a back-end system of the provider user; and
(c) an automated message exchange mechanism that automatically can exchange messages employing the standard format, including the transaction message, between the server node and the provider node.
26. The system of claim 25 wherein the standard format is an XML format.
27. The system of claim 26 wherein the XML format can represent:
(a) transaction data describing the transaction, including:
(i) a type of the transaction;
(ii) a plurality of parties to the transaction, including the provider user and the member user of the system;
(iii) a payment schedule pursuant to which the member user will make one or more payments to the provider user; and
(iv) rate information which can include information relating to an interest rate or an exchange rate that can affect the calculation of the amount of one or more of the payments made pursuant to the payment schedule;
(b) reference data, including profile information about the parties to the transaction; and
(c) market data, including market interest rate or currency exchange rates.
28. A method for converting a first set of internal objects, representing the terms of a transaction involving the exchange of financial instruments between a provider user and a member user of a system for facilitating transactions involving the exchange of financial instruments, into a transaction message employing a standard format for representing the transaction, the method comprising the following steps:
(a) applying an XML mapping to the first set of internal objects in order to dynamically generate a Document Object Model tree; and
(b) applying an XSL stylesheet to convert the Document Object Model tree into the transaction message, wherein the transaction message includes transaction data describing the transaction, including:
(i) a type of the transaction;
(ii) a plurality of parties to the transaction, including the member user and a provider user selected by the member user from a plurality of provider users;
(iii) a payment schedule pursuant to which the member user will make one or more payments to the provider user; and
(iv) rate information which can include information relating to an interest rate or an exchange rate that can affect the calculation of the amount of one or more of the payments made pursuant to the payment schedule.
29. The method of claim 28 wherein the standard format is an XML format.
30. The method of claim 28 wherein the first set of internal objects includes Java objects.
31. A method for converting a transaction message employing a standard format for representing the terms of a transaction involving the exchange of financial instruments between a provider user and a member user of a system for facilitating transactions involving the exchange of financial instruments, and a first set of internal objects representing the transaction, the method comprising the following steps:
(a) applying an XSL stylesheet to the transaction message in order to dynamically generate a JavaScript program; and
(b) executing the JavaScript program to produce the first set of internal object, wherein the transaction message includes transaction data describing the transaction, including:
(i) a type of the transaction;
(ii) a plurality of parties to the transaction, including the member user and a provider user selected by the member user from a plurality of provider users;
(iii) a payment schedule pursuant to which the member user will make one or more payments to the provider user; and
(iv) rate information which can include information relating to an interest rare or an exchange rate that can affect the calculation of the amount of one or more of the payments made pursuant to the payment schedule.
32. The method of claim 31 wherein the standard format is an XML format.
33. The method of claim 31 wherein the first set of internal objects includes Java objects.
Description
FIELD OF THE INVENTION
This invention relates generally to the field of interactive and automated Web-based financial transaction applications, and in particular to interactive and automated systems and methods for conducting financial transactions and managing portfolios and related financial information in capital markets.
BACKGROUND
During the evolution of the Internet, including the World Wide Web, there has been a continual introduction of applications and services to enable individuals and organizations to conduct financial research, manage their financial portfolios, and engage in certain types of financial transactions. The wide array of applications and services ranges from on-line banking to stock quote and financial information services to sites that enable users to engage in on-line, real-time market trades involving various instruments such as stocks, stock options, bonds, and mutual funds. The trading services, for example E*TRADE Securities, Inc.'s "E*TRADE"<www.etrade.com>, Charles Schwab & Co., Inc.'s "Schwab.com" <www.schwab.com>, and Fidelity Brokerage Services, Inc.'s "Fidelity.com" <www.fidelity.com>, permit trading of standard instruments in recognized markets. In such services, the investor uses credit or an account set up through the trade service to engage in trades through the service's proprietary system and interfaces. Such services, which are geared towards individual investors, do not permit seamless integration with users' internal or back-end systems or the creation and trading of customized transactions. These services, and many others like them, do not enable trading between parties in currency derivatives or foreign exchange, or the pricing and modeling of other capital market transactions.
Some steps have been taken to tap into the potentially vast market of institutional investors wishing to engage in complex transactions via the Internet. The "Open Financial Exchange" (Intuit Inc., Microsoft Corp., CheckFree Corp.) <www.ofx.net> was created to provide a common specification for the electronic exchange of financial data between financial institutions, businesses, and consumers via the Internet that enables financial data exchange among disparate systems, in order to support online banking, bill payment and presentment, and the trading of stocks, bonds, and mutual funds. The Open Financial Exchange does not, however, provide a vocabulary, platform, and communication protocol to enable the creation, negotiation, and execution of complex, capital market transactions among financial institutions and institutional investors.
What is needed is a system and method that enables institutional investors and financial institutions to seamlessly create, price, negotiate, execute, settle and analyze complex, capital market transactions, including interest and currency derivatives, foreign exchange, loans and deposits, and fixed-income instruments, using a standard vocabulary and messaging system that enables seamless integration with the proprietary, existing systems of the users.
SUMMARY
The present invention provides a system and method that enables users, such as "Members" (e.g., institutional investors) and "Providers" (e.g., financial institutions), to engage in capital market transactions, including the trading of Over-the-Counter financial products, via the Internet (including the World Wide Web). The system includes a variety of servers, applications, and interfaces that enable users to interactively communicate and trade financial instruments among one another, and to manage their portfolios. Interactive communications supported by the system include: requesting price quotes, monitoring and reviewing quote requests, issuing price quotes, monitoring and reviewing price quotes, negotiation between Members and Providers, acceptance of price quotes, reporting, portfolio management, analysis of financial information and market data, calendaring, and communications among Members, Providers, and/or system administrators, including e-mail, chat, and message boards.
The present invention also supports communications with the server side in an automated manner via an automated processor (the "Connect Processor" and "Connect Messaging Server"). Such automated communications enable connectivity with users' internal, back-end systems to execute automated, straight-through processing, including transaction pricing, payment scheduling and journaling, derivatives trading, trade confirmation, and trade settlement. Such communications are facilitated using a novel XML-based syntax ("FinXML") and XSL-based processing language ("FinScript"). FinXML provides a standard data interchange language for capital market transactions and supports a broad set of elements and attributes that represent a wide variety of financial transactions, reference data, and market data. The common description of the FinXML syntax can be used for all aspects of straight-through-processing, including deal creation, confirmation, settlement, payment, risk management, and accounting.
BRIEF DESCRIPTION OF THE FIGURES
The above objects and description of the present invention may be better understood with the aid of the following text and accompanying drawings:
FIG. 1 shows the architecture of an embodiment of the present invention.
FIG. 2 shows a flowchart of the process by which Members and Providers conduct a financial transaction in an embodiment of the present invention.
FIG. 3 shows the structure of a FinXML "Trade" element in an embodiment of the present invention.
FIG. 4 shows the structure of a FinXML "External Party" element in an embodiment of the present invention.
FIG. 5 shows the structure of a FinXML "Internal Party" element in an embodiment of the present invention.
FIG. 6 shows the structure of a FinXML "Events" element in an embodiment of the present invention.
FIG. 7 shows the general architecture of the Connect Automated Processor in an embodiment of the present invention.
FIG. 8 shows an architectural overview of the Connect Automated Processor in an embodiment of the present invention.
FIG. 9 shows the layout of a Connect Message in an embodiment of the present invention.
FIG. 10 shows the structure of a Connect Message in an embodiment of the present invention.
FIG. 11 shows a diagram of the Connect Message Flow for the automated pricing (synchronous) function in an embodiment of the present invention.
FIG. 12 shows a diagram of the Connect Message Flow for the automated pricing (asynchronous) function in an embodiment of the present invention.
FIG. 13 shows a diagram of the Connect Message Flow for the semi-automated pricing (synchronous) function in an embodiment of the present invention.
FIG. 14 shows a diagram of the Connect Message Flow for the deal transmission (asynchronous) function in an embodiment of the present invention.
FIG. 15 shows the components utilized in converting financial objects into a FinXML document using FinScript in an embodiment of the present invention.
FIG. 16 shows a flowchart of the process of converting financial objects into a FinXML document using FinScript in an embodiment of the present invention.
FIG. 17 shows the components utilized in converting a FinXML document into financial objects using FinScript in an embodiment of the present invention.
FIG. 18 shows a flowchart of the process of converting a FinXML document into financial objects using FinScript in an embodiment of the present invention.
DETAILED DESCRIPTION OF THE INVENTION
A. System Functionality
The technology of the present invention can be embodied in various forms to provide a platform for conducting interactive and automated financial transactions and management of portfolios and related financial information in capital markets. The platform enables members, including end-users and providers of financial products and services, to engage in the trading of standard and customized financial instruments in capital markets. System functionality includes: capture and pricing of financial instrument trades; presentation of real-time market data; saving of completed trades to a portfolio; management of trading workflow; transmission of trades to end-users' proprietary, back-end systems for pricing, trading, payment processing, confirmation, and settlement; performance of portfolio analysis; performance of risk management analysis; and inter-user communications.
In the present embodiment of the invention, the system includes both server-side and client-side functionality. The server-side functionality enables system users to interactively and seamlessly: engage in financial instrument trades; perform portfolio management, analysis, and reporting; obtain real-time market data and news; communicate with the system and other users via electronic mail, chat, and message boards; and maintain a calendar. The server-side includes interactive system servers that host such user activities, as well as one or more system databases, and an automated messaging server that controls communication with the automated back-end systems of clients.
The client side functionality includes an automated processor that communicates with the automated messaging server of the system side and serves as a seamless interface to the automated back-end systems and proprietary databases of clients. Thus, the system enables organizations with disparate systems and data to engage in transactions using the common functionality and interfaces of this invention. The client side also includes client web browsers that enable interactive communication with the system servers.
The invention described herein provides a standard, XML-based vocabulary to represent and facilitate the financial transactions, as well as a system and method for converting users' data and information to/from the standard vocabulary and communicating such information through the system in an automated manner.
1. System Architecture Overview
FIG. 1 illustrates the architecture of one embodiment of this invention. This embodiment is presented for purposes of illustration and description, and other embodiments will be apparent to and could be implemented by practitioners skilled in this art.
a. Server Side
The server side (sometimes referred to as the "CFOWeb System" in this embodiment) communicates with the client side (consisting of users known as "Members", e.g., corporations and institutional investors, and "Providers", e.g., financial institutions) via the Internet (including the World Wide Web) 10. The server side includes a variety of interactive system servers that provide functionality to users. Web Server 100 enables communications (through the Internet via a transfer protocol such as, e.g., HyperText Transfer Protocol or "HTTP/IP") between users who connect to the server side through their web browsers 30 and the various system servers. Trading server 160 provides a graphic user interface and applications that enable users to interactively trade financial derivatives among each other. Portfolio management server 170 provides a graphic user interface and applications that enable users to manage their portfolios of financial derivatives. Reports server 180 provides a graphic user interface and applications that enable users to run and produce standard and customizable reports regarding their portfolios, including mark to market, upcoming events, and trade lists. Analysis server 190 provides a graphic user interface and applications that enable users to run analytics against their portfolios, including valuation, and interest rate sensitivity. Calendar server 200 provides a graphic user interface and applications that enable users to automatically calendar key dates regarding settlement, payments, cash flows, and other details related to their financial derivative transactions and portfolios. News and research server 210 provides a graphic user interface and applications that enable users to obtain real-time market data and financial and other news, as well as proprietary third-party data feeds. News and research server 210 includes connections to real-time market data feeds and news services 220 and third-party data feeds 230.
The interactive system servers also include servers that enable communication among system users and administrators. Chat server 120 provides real-time chat, thus enabling users to engage in discussion forums related to financial derivatives. Paging server 130 enables users to build a messaging community and determine which users are online and available to receive messages at a given instance. E-mail server 140 provides an intra-system electronic mail vehicle, enabling communications among users and system administrators, including all aspects of a financial trade from quote requests to settlement. Message boards server 150 provides an arena for users and system administrators to post and read system-wide messages, as well as quote requests and quotes.
Automated messaging server 90 (sometimes referred to as the "Connect Messaging Server" in this embodiment) controls communications (through the Internet via a transfer protocol, e.g., HTTP/IP) between the various system servers of the server side and users whose internal, back-end systems 85 execute automated processes that require communication with the server side. Such automated processes could include transaction pricing 40, payment scheduling and journaling 50, derivatives trading 60, trade confirmation 70, and trade settlement 80. Communications between Connect Messaging Server 90 and the client side pass through automated processor 20 (sometimes referred to as the "Connect Processor" in this embodiment)--which shares the same functionality as automated messaging server 90--and automated message broker 25 and are facilitated using the "FinXML" vocabulary and the "FinScript" processing language, as described below.
The CFOWeb System includes one or more system databases 110, which store data related to the processing of financial transactions, as well as user communications and interactions with the system servers.
b. Client Side
The client side includes functionality that enables users--Members and Providers--to communicate, either interactively or in an automated manner, with the various system servers. Web browser 30 enables interactive communications (through the Internet via a transfer protocol, e.g., HTTP/IP) between users and the CFOWeb System with connection made on the server side at web server 100. Interactive communications might include: requesting price quotes (Members), monitoring and reviewing quote requests (Providers), issuing price quotes (Providers), monitoring and reviewing price quotes (Members), negotiation between Members and Providers, acceptance of price quotes (Members), reporting, portfolio management, analysis of financial information and market data, calendaring, and communications among Members, Providers, and/or system administrators, including e-mail, chat, and message boards.
Alternatively, users can communicate with the server side in an automated manner via Connect Processor 20 (and automated message broker 25) which communicates (through the Internet via a transfer protocol, e.g., HTTP/IP) with Connect Messaging Server 90. Such automated communications enable users' internal back-end systems 85 (which include one or more back-end databases 88) to execute automated processes, which could include transaction pricing 40, payment scheduling and journaling 50, derivatives trading 60, trade confirmation 70, and trade settlement 80. Such communications are facilitated using the "FinXML" vocabulary and the "FinScript" processing language, as described below.
2. Financial Transaction Functionality
For system users--Members and Providers--the functionality included in an embodiment of this invention can be categorized as follows: pre-transaction, transaction, post-transaction, and general. The present invention (i) automates or (ii) provides an interactive interface for such functionality.
a. Pre-Transaction
Members and Providers (or in other embodiments of this invention, Members and Members) that engage in a financial transaction of a type enabled by this invention proceed through a series of steps illustrated in FIG. 2. When a Member and Provider decide that they may engage in financial transactions in the future, the parties establish their relationship by executing certain agreements (step 300). Such agreements govern the rules of engagement, rate sources, confirmation and settlement procedures, and other information that can be reused over a series of transaction between the parties. The International Swaps and Derivatives Association, Inc. ("ISDA") <http://www.isda.org> provides certain standardized agreements (e.g., "1992
ISDA Master Agreement") that may be used by the parties for these purposes. The parties can carry out this step using the interactive e-mail function of the system (provided by e-mail server 140 in FIG. 1) to exchange information to be included in the agreements. In addition, by combining off-the-shelf electronic signature software with the system, the parties can electronically sign and exchange the standardized agreements. Members and Providers may engage in multiple iterations of this step, depending upon the number of standardized agreements that the parties will execute.
Next, the Member and Provider will negotiate one or more lines of credit to be assigned by the Provider to the Member for future transactions (step 310). Each Member will negotiate such line(s) of credit with each Provider with which the Member intends to engage in future transactions. In assigning a credit line to a Member, the Provider will analyze the Member's asset portfolio, credit ratings, and type of financial transactions to be executed by Member. The parties can carry out this step using the interactive e-mail function of the system (provided by e-mail server 140 in FIG. 1) to exchange information during the credit line negotiations.
b. Transaction
Once the Member and Provider have established their relationship and negotiated a credit line, the Member can commence the process of engaging in a financial transaction. The Member must decide on the type of transaction it wishes to execute (e.g., Foreign Exchange Spot, Foreign Exchange Forward, Interest Rate Swap, etc.) and structure the desired transaction (step 320). In this step, the Member will use the interactive trading function of the system (provided by trading server 160 in FIG.
1), including graphic user interfaces and tools. Depending upon the type of transaction, the structure might include pricing variables, an expiration period, a list of Providers to whom the Member would like to request pricing, and any other particulars specific to the Member and the desired transaction. For example, a Member might specify a Foreign Exchange Spot transaction in which the Member desires to buy 1 million Euro currency for U.S. Dollars, with the transaction request set to expire on Jul.
30, 2000 at 11:59 P.M. Pacific Standard Time.
After structuring the transaction, the Member submits a request for pricing of the transaction to one or more Providers (step 330), using the interactive trading function of the system (provided by trading server 160 in FIG. 1). Alternatively, the Member might communicate a request for pricing directly to a particular Provider using the interactive e-mail function of the system (provided by e-mail server 140 in FIG. 1). Such an e-mail communication would include a URL to the structured transaction and request for pricing.
Providers monitor and review the Member's pricing request (step 340) via communications between the automated messaging server 90 and automated processor 20, as will be described below. Such communications result in the posting of pricing requests on a request-monitoring interface hosted by the system. Upon reviewing the transaction and pricing request, including information about the particular Member (unless the Member's identity was not disclosed), a Provider can submit a pricing offer (i.e., price quote) to the requesting Member (step 350). The submission of the pricing offer occurs via a communication between the automated processor 20 and automated messaging server 90, as will be described below. Each pricing offer typically has an expiration period because of constantly changing market conditions, and the Provider may submit modified pricing offers to the Member.
The Member can monitor and review any pricing offers submitted by Providers (step 360) on a monitoring interface hosted by the system. The Member will select one or more pricing offers (step 370) and negotiate with the particular Provider(s) who provided the offer(s). In the present embodiment, such negotiations may occur using the interactive e-mail function of the system (provided by e-mail server 140 in FIG. 1) or through traditional methods (e.g., telephone calls). The number of iterations of negotiations will depend upon the market volatility and other conditions. In other embodiments of this invention, such negotiations may be unnecessary if certain parameters are met by a Provider's pricing offer.
Following negotiations regarding pricing offers, the Member will accept the best pricing offer (step 380) and communicate its acceptance to the Provider using the interactive trading function of the system (provided by trading server 160 in FIG.
1). The Provider will receive the Member's acceptance via communications between the automated messaging server 90 and automated processor 20, as will be described below. Such communications result in the posting of the Member's acceptance of the pricing offer on the request monitoring interface hosted by the system.
c. Post-Transaction
Upon receipt of the Member's acceptance, the Provider sends confirmation of the transaction to the Member (step 390), including specific terms, payment dates, and amounts. The Provider sends the confirmation information to the Member via communications between the automated processor 20 and the automated messaging server 90, as will be described below. The Provider's back-end system 85 provides automated processing of this information.
Following confirmation, the Member and Provider will submit the transaction to their respective back-end systems 85 (step 400) for purposes including internal accounting and payment scheduling. This step can be handled by the system via an automated connection between the automated processor 20 and the back-end system 85. Using their respective back-end systems 85, the Member and Provider schedule settlement of the transaction and future cash flows (step 410).
d. General
Interactive system functionality that can be accessed and implemented at any time by the Member and Provider includes: reporting; portfolio management; risk management; analysis of financial information and market data; e-mail communication with Members, Providers, and system administrators; chat with Members and Providers; message boards; calendaring; and paging.
B. Automated Processing and Transferring of Financial Information
The present embodiment of this invention supports financial transactions between Members and Providers by providing automated processing and transfer of the underlying financial information between the messaging server of the server side and the automated processor of the client side. The system enables such processing and transfer by using a novel tag-based language--FinXML.TM.--that describes financial instrument trades, including transaction-specific data, reference data, and market data. FinXML conforms to the Extensible Markup Language (XML) 1.0 Recommendation (Feb. 10, 1998), World Wide Web Consortium (Massachusetts Institute of Technology, Institut National de Recherche en Informatique et en Automatique, Keio University) <http://www.w3.org/TR/REC-xm1>. The XML Recommendation describes a set of rules for conforming documents that is based around the use of element tags which mark the components of a document or describe the structure of data files as textual documents.
FinXML also conforms to the 1991 ISDA Definitions (and 1998 Supplement) of the International Swaps and Derivatives Association, Inc. ("ISDA") <http://www.isda.org>. The ISDA Definitions provide a set of standard terms for use in privately-negotiated financial derivatives transactions. The element tags and attribute names and values defined in FinXML, as described below, correspond to the terms defined in the ISDA Definitions.
FinXML, as a type of XML vocabulary, is ideally suited to electronic transmission over corporate intranets, extranets, and the Internet (including the World Wide Web), using a transfer protocol such as HTTP/IP. HTTP/IP is intended to transmit text documents such as the HyperText Markup Language ("HTML") documents used to describe the pages to be displayed in a Web browser. XML documents--and, thus, FinXML documents--are similar to HTML documents in that both types of documents are text-based, both consist of a mixture of element tags and data content, and both may include references to other external material.
In a basic financial transaction between two organizations, a financial transaction encoded in XML is sent using a transfer protocol such as HTTP/IP from a client application of one organization to a server of the other organization. The server, in turn, sends back a response that is also encoded in XML.
As will be describe below, the present embodiment of this invention includes a novel method of encoding/decoding financial objects to/from FinXML (or other XML) documents using the automated processor 20 (also known as "Connect Processor") and automated messaging server 90 (also known as "Connect Messaging Server"). In a financial transaction between two organizations, one organization (e.g., a Member) submits a Java object to automated processor 20 which, as will be described below, uses a XML mapping and FinScript.TM.--proprietary stylesheets created in Extensible Stylesheet Language ("XSL")--to create a FinXML (or other XML) document that can be sent using a transfer protocol such as HTTP/IP to the automated messaging server 90 for conversion to an object and processing on the server side. Following processing, the automated messaging server 90 converts objects to a FinXML (or other XML) document and sends the document to the automated processor 20 which, as will be described below, uses FinScript to create a JavaScript program from the FinXML (or other XML) document. In turn, Java objects are created from the JavaScript program and sent to the other organization (e.g., a Provider). XSL, which serves as the foundation for FinScript, is described in the Extensible Stylesheet Language (XSL) Version 1.0 (Mar. 27, 2000), World Wide Web Consortium (Massachusetts Institute of Technology, Institut National de Recherche en Informatique et en Automatique, Keio University) <http://www.w3.org/TR/xsl>.
1. FinXML
In the present embodiment of this invention, FinXML documents are distributed between servers in order to communicate the details of financial transactions and related data. The FinXML syntax provides a general structure for all financial transactions. The financial transactions, in turn, consist of underlying elements, each of which contains attributes and/or other elements.
a. Trade Structure
The basic financial transaction element of the FinXML syntax is a "Trade", of which there are multiple types (described below). The Trade element is the root element for the description of each financial transaction object. The Trade element is contained within the Connect message "payload" component (described below).
FIG. 3 illustrates the structure of a Trade element. Trade element 500 contains at least one pair of "Counterparty" elements 510, which are the parties engaged in the transaction. Each Counterparty element 510 can be an "Internal Party" element
515 or an "External Party" element 520 (described below). Trade element 500 also contains a "Trade Type" element 530, which contains one of the following Trade Type sub-elements:
(1) Foreign Exchange ("FX") Spot
(2) FX Forward
(3) Interest Rate Fixed Float Swap
(4) Interest Rate Float Float Swap
(5) Cap
(6) Floor
(7) Fixed Deposit
(8) Fixed Loan
(9) Float Deposit
(10) Float Loan
(11) FX Option
(12) FX Swap
(13) Cross Currency Fixed Fixed Swap
(14) Cross Currency Fixed Float Swap
(15) Cross Currency Float Float Swap
(16) Forward Rate Agreement
(17) Customized Trade
Each Trade Type element represents a different type of financial transaction, which will be described separately below.
In the present embodiment of this invention, Trade element 500 has the following XML definition:
<!ELEMENT trade (%parties; , (fxSpot .vertline. fxForward .vertline. interestRateFixedFloatSwap .vertline. interestRateFloatFloatSwap .vertline. cap .vertline. floor .vertline. fixedDeposit .vertline. fixedLoan .vertline. floatDeposit .vertline. floatLoan .vertline. fxOption .vertline. fxSwap .vertline. crossCurrencyFixedFixedSwap .vertline. crossCurrencyFixedFloatSwap .vertline. crossCurrencyFloatFloatSwap .vertline. forwardRateAgreement .vertline. customizedTrade ) )> <!ATTLIST trade tradeId CDATA #REQUIRED isBuiltFromParameters CDATA #IMPLIED>
b. Financial Transaction Data
The FinXML syntax describes various types of data that comprise a financial transaction, including transaction data, reference data, and market data. Each of these types of data includes elements and attributes.
i. Transaction Data
Transaction data describes the various components of a financial transaction or trade. These components include "Counterparty" elements, "Trade Type" elements, "Trade Specific" elements, "Financial Event" elements, and "Calculation" elements.
(a) Counterparty Elements
In a financial transaction of the type described by FinXML, there are typically two parties, also referred to as "counterparties". As described above, FinXML describes such parties to a transaction with Counterparty element 510 (as shown in FIG.
3), including an Internal Party element and an External Party element. In the present embodiment of this invention, Counterparty element 510 has the following XML definition:
<!ENTITY % counterParty "internalParty .vertline. externalParty"> <!ENTITY % parties "(%counterParty;), (%counterParty;)">
In each transaction, from the perspective of an organization, that organization is the "internal" party and the other, unrelated organization is the "external" party, e.g., a corporation and a third-party bank that engages in a foreign exchange transaction. Alternatively, where a corporation engages in a transaction with a subsidiary legal entity within the corporation, the subsidiary is also an "internal" party.
FIG. 4 illustrates the structure of the External Party element 700, which represents an external party to a transaction. Each external party can be either a "disclosed party" or an "undisclosed party". In the present embodiment of this invention, External Party element 700 has the following XML definition:
<!ELEMENT externalParty ((disclosedParty .vertline.undisclosedParty)) > <!ATTLIST externalParty id ID #IMPLIED type CDATA #IMPLIED >
Disclosed Party element 705 represents a party to a transaction (e.g., a Member) whose details, including corporate identification, are fully known to the other party to the transaction. Each Disclosed Party element 705 includes the following sub-elements (described in greater detail below in the discussion regarding "Reference Data" elements): Organization 710, Contact Information 730, Address 765, and Credit Rating 805. In the present embodiment of this invention, Disclosed Party element
705 has the following XML definition:
<!ELEMENT disclosedParty (organization, contactInformation*, address, creditRating+ )>
Undisclosed Party element 835 represents a party that remains anonymous to the other party; the only information disclosed is the party's credit rating. Thus, each Undisclosed Party element 835 includes the Credit Rating 805 element (described in greater detail below in the discussion regarding "Reference Data" elements). In the present embodiment of this invention, Undisclosed Party element 805 has the following XML definition:
<!ELEMENT undisclosedParty (creditRating+ )>
FIG. 5 illustrates the structure of the Internal Party element 600, which represents an internal party to a transaction. Internal Party element 600 includes Legal Entity element 605, which represents each of the separate legal (i.e., corporate) entities associated with the internal party, and Book element 625, which represents the trading book(s) in which a party will group transactions for accounting purposes (described in greater detail below in the discussion regarding "Reference Data" elements). In the present embodiment of this invention, Internal Party element 600 has the following XML definition:
<!ELEMENT internalParty (legalEntity? , book? )> <!ATTLIST internalParty id ID #IMPLIED type CDATA #IMPLIED >
(b) Trade Type Elements
As shown in FIG. 3, Trade element 500 includes Trade Type element 530. Each Trade Type element 530, in turn, includes a Trade Type sub-element that describes one type of financial transaction or trade.
(1) Foreign Exchange Spot
A Foreign Exchange Spot ("FX Spot") transaction is one in which one party acquires a specified quantity of one currency in exchange for another currency from another party, to be paid or settled as soon as is standard (i.e., usually two days) in the foreign exchange market. For example, a Member buys from a Provider 2 million Euro for U.S. Dollars to be paid in two days.
The FX Spot element represents such a transaction and includes the following sub-elements and attributes:
"Dealt Amount": the specified amount of currency to be converted into the currency being acquired.
"Settled Amount": the amount of currency being acquired.
"Trade Date": the date on which the currency trade has been agreed to by the parties.
"Value Date": the date on which the traded currencies will be exchanged (i.e., the trade will be settled).
"FX Rate": the foreign exchange rate at which the trade will be executed.
"Base Currency": the currency against which the currency to be acquired will be measured.
"Base Units": the number of units of the Base Currency against which the currency to be acquired will be quoted (usually one unit).
"Quote Currency": the currency to be acquired or the currency to which the quote is pegged.
"Quote Units": the number of units of the Quote Currency to be acquired.
In the present embodiment of this invention, the FX Spot element has the following XML definition:
<!-- Foreign Exchange Trades - FXSPOT --> <!ENTITY % fxTradeSpec "%trade.elements; , dealtAmount , settledAmount"> <!ELEMENT fxSpot (%fxTradeSpec; )> <!ELEMENT dealtAmount (currency, amount )> <!ATTLIST dealtAmount %payReceiver;> <!ELEMENT settledAmount (currency, (fxRate .vertline. amount ) )> <!ATTLIST settledAmount %payReceiver;> <!ELEMENT fxRate (baseCurrency, baseUnits, quoteCurrency, quoteUnits, rate )> <!ELEMENT baseCurrency (#PCDATA )> <!ELEMENT baseUnits (#PCDATA )> <!ELEMENT quoteCurrency (#PCDATA )> <!ELEMENT quoteUnits (#PCDATA )> <!ENTITY % trade.elements "tradeDate , settlementDate? , valueDate? , externalID?">
(2) Foreign Exchange Forward
A Foreign Exchange Forward ("FX Forward") transaction is one in which one party acquires a quantity of one currency in exchange for a specified amount of another currency from another party, with the amounts to be paid on a specified future date. For example, a Member buys from a Provider 2 million Euro for U.S. Dollars to be paid 60 days from the trade date.
The FX Forward element represents such a transaction and includes the following sub-elements and attributes:
"Dealt Amount": the specified amount of currency to be converted into the currency being acquired.
"Settled Amount" the amount of currency being acquired.
"Trade Date": the date on which the currency trade has been agreed to by the parties.
"Value Date": the date on which the traded currencies will be exchanged (i.e., the trade will be settled).
"FX Rate": the foreign exchange rate at which the trade will be executed.
"Base Currency": the currency against which the currency to be acquired will be measured.
"Base Units": the number of units of the Base Currency against which the currency to be acquired will be quoted (usually one unit).
"Quote Currency": the currency to be acquired or the currency to which the quote is pegged.
"Quote Units": the number of units of the Quote Currency to be acquired.
In the present embodiment of this invention, the FX Forward element has the following XML definition:
<!-- Foreign Exchange Trades - FORWARD --> <!ENTITY % fxTradeSpec "%trade.elements; , dealtAmount , settledAmount"> <!ELEMENT fxForward (%fxTradeSpec; )> <!ELEMENT dealtAmount (currency, amount )> <!ATTLIST dealtAmount %payReceiver;> <!ELEMENT settledAmount (currency, (fxRate .vertline. amount ) )> <!ATTLIST settledAmount %payReceiver;> <!ELEMENT fxRate (baseCurrency, baseUnits, quoteCurrency, quoteUnits, rate )> <!ELEMENT baseCurrency (#PCDATA )> <!ELEMENT baseUnits (#PCDATA )> <!ELEMENT quoteCurrency (#PCDATA )> <!ELEMENT quoteUnits (#PCDATA )> <!ENTITY % trade.elements "tradeDate , settlementDate? , valueDate? , externalID?">
(3) Interest Rate Fixed-Float Swap
An Interest Rate Fixed-Float Swap is a type of interest rate swap in which two parties exchange periodic payment streams, where one payment stream is based on a fixed interest rate and the other payment stream is based on a floating rate index (e.g., LIBOR), with each payment stream in the same currency. For example, a Member buys from a Provider a fixed payment stream in Euro in exchange for a floating payment stream in Euro based on the LIBOR index.
The Interest Rate Fixed-Float Swap element represents such a transaction and includes the following sub-elements and attributes:
"Trade Date": the date on which the trade has been agreed to by the parties.
"Start Date": the date on which the exchanged payments will begin.
"End Date": the date on which the exchanged payments will end.
"Fixed Leg Details": the details of the fixed interest payments for the fixed leg.
"Float Leg Details": the details of the floating interest payments for the floating leg.
"Events": the various payment and calculation events in the swap transaction, including cash payment, principal payment, interest payment, interest calculation, compound interest calculation, and interest rate reset information.
In the present embodiment of this invention, the Interest Rate Fixed-Float Swap element has the following XML definition:
<!-- Interest Rate Fixed Float Swap --> <!ELEMENT interestRateFixedFloatSwap (tradeDate, startDate, endDate, externalID?, fixedLegDetails, floatLegDetails, events?)>
(4) Interest Rate Float-Float Swap
An Interest Rate Float-Float Swap is a type of interest rate swap in which two parties exchange periodic payment streams, where each payment stream is based on a floating rate index (e.g., LIBOR), with each payment stream in the same currency. For example, a Member buys from a Provider a floating payment stream in Euro in exchange for a floating payment stream in Euro, where each payment stream is based on the LIBOR index.
The Interest Rate Float-Float Swap element represents such a transaction and includes the following sub-elements and attributes:
"Trade Date": the date on which the trade has been agreed to by the parties.
"Start Date": the date on which the exchanged payments will begin.
"End Date": the date on which the exchanged payments will end.
"Float Leg Details": the details of the floating interest payments; separate information for each of the two floating legs.
"Events": the various payment and calculation events in the swap transaction, including cash payment, principal payment, interest payment, interest calculation, compound interest calculation, and interest rate reset information.
In the present embodiment of this invention, the Interest Rate Float-Float Swap element has the following XML definition:
<!-- Interest Rate Float Float Swap --> <!ELEMENT interestRateFloatFloatSwap (tradeDate, startDate, endDate, externalId?, floatLegDetails, floatLegDetails, events?)>
(5) Cap
A Cap transaction is one in which one party, in exchange for a premium payment, acquires from another party the right to receive a payment stream from the other party with respect to a specified quantity of one currency if, on the scheduled payment dates, the level of a specified rate or index exceeds an agreed "strike rate" for the period involved. For example, a Member purchases from a Provider an interest rate cap at a strike rate of 8 percent on U.S. Dollars based on the 3-month LIBOR for a period of 12 months, in order to hedge its exposure to increasing interest rates on a 10 million U.S. Dollars floating-rate loan based on the 3-month LIBOR.
The Cap element represents such a transaction and includes the following sub-elements and attributes:
"Cap Floor Spec": describes the structured elements common to Cap and Floor transactions.
"Trade Date": the date on which the trade has been agreed to by the parties.
"Settlement Date": the date on which the trade will be settled.
"Start Date": the beginning date of the period for which the interest rate is protected.
"End Date": the date on which the payment stream will end.
"Premium Details": the details of the premium to be paid, as either a percentage ("Premium Percentage") or a specified amount ("Premium Amount"), and the payment date ("Premium Date").
"Strike Rate": the rate that, if exceeded, will trigger the settlement of the transaction.
"Buyer": the buyer of the option to be exercised; this is a reference to a Counterparty element.
"Writer": the recipient of the premium for the option to be exercised; this is a reference to a Counterparty element.
"Volatility Spread": the spread over the volatility calculated using the volatility surface; an additional spread for pricing the cap transaction.
"Discount Curve": the definition of the discount curve used to calculate the payment stream.
"Forecast Curve": the definition of the forecast curve used to calculate the payment stream.
"Notional Amount": the amount used as the basis for calculating the payment stream.
"Floating Interest Rate": the floating interest rate.
"First Fixing Rate": the interest rate to be used for the first interest calculation period.
"Day Count": the day-count method to be used for calculating interest.
"Payment Frequency": the frequency of interest/principal payment.
"Roll Date": the specific day each month to be used for payment/settlement of interest/principal.
"Payment Calendar": the calendar to be used for reference to business holidays.
"Rate Reset Calendar": the calendar to be used for reference to business holidays for interest rate resets.
"Date Stub": an indicator for an irregular schedule of payments.
"Anchor Date": the date to which the payment schedule is anchored, i.e., the end date of the first interest period or specific date of first payment; could be the start of the last interest period if dates generated in reverse.
"Amortization Details": details regarding how the payment cashflow should be amortized, including amortization method (em, single payment at end, equal payments over term of stream).
"Compounding Details": details regarding how the interest should be compounded, including calculation frequency and rate.
In the present embodiment of this invention, the Cap element has the following XML definition:
<!-- Cap --> <!ENTITY % capFloorSpec "premium details , strikeRate , volatilitySpread , discountCurve? , forecastCurve?"> <!ELEMENT cap (tradeDate, settlementDate?, startDate, endDate, externalID?, %genericSpecDetails; , %floatRateDetails; , %capFloorSpec; , events? )> <!ATTLIST cap buyer IDREF #REQUIRED writer IDREF #REQUIRED> <!ELEMENT premiumDetails ( (premiumPercentage .vertline. premiumAmount ) , premiumDate )> <!ELEMENT premiumAmount (%currencyAmount; )> <!ATTLIST premiumAmount %payReceiverAmount;> <!ELEMENT premiumPercentage (#PCDATA )*> <!ATTLIST premiumPercentage %payReceiverAmount;> <!ELEMENT volatilitySpread (#PCDATA )> <!ELEMENT discountCurve (#PCDATA )> <!ELEMENT forecastCurve (#PCDATA )>
(6) Floor
A Floor transaction is one in which one party, in exchange for a premium payment, acquires from another party the right to receive a payment stream from the other party with respect to a specified quantity of one currency if, on the scheduled payment dates, the level of a specified rate or index is less than an agreed "strike rate" for the period involved. For example, a Member purchases from a Provider an interest rate floor at a strike floor level of 8 percent on U.S. Dollars based on the
3-month LIBOR for a period of 12 months, in order to protect its investment returns on a 10 million U.S. Dollars money market investment based on the 3-month LIBOR.
The Floor element represents such a transaction and includes the following sub-elements and attributes:
"Cap Floor Spec": describes the structured elements common to Cap and Floor transactions.
"Trade Date": the date on which the trade has been agreed to by the parties.
"Settlement Date": the date on which the trade will be settled.
"Start Date": the beginning date of the period for which the interest rate is protected.
"End Date": the date on which the payment stream will end.
"Premium Details": the details of the premium to be paid, as either a percentage ("Premium Percentage") or a specified amount ("Premium Amount"), and the payment date ("Premium Date").
"Strike Rate": the rate that, if exceeded, will trigger the settlement of the transaction.
"Buyer": the buyer of the option to be exercised; this is a reference to a Counterparty element.
"Writer": the recipient of the premium for the option to be exercised; this is a reference to a Counterparty element.
"Volatility Spread": the spread over the volatility calculated using the volatility surface; an additional spread for pricing the cap transaction.
"Discount Curve": the definition of the discount curve used to calculate the payment stream.
"Forecast Curve": the definition of the forecast curve used to calculate the payment stream.
"Notional Amount": the amount used as the basis for calculating the payment stream.
"Floating Interest Rate": the floating interest rate.
"First Fixing Rate": the interest rate to be used for the first interest calculation period.
"Day Count": the day-count method to be used for calculating interest.
"Payment Frequency": the frequency of interest/principal payment.
"Roll Date": the specific day each month to be used for payment/settlement of interest/principal.
"Payment Calendar": the calendar to be used for reference to business holidays.
"Rate Reset Calendar": the calendar to be used for reference to business holidays for interest rate resets.
"Date Stub": an indicator for an irregular schedule of payments.
"Anchor Date": the date to which the payment schedule is anchored, i.e., the end date of the first interest period or specific date of first payment; could be the start of the last interest period if dates generated in reverse.
"Amortization Details": details regarding how the payment cashflow should be amortized, including amortization method (e.g., single payment at end, equal payments over term of stream).
"Compounding Details": details regarding how the interest should be compounded, including calculation frequency and rate.
In the present embodiment of this invention, the Floor element has the following XML definition:
<!-- Floor --> <!ENTITY % capFloorSpec "premium details , strikeRate , volatilitySpread , discountCurve? , forecastCurve?"> <!ELEMENT floor (tradeDate, settlementDate?, startDate, endDate, externalID?, %genericSpecDetails; , %floatRateDetails; , %capFloorSpec; , events? )> <!ATTLIST floor buyer IDREF #REQUIRED writer IDREF #REQUIRED> <!ELEMENT premiumDetails ( (premiumPercentage .vertline. premiumAmount) , premiumDate)> <!ELEMENT premiumAmount (%currencyAmount; )> <!ATTLIST premiumAmount %payReceiverAmount;> <!ELEMENT premiumPercentage (#PCDATA )*> <!ATTLIST premiumPercentage %payReceiverAmount;> <!ELEMENT volatilitySpread (#PCDATA )> <!ELEMENT discountCurve (#PCDATA )> <!ELEMENT forecastCurve (#PCDATA )>
(7) Fixed Rate Loan/Deposit
A Fixed Rate Loan/Deposit transaction is one in which one party borrows a sum of money from another party at a fixed interest rate. For example, a Member borrows from a Provider 1 million U.S. Dollars at a fixed interest rate for one year.
The Fixed Loan/Deposit element represents such a transaction and includes the following sub-elements and attributes:
"Trade Date": the date on which the loan has been agreed to by the parties.
"Start Date": the date on which the loan will begin.
"End Date": the date on which the loan will end.
"Lender": the lender of the loan; this is a reference to a counterparty element.
"Borrower": the borrower of the loan; this is a reference to a Counterparty element.
"Notional Amount": the loan amount.
"Fixed Interest Rate": the fixed interest rate.
"Day Count": the day-count method to be used for calculating interest.
"Payment Frequency": the frequency of interest/principal payment.
"Roll Date": the specific day each month to be used for payment/settlement of interest/principal.
"Payment Calendar": the calendar to be used to generate payment dates.
"Date Stub": an indicator for an irregular schedule of loan payments.
"Anchor Date": the date to which the payment schedule is anchored, i.e., the end date of the first interest period or specific date of first payment; could be the start of the last interest period if dates generated in reverse.
"Amortization Details": details regarding how the loan payment cashflow should be amortized, including amortization method (e.g., single payment at end, equal payments over term of loan).
"Compounding Details": details regarding how the loan interest should be compounded, including calculation frequency and rate.
In the present embodiment of this invention, the Fixed Loan deposit element has the following XML definition:
<!-- Loan and Deposit --> <!ELEMENT fixedLoan (tradeDate, startDate, endDate, externalId?, %genericSpecDetails; , %fixedRateDetails; , events? )> <!ATTLIST fixedLoan lender IDREF #REQUIRED borrower IDREF #REQUIRED> <!ELEMENT fixedDeposit (tradeDate, startDate, endDate, externalId?, %genericSpecDetails; , %fixedRateDetails; , events? )> <!ATTLIST fixedDeposit lender IDREF #REQUIRED borrower IDREF #REQUIRED> <!ENTITY % genericSpecDetails "notionalAmount , dayCount , paymentFrequency , rollDate , anchorDate? , paymentCalendar , dateStub , amortizationDetails? , compoundingDetails?"> <!ENTITY % fixedRateDetails " (fixedInterestRate .vertline. fxRate)">
(8) Floating Rate Loan/Deposit
A Floating Rate Loan/Deposit transaction is one in which one party borrows a sum of money from another party at a variable interest rate, generally based on a floating rate index (e.g., London Interbank Offered Rate or "LIBOR"). For example, a Member borrows from a Provider 1 million U.S. Dollars at a variable interest rate for two years.
The Floating Loan/Deposit element represents such a transaction and includes the following sub-elements and attributes:
"Trade Date": the date on which the loan has been agreed to by the parties.
"Start Date": the date on which the loan will begin.
"End Date": the date on which the loan will end.
"Lender": the lender of the loan; this is a reference to a Counterparty element.
"Borrower": the borrower of the loan; this is a reference to a Counterparty element.
"Notional Amount": the loan amount.
"Floating Interest Rate": the floating interest rate.
"First Fixing Rate": the interest rate to be used for the first interest calculation period.
"Day Count": the day-count method to be used for calculating interest.
"Payment Frequency": the frequency of interest/principal payment.
"Roll Date": the specific day each month to be used for payment/settlement of interest/principal.
"Payment Calendar": the calendar to be used to generate payment dates.
"Rate Reset Calendar": the calendar to be used for reference to business holidays for interest rate resets.
"Date Stub": an indicator for an irregular schedule of loan payments.
"Anchor Date": the date to which the payment schedule is anchored, i e., the end date of the first interest period or specific date of first payment; could be the start of the last interest period if dates generated in reverse.
"Amortization Details": details regarding how the loan payment cashflow should be amortized, including amortization method (em, single payment at end, equal payments over term of loan).
"Compounding Details": details regarding how the loan interest should be compounded, including calculation frequency and rate.
In the present embodiment of this invention, the Floating Loan/Deposit element has the following XML definition:
<!-- Loan and Deposit --> <!ELEMENT floatLoan (tradeDate, startDate, endDate, externalId?, %genericSpecDetails; , %floatRateDetails; , events? )> <!ATTLIST floatLoan lender IDREF #REQUIRED borrower IDREF #REQUIRED> <!ELEMENT floatDeposit (tradeDate, startDate, endDate, externalId?, %genericSpecDetails; , %floatRateDetails; , events? )> <!ATTLIST floatDeposit lender IDREF #REQUIRED borrower IDREF #REQUIRED> <!ENTITY % genericSpecDetails "notionalAmount , dayCount , paymentFrequency , rollDate , anchorDate? , paymentCalendar , dateStub , amortizationDetails? , compoundingDetails?"> <!ENTITY % floatRateDetails "floatingInterestRate , firstFixingRate? , rateResetCalendar">
(9) Foreign Exchange Option
A Foreign Exchange Option ("FX Option") transaction is one in which one party, in exchange for a premium payment, acquires from another party the right, but not the obligation, to buy (i.e., exercise a put option) or sell (i.e., exercise a call option) a specified quantity of one currency at a specified price on a specified exercise date or during a specified exercise period. For example, a Member pays a premium to a Provider for the right to exercise an option to purchase 1 million Euro for a set price in U.S. Dollars in three months.
The FX Option element represents such a transaction and includes the following sub-elements and attributes:
"Settlement Date": the date on which the trade will be settled.
"Premium Details": the details of the premium to be paid, as either a percentage ("Premium Percentage") or a specified amount ("Premium Amount"), and the payment date ("Premium Date").
"Expiration Date": the expiration date by which the option must be exercised.
"Dealt Amount": the specified amount of currency to be converted into the currency to be bought or sold upon exercise of the option.
"Settled Amount": the amount of currency to be bought or sold upon exercise of the option.
"Delivery Date": the date on which either the cash difference or the underlying contract nominal amount must be exchanged upon exercise of the option.
"Delivery Mode": indicator of whether the cash difference ("Cash") or the underlying contract nominal amount ("Physical") must be exchanged upon exercise of the option.
"Option Type": the type of option to be exercised ("Put" or "Call").
"Volatility": the definition of the volatility surface used to calculate the option premium.
"Buyer": the buyer of the option to be exercised; this is a reference to a Counterparty element.
"Writer": the recipient of the premium for the option to be exercised; this is a reference to a Counterparty element.
In the present embodiment of this invention, the FX Option element has the following XML definition:
<!-- FX Option --> <!ENTITY % fxOptionSpec "tradeDate , settlementDate , externalId? , premiumDetails , expirationDate , deliveryDate , optionType , dealtAmount , strikeRate? , settledAmount , deliveryMode , volatility?"> <!ELEMENT fxOption (%fxOptionSpec; )> <!ATTLIST fxOption buyer IDREF #REQUIRED writer IDREF #REQUIRED> <!ELEMENT optionType (call .vertline. put )> <!ELEMENT deliveryMode (physical .vertline. cash )> <!ELEMENT volatility (#PCDATA )> <!ELEMENT call (#PCDATA )> <!ELEMENT put (#PCDATA )> <!ELEMENT physical EMPTY> <!ELEMENT cash EMPTY>
(10) Foreign Exchange Swap
A Foreign Exchange Swap ("FX Swap") transaction is one in which two parties exchange periodic payment streams, each in a different currency. The first payment stream is delivered at the beginning of the transaction period and the second payment is delivered at the end of the transaction period. The payments may be based upon a specified interest rate. For example, a Member buys a payment stream of 3 million Euro from a Provider in exchange for a payment stream of 1 million U.S. Dollars to be paid six months after the first payment stream.
The FX Swap element represents such a transaction and includes the following sub-elements and attributes:
"Trade Date": the date on which the trade has been agreed to by the parties.
"Near Leg Value Date": the date on which the final payment of the first leg (the "Near Leg") of the swap will be paid.
"Far Leg Value Date": the date on which the final payment of the second leg (the "Far Leg") of the swap will be paid.
"Notional Amount": the amount used as the basis for calculating the payment streams to be exchanged.
"Near Leg Settled Amount": the amount that will be paid under the Near Leg; alternative to Near Leg FXRate.
"Near Leg FXRate": the foreign exchange rate of the Near Leg; alternative to Near Leg Settled Amount.
Far Leg Settled Amount": the amount that will be paid under the Far Leg; alternative to Far Leg FXRate.
Far Leg FXRate": the foreign exchange rate of the Far Leg; alternative to Far Leg Settled Amount.
In the present embodiment of this invention, the FX Swap element has the following XML definition:
<!-- FX Swap --> <!ENTITY % fxSwapSpec "tradeDate , externalId? , nearLegValueDate , farLegValueDate , notionalAmount , (nearLegFxRate .vertline. nearLegSettledAmount ) , (farLegFXRate .vertline.farLegSettledAmount )"> <!ELEMENT FXSwap (%fxSwapSpec; )> <!ELEMENT nearLegValueDate (#PCDATA )> <!ELEMENT farLegValueDate (#PCDATA )> <!ELEMENT nearLegFXRate (fxRate )> <!ELEMENT farLegFXRate ( fxRate )> <!ELEMENT nearLegSettledAmount (%currencyAmount; )> <!ATTLIST nearLegSettledAmount %payReceiver;> <!ELEMENT farLegSettledAmount (%currencyAmount; )> <!ATTLIST farLegSettledAmount %payReceiver;>
(11) Cross-Currency Fixed-Fixed Swap
A Cross-Currency Fixed-Fixed Swap is a type of interest rate swap in which two parties exchange periodic payment streams based on fixed interest rates each in a different currency.
The Cross-Currency Fixed-Fixed Swap element represents such a transaction and includes the following sub-elements and attributes:
"Trade Date": the date on which the trade has been agreed to by the parties.
"Start Date": the date on which the exchanged payments will begin.
"End Date": the date on which the exchanged payments will end.
"Notional Amount": the amount used as the basis for calculating the payment streams to be exchanged.
"Fixed Leg Details": the details of the fixed interest payments; separate information for each of the two fixed legs.
"Events": the various payment and calculation events in the swap transaction, including cash payment, principal payment, interest payment, interest calculation, compound interest calculation, and interest rate reset information.
In the present embodiment of this invention, the Cross-Currency Fixed-Fixed Swap element has the following XML definition:
<!-- Cross Currency Fixed Fixed Swap --> <!ELEMENT crossCurrencyFixedFixedSwap (%tenor.elements; , fixedLegDetails , fixedLegDetails , events?)> <!ATTLIST crossCurrencyFixedFixedSwap notionalAmount (Yes .vertline. No ) #REQUIRED>
(12) Cross-Currency Float-Float Swap
A Cross-Currency Float-Float Swap is a type of interest rate swap in which two parties exchange periodic payment streams based on a floating rate index (e.g., LIBOR), each in a different currency.
The Cross-Currency Float-Float Swap element represents such a transaction and includes the following sub-elements and attributes:
"Trade Date": the date on which the trade has been agreed to by the parties.
"Start Date": the date on which the exchanged payments will begin.
"End Date": the date on which the exchanged payments will end.
"Notional Amount": the amount used as the basis for calculating the payment streams to be exchanged.
"Float Leg Details": the details of the floating interest payments; separate information for each of the two fixed legs.
"Events": the various payment and calculation events in the swap transaction, including cash payment, principal payment, interest payment, interest calculation, compound interest calculation, and interest rate reset information.
In the present embodiment of this invention, the Cross-Currency Float-Float Swap element has the following XML definition:
<!-- Cross Currency Float Float Swap --> <!ELEMENT crossCurrencyFloatFloatSwap (%tenor.elements; , floatLegDetails , floatLegDetails , events?)> <!ATTLIST crossCurrencyFloatFloatSwap notionalAmount (Yes .vertline. No ) #REQUIRED>
(13) Cross-Currency Fixed-Float Swap
A Cross-Currency Fixed-Float Swap is a type of interest rate swap in which two parties exchange periodic payment streams, where one payment stream is based on a fixed interest rate and the other payment stream is based on a floating rate index (e.g., LIBOR), each in a different currency.
The Cross-Currency Fixed-Float Swap element represents such a transaction and includes the following sub-elements and attributes:
"Trade Date": the date on which the trade has been agreed to by the parties.
"Start Date": the date on which the exchanged payments will begin.
"End Date": the date on which the exchanged payments will end.
"Notional Amount": the amount used as the basis for calculating the payment streams to be exchanged.
"Fixed Leg Details": the details of the fixed interest payments for the fixed leg.
"Float Leg Details": the details of the floating interest payments for the floating leg.
"Events": the various payment and calculation events in the swap transaction, including cash payment, principal payment, interest payment, interest calculation, compound interest calculation, and interest rate reset information.
In the present embodiment of this invention, the Cross-Currency Fixed-Float Swap element has the following XML definition:
<!-- Cross Currency Fixed Float Swap --> <!ELEMENT CrossCurrencyFixedFloatSwap (%tenor.elements; , fixedLegDetails, floatLegDetails, events?)> <!ATTLIST crossCurrencyFixedFloatSwap notionalAmount (Yes .vertline. No ) #REQUIRED>
(14) Forward Rate Agreement
A Forward Rate Agreement transaction is one in which one party buys a single floating rate payment in exchange for a single fixed rate payment. The fixed rate payment amount is determined by applying a fixed rate of interest to the notional amount of the transaction, while the floating rate payment amount is determined by sampling the value of a specified floating rate option on a specified date and applying the sampled rate to the notional amount. The parties settle the Forward Rate Agreement by netting the effects of the two payments into a single payment made by one or the other of the parties: if the floating rate amount due is greater than the fixed rate amount due, then the floating rate payer pays the excess to the fixed rate payer; conversely, if the fixed rate amount due is greater than the floating rate amount due, then the fixed rate payer pays the excess to the floating rate payer. Settlement occurs at the beginning of the transaction subject to future discounting (i.e., payment of difference in fixed and floating rates).
The Forward Rate Agreement element represents such a transaction and includes the following sub-elements and attributes:
"Trade Date": the date on which the trade has been agreed to by the parties.
"Settlement Date": the date on which payment settlement will be completed.
"Start Date": the date on which the transaction will begin.
"End Date": the date on which the transaction will end.
"Adjusted Start Date": the date on which the transaction will begin, adjusted for holidays.
"Adjusted End Date": the date on which the transaction will end, adjusted for holidays.
"Notional Amount": the amount used as the basis for calculating the payments to be exchanged.
"Fixed Interest Rate": the fixed interest rate for the fixed rate payment.
"Interest Index": the details of the floating interest index to be used for the floating rate payment.
"Day Count": the day-count method to be used for calculating interest.
"Payment Frequency": the frequency of interest/principal payment.
"Roll Date": the specific day each month to be used for payment/settlement of interest/principal.
"Roll Convention": the convention to be used for rolling the payment dates in the event the date falls on a holiday.
"Holiday Calendar": the calendar to be used for reference to business holidays.
"Fixing Date": the date on which the rate to be used for settlement is fixed.
"Rate Reset Calendar": the calendar to be used for determining the dates on which to reset floating interest rates.
"Buyer": the buyer of the floating rate payment; this is a reference to a Counterparty element.
"Seller": the seller of the floating rate payment; this is a reference to a Counterparty element.
"Premium Details": the details of the premium to be paid, as either a percentage ("Premium Percentage") or a specified amount ("Premium Amount"), and the payment date ("Premium Date").
In the present embodiment of this invention, the Forward Rate Agreement element has the following XML definition:
<!-- Forward Rate Agreement --> <!ELEMENT forwardRateAgreement (tradeDate, settlementDate?, startDate, endDate, externalId?, adjustedStartDate, adjustedEndDate , notionalAmount, dayCount, rollConvention, rollDate, holidayCalendar, fixedInterestRate, interestIndex, fixingDate, rateResetCalendar, premiumDetails? )> <!ATTLIST forwardRateAgreement buyer IDREF #REQUIRED> <!ATTLIST forwardRateAgreement seller IDREF #REQUIRED> <!ELEMENT adjustedStartDate (#PCDATA )> <!ELEMENT adjustedEndDate (#PCDATA )> <!ELEMENT fixingDate (#PCDATA )>
(15) Customized Trade
In addition to the financial transactions represented by the elements described above, the present embodiment of this invention supports customized trades and transactions created by Members and/or Providers, so long as such transactions are permitted by applicable law. Such customized transactions might include hybrid trades, where one or more aspects of one type of trade are combined with those of another. For example, a party might structure a foreign exchange "swaption" in which a stream of periodic payments in one currency is exchanged for the right to buy a specified quantity of another currency at a specified price on a specified date.
FinXML enables the representation of customized transactions through the combination of elements that comprise different types of transactions. Using FinXML, a party can specify the element fields and values that it wishes to comprise the particular customized transactions. The Customized Trade element represents such a transaction and includes the following sub-elements and attributes:
"Field Name": a particular component included in the transaction; separate information for each component; paired with "Field Value".
"Field Value": the value of a particular component included in the transaction;
separate information for each component; paired with "Field Name".
"Buyer": the buyer of the customized trade; this is a reference to a Counterparty element.
"Seller": the seller of the customized trade; this is a reference to a Counterparty element.
In the present embodiment of this invention, the Customized Trade element has the following XML definition:
<!-- Customized Trade --> <!ELEMENT customizedTrade ( (fieldName, fieldValue ) * )> <!ATTLIST customizedTrade buyer IDREF #REQUIRED> <!ATTLIST customizedTrade seller IDREF #REQUIRED> <!ELEMENT fieldName (#PCDATA )> <!ELEMENT fieldValue (#PCDATA )>
(c) Trade Specific Elements
In the present embodiment of this invention, FinXML includes a number of elements that represent details common to one or more of the Trade Type elements 530. Such elements may also be included in customized trades.
(1) Generic Trade Details
Generic trade details include information relating to notional amounts and interest rate, amortization, and compounding calculations that are common to different types of trades. The "Generic Spec Details" element represents such information and includes the following sub-elements and attributes:
"Notional Amount": the transaction amount.
"Day Count": the day-count method to be used for calculating interest.
"Payment Frequency": the frequency of interest/principal payment (e.g., monthly, quarterly, semi-annually).
"Roll Date": the specific day each month to be used for payment/settlement of interest/principal.
"Anchor Date": the date to which the payment schedule is anchored, i.e., the end date of the first interest period or specific date of first payment.
"Payment Calendar": the calendar to be used for reference to business holidays.
"Date Stub": an indicator for a schedule of loan payments in which the payment period differs (i.e., is offset from the start of ) from all other payment periods.
"Amortization Details": details regarding how the loan payment cashflow should be amortized, including amortization method (e.g., single payment at end, equal payments over term of loan).
"Compounding Details": details regarding how the loan interest should be compounded, including calculation frequency and rate.
In the present embodiment of this invention, the Generic Spec Details element has the following XML, definition:
<!ENTITY % genericSpecDetails "notionalAmount , dayCount , paymentFrequency , rollDate , anchorDate? , paymentCalendar , dateStub , amortizationDetails? , compoundingDetails?">
(2) Fixed Rate Details
Fixed rate details include information relating to fixed interest rates. The "Fixed Spec Details" element represents such information and includes the following sub-elements and attributes:
"Fixed Interest Rate": the fixed interest rate.
"FX Rate": the foreign exchange rate at which a trade will be executed.
In the present embodiment of this invention, the Fixed Spec Details element has the following XML definition:
<!ENTITY % fixedSpecDetails "fixedInterestRate .vertline. fxRate">
(3) Floating Rate Details
Floating rate details include information relating to floating interest rates that are based on a floating rate index (e.g., LIBOR). The "Floating Spec Details" element represents such information and includes the following sub-elements and attributes:
"Floating Interest Rate": the floating interest rate. "First Fixing Rate": the interest rate to be used for the first interest calculation period.
"Rate Reset Calendar": the calendar to be used for reference to business holidays for interest rate resets.
In the present embodiment of this invention, the Floating Spec Details element has the following XML definition:
<!ENTITY % floatingSpecDetails "floatingInterestRate, firstFixingRate?, rateResetCalendar">
(4) Fixed Leg Details
A number of the transactions described above include multiple "legs," where each leg is a series of payments or cashflows. Such legs can be "fixed" or "floating."
A "fixed leg" is a payment stream based on a fixed interest rate. The "Fixed Leg Details" elements represents information regarding the fixed leg of a trade and includes generic trade details (described above in "Generic Spec Details" element), fixed rate details (described above in "Fixed Spec Details" element), financial events details (described below in "Events" element), and the following additional sub-elements and attributes:
"Leg ID": identifier of a particular leg of a trade.
"Payer": the payer of the fixed leg in a trade; this is a reference to a Counterparty element.
"Receiver": the recipient of the proceeds of the fixed leg in a trade; this is a reference to a Counterparty element.
In the present embodiment of this invention, the Fixed Leg Details element has the following XML definition:
<!ELEMENT fixedLegDetails (%genericSpecDetails; , %fixedRateDetails; , events? )> <!ATTLIST fixedLegDetails legID ID #REQUIRED > <!ATTLIST fixedLegDetails payer IDREF #REQUIRED > <!ATTLIST fixedLegDetails receiver IDREF #REQUIRED >
(5) Floating Leg Details
A "floating leg" is a payment stream based on a floating interest rate. The "Float Leg Details" elements represents information regarding the floating leg of a trade and includes generic trade details (described above in "Generic Spec Details" element), floating rate details (described above in "Float Spec Details" element), financial event details (described below in "Events" element), and the following additional sub-elements and attributes:
"Leg ID": identifier of a particular leg of a trade.
"Payer": the payer of the floating leg in a trade; this is a reference to a Counterparty element.
"Receiver": the recipient of the proceeds of the floating leg in a trade; this is a reference to a Counterparty element.
In the present embodiment of this invention, the Float Leg Details element has the following XML definition:
<!ELEMENT floatLegDetails (GenericSpecDetails; , %floatRateDetails; , event ,> <!ATTLIST floatLegDetails legID ID #REQUIRED > <!ATTLIST floatLegDetails payer IDREF #REQUIRED > <!ATTLIST floatLegDetails receiver IDREF #REQUIRED >
(d) Financial Event Elements
In the present embodiment of this invention, FinXML includes a number of elements that represent details common to certain Trade Type elements 530, including customized trades, that relate to optional events during the life cycle of a trade such as premium payment, interest payment, contingent payment, and interest calculation. "Events" element 900, shown in FIG. 6, describes such information and includes the following sub-elements: "Cash Payment" 910, "Principal Payment" 920, "Interest Payment" 930, "Interest Calculation" 940, "Compound Interest Calculation" 950, and "Contingent Payment" 960.
In the present embodiment of this invention, Events element 900 has the following XML definition:
<!ELEMENT events ((cashPayment .vertline. principalPayment .vertline. interestPayment .vertline. contingentPayment .vertline. interestCalculation .vertline. compoundInterestCalculation )+ )> <!ATTLIST events id ID #IMPLIED >
(1) Cash Payment
Cash Payment element 910 describes information relating to cash payments to be made as a part of certain trades, and includes the following sub-elements and attributes:
"Currency": the currency of the cash payment.
"Amount": the amount of the cash payment.
"Payment Date": the date on which the cash payment is to be made.
"ID": the identifier of the particular cash payment.
"Type": the indicator of type of payment (e.g., "Premium" or "Fees").
"Payer": the payer of the cash payment; this is a reference to a Counterparty element.
"Receiver": the recipient of the cash payment; this is a reference to a Counterparty element.
In the present embodiment of this invention, Cash Payment element 910 has the following XML definition:
<!ELEMENT cashPayment (currency, amount, paymentDate )> <!ATTLIST cashPayment id ID #REQUIRED type ( Premium .vertline. Fees ) #REQUIRED payer IDREF #REQUIRED receiver IDREF #REQUIRED >
(2) Principal Payment
Principal Payment element 920 describes information relating to principal payments to be made as a part of certain trades, and includes the following sub-elements and attributes:
"Currency": the currency of the principal payment.
"Amount": the amount of the principal payment.
"Payment Date": the date on which the principal payment is to be made.
"ID": the identifier of the particular principal payment.
"Payer": the payer of the principal payment; this is a reference to a Counterparty element.
"Receiver": the recipient of the principal payment; this is a reference to a Counterparty element.
In the present embodiment of this invention, Principal Payment element 920 has the following XML definition:
<!ELEMENT principalPaymentcurrency, amount, paymentDate )> <!ATTLIST principalPayment id ID #REQUIRED payer IDREF #REQUIRED receiver IDREF #REQUIRED >
(3) Interest Payment
Interest Payment element 930 describes information relating to interest payments to be made as a part of certain trades, and includes the following sub-elements and attributes:
"Currency": the currency of the interest payment.
"Amount": the amount of the interest payment.
"Payment Date": the date on which the interest payment is to be made.
"Start Date": the start date of the interest period to which the interest payment pertains.
"End Date": the end date of the interest period to which the interest payment pertains.
"ID": the identifier of the particular interest payment.
"Payer": the payer of the interest payment; this is a reference to a Counterparty element.
"Receiver": the recipient of the interest payment; this is a reference to a Counterparty element.
"Interest Type": the indicator of type of interest payment (e.g., "Coupon", "Swap", "Loan", "Deposit", or "Other").
"Calculations": the identifier of the particular interest calculation periods.
In the present embodiment of this invention, Interest Payment element 930 has the following XML definition:
<!ELEMENT interestPayment (currency, paymentDate, startDate, endDate )> <!ATTLIST interestPayment id ID #REQUIRED payer IDREF #REQUIRED receiver IDREF #REQUIRED interestType (Coupon .vertline. Swap .vertline. Loan .vertline. Deposit .vertline. Other) #IMPLIED calculations IDREFS #REQUIRED >
(4) Contingent Payment
Contingent Payment element 960 describes information relating to contingent payments to be made in the settlement of certain trades after the exercise of an option, and includes the following sub-elements and attributes:
"Underlying Amount": the amount of the option-underlying instrument.
"Settlement Amount": the amount to be paid in settlement of the exercise of the option in return for the underlying instrument.
"Expiration Date": the date of expiry of the option.
"Exercise Begin Date": the first date on which the option may be exercised.
"Exercise End Date": the last date on which the option may be exercised.
"Exercise Rule": the rule governing normal exercise of the option (e.g., "American"--the option may be exercised on any day within a given period; "European"--the option may only be exercised on the option expiration date).
"Exercise Condition": any conditions that must be met to permit exercise of the option (e.g., the 3-month LIBOR rate must be greater than 4.5% on the exercise date).
"Volatility": the volatility value to be used when valuing the option.
"ID": the identify of the particular interest payment.
"Payer": the party responsible for delivering the option underlying instrument; this party will receive the settlement amount in exchange for the option underlying instrument.
"Receiver": the recipient of the option-underlying instrument; this party will pay the settlement amount as the price for exercising the option.
"Option Type": the nature of the option (e.g., "Call"--an option to buy the underlying instrument at the exercise price; "Put"--an option to sell the underlying instrument at the exercise price).
"Delivery Type": an indicator describing whether the Payer will physically deliver the option underlying instrument to the Receiver or, alternatively, that the transaction will be settled for cash where the option writer will, upon exercise, pay to the option holder the difference between the value of the underlying instrument and the exercise price.
In the present embodiment of this invention, Contingent Payment element 960 has the following XML definition:
<!ELEMENT contingentPayment (underlyingAmount, settlementAmount, expirationDate, exerciseBeginDate, exerciseEndDate, exerciseRule, exerciseCondition, volatility)> <!ATTLIST contingentPayment id ID #REQUIRED payer IDREF #REQUIRED receiver IDREF #REQUIRED optionType (call .vertline. put)#REQUIRED deliveryType (deliverable .vertline. non-deliverable) #REQUIRED> <!ELEMENT underlyingAmount (currency, amount)> <!ELEMENT settlementAmount (currency, amount)> <!ELEMENT exerciseBeginDate (#PCDATA)> <!ELEMENT exerciseEndDate (#PCDATA)> <!ELEMENT exerciseRule (#PCDATA)> <!ELEMENT exerciseCondition (#PCDATA)> <!ELEMENT volatility (#PCDATA)>
(5) Interest Calculation
Interest Calculation element 940 describes information relating to an interest amount calculated for a given period within a particular interest payment, and includes the following sub-elements and attributes:
"ID": the identifier of the particular interest calculation period.
"Resets": the identifier of the particular rate reset series.
"Notional Amount": the amount involved in the interest calculation.
"Calculation Date": the date on which the interest calculation is performed.
"Start Date": the start date of the interest period for which the interest calculation is to be performed.
"End Date": the end date of the interest period for which the interest calculation is to be performed.
"Amount": the calculated interest amount.
"Day Count": the day-count method to be used for performing the interest calculation.
"%InterestRate.Elements": definition of the type of interest rate involved (e.g., "Fixed" or "Floating").
In the present embodiment of this invention, Interest Calculation element 940 has the following XML definition:
<!ELEMENT interestCalculation ((%interestRate.elements; )?, notionalAmount, calculationDate, startDate, endDate, amount?, dayCount )> <!ATTLIST interestCalculation id ID #REQUIRED resets IDREFS #IMPLIED >
(6) Compound Interest Calculation
Compound Interest Calculation element 950 describes information relating to a compound interest amount calculated for a given period within a particular interest payment, and includes the following sub-elements and attributes:
"ID": the identifier of the particular interest calculation period.
"Rate": the identifier of the particular interest rate.
"Resets": the identifier of the particular rate reset series.
"Notional Amount": the amount involved in the compound interest calculation.
"Calculation Date": the date the compound interest calculation is performed.
"Start Date": the start date of the interest period for which the compound interest calculation is to be performed.
"End Date": the end date of the interest period for which the compound interest calculation is to be performed.
"Amount": the calculated compound interest amount.
"%InterestRate.Elements": definition of the type of interest rate involved (e.g., "Fixed" or "Floating").
In the present embodiment of this invention, Compound Interest Calculation element 950 has the following XML definition:
<!ELEMENT compoundInterestCalculation ((fixedInterestRate .vertline. floatingInterestRate)?, calculationDate, startDate, endDate, amount)> <!ATTLIST compoundInterestCalculation id ID #REQUIRED resets IDREF #REQUIRED rate IDREF #IMPLIED>
(e) Calculation Elements
In the present embodiment of this invention, FinXML includes a number of elements that represent details regarding calculations to be performed in certain Trade Type elements 530, including customized trades. These elements relate to compounding, amortization, and calculation frequency.
(1) Compounding Details
The "Compounding Details" element describes information relating to any compounding calculations that need to be performed in a particular transaction. This typically arises when the actual interest payment frequency is less than the interest calculation frequency. For example, if interest is calculated every three months but paid every 6 months, then the interest calculated at the end of the 3-month period would be compounded and paid along with the interest calculated for the fourth through sixth months. The Compounding Details element includes the following sub-element:
"Calculation Frequency": the frequency at which interest calculations should be performed in a multi-period transaction.
In the present embodiment of this invention, the Compounding Details element has the following XML definition:
<!ELEMENT compoundingDetails (calculationFrequency)>
(2) Amortization Details
The "Amortization Details" element describes information relating to any amortization calculations that need to be performed in a particular swap transaction. If the amortization method is defined to be "bullet", principal will be paid in one lump sum at maturity, whereas under "equal" amortization, principal will be paid in equal installments during the life of the swap transaction. The Amortization Details element includes the following sub-elements and attributes:
"Amortization Frequency": the frequency at which amortization will be performed in a particular transaction (e.g., semi-annual or annual).
"Amortization Method": the amortization method (e.g., "bullet" or "equal").
In the present embodiment of this invention, the Amortization Details element has the following XML definition:
<!ELEMENT amortizationDetails (amortizationFrequency )> <!ATTLIST amortizationDetails amortizationMethod %amortMethod; #REQUIRED>
(3) Calculation Frequency
The "Calculation Frequency" element describes information relating to the frequency of a particular calculation to be performed. The Calculation Frequency element includes the following sub-elements and attributes:
"Convention": the particular calculation methodology based on the market convention (e.g., "IMM", "FRN", "Eurodollar", or "Normal").
"End of Month": indicator of whether the particular calculation should be moved to the end of the month.
"Term": the period of time for a single calculation period (e.g., 3-months, 6-months, etc.).
In the present embodiment of this invention, the Calculation Frequency element has the following XML definition:
<!ELEMENT calculationFrequency (term )> <!ATTLIST calculationFrequency convention (IMM .vertline. FRN .vertline. Eurodollar .vertline. Normal ) `Normal` endOfMonth (Yes .vertline. No) #REQUIRED >
(4) Payment Frequency
The "Payment Frequency" element describes information relating to the frequency of a particular payment to be made. The Payment Frequency element includes the following sub-elements and attributes:
"Convention": the particular calculation methodology based on the market convention (e.g., "IMM", "FRN", "Eurodollar", or "Normal").
"End of Month": indicator of whether the particular payment should be moved to the end of the month.
"Term": the term of the interest index used in calculating the particular payment (e.g., 3-months, 6-months, etc.).
In the present embodiment of this invention, the Payment Frequency element has the following XML definition:
<!ELEMENT paymentFrequency (term )> <!ATTLIST paymentFrequency convention (IMM .vertline. FRN .vertline. Eurodollar .vertline. Normal ) `Normal` endOfMonth (Yes .vertline. No ) #REQUIRED >
(5) Amortization Frequency
The "Amortization Frequency" element describes information relating to the frequency of a particular amortization to be performed. The Amortization Frequency element includes the following sub-elements and attributes:
"Convention": a particular calculation methodology based on the market convention (e.g., "IMM", "FRN", "Eurodollar", or "Normal").
"End of Month": indicator of whether the particular amortization should be moved to the end of the month.
"Term": the period of time for a single amortization calculation period (e.g., 3-months, 6-months, etc.).
In the present embodiment of this invention, the Payment Frequency element has the following XML definition:
<!ELEMENT paymentFrequency (term )> <!ATTLIST paymentFrequency convention (IMM .vertline. FRN .vertline. Eurodollar .vertline. Normal ) `Normal` endOfMonth (Yes .vertline. No) #REQUIRED >
ii. Reference Data
Reference data describes the profile information specific to Members and Providers that will be referenced in any transactions engaged in by such parties. The FinXML syntax represents this profile information with the following elements: "Organization" element 710 (FIG. 4), "Contact Information" element 730 (FIG. 4), "Address" element 765 (FIG. 4), "Credit Rating" element 805 (FIG. 4), "Legal Entity" element 605 (FIG. 5), and "Book" element 625 (FIG. 5).
(a) Organization
Organization element 710 (as shown in FIG. 4) describes the organizational information regarding a Disclosed Party 705. Organization element 710 includes the following sub-elements and attributes:
"Organization Name" 715: the full name of the organization.
"Organization Short Name" 720: the short name of the organization.
"Address" 725: the address of the organization.
In the present embodiment of this invention, Organization element 710 has the following XML definition:
<!ELEMENT organization (organizationShortName, organizationName, address )> <!ELEMENT organizationShortName (#PCDATA )> <!ELEMENT organizationName (#PCDATA )>
(b) Contact Information
Contact Information element 730 (as shown in FIG. 4) describes the information necessary to contact a Disclosed Party 705 during the transaction process. Contact Information element 730 includes the following sub-elements and attributes:
"Contact Name" 735: name of the specific contact within the party.
"Contact ID": the identifier of the particular contact.
"Telephone" 740: the telephone details of the party.
"Fax" 745: the fax details of the party.
"Telex" 750: the telex details of the party.
"Email" 755: the electronic mail details of the party.
"URL" 760: the Uniform Resource Locator details of the party.
In the present embodiment of this invention, Contact Information element 730 has the following XML definition:
<!ELEMENT contactInformation (contactName, (telephone .vertline. fax .vertline. telex .vertline. email .vertline. url)* )> <!ATTLIST contactInformation contactID #REQUIRED default (Y .vertline. N ) #REQUIRED > <!ELEMENT contactName (#PCDATA )> <!ELEMENT telex (#PCDATA )> <!ELEMENT telephone (#PCDATA )> <!ELEMENT fax (#PCDATA )> <!ELEMENT email (#PCDATA )> <!ELEMENT URL (#PCDATA )>
(c) Address
Address element 765 (as shown in FIG. 4) describes the registered address information of the Disclosed Party 705. Address element 765 includes the following sub-elements and attributes:
"Address1" 770: the first line of the street address of the party.
"Address2" 775: the second line of the street address of the party.
"City" 780: the city of the party.
"State-Province-County" 785: the state, province, and/or county of the party.
"Zip Postal Code" 790: the zip or postal code of the party.
"Country" 795: the country of the party.
"SWIFT Address" 800: the Bank-identifier Code ("BIC") of the party (as assigned by S.W.I.F.T. sc).
In the present embodiment of this invention, Address element 765 has the following XML definition:
<!ELEMENT address (address1, address2, city, stateProvinceCounty, zipPostalCode, country, swiftAddress?)> <!ELEMENT address1 (#PCDATA )> <!ELEMENT address2 (#PCDATA )> <!ELEMENT city (#PCDATA )> <!ELEMENT stateProvinceCounty (#PCDATA )> <!ELEMENT zipPostalCode (#PCDATA )> <!ELEMENT country (#PCDATA )> <!ELEMENT swiftAddress (#PCDATA )>
(d) Credit Rating
Credit Rating element 805 (as shown in FIG. 4) describes the details of the credit rating of the Disclosed Party 705 or Undisclosed Party 835, as rated by standard credit rating agencies. Credit Rating element 805 includes the following sub-elements and attributes:
"Agency" 810: the name of the credit rating agency that provided the credit rating of the party.
"Rating" 815: the actual rating value (e.g., AAA, BB, ed.) of the party provided by the credit rating agency.
"Country" 820: the country to which the party is assigned for purposes of the credit rating by the credit rating agency.
"Industry Group" 825: the industry group to which the party is assigned for purposes of the credit rating by the credit rating agency.
"Industry" 830: the industry to which the party is assigned for purposes of the credit rating by the credit rating agency.
In the present embodiment of this invention, Credit Rating element 805 has the following XML definition:
<!ELEMENT creditRating (agency, rating, country, industryGroup, industry )> <!ELEMENT agency (#PCDATA )> <!ELEMENT rating (#PCDATA )> <!ELEMENT name (#PCDATA )> <!ELEMENT industryGroup (#PCDATA )> <!ELEMENT industry (#PCDATA )>
(e) Legal Entity
Legal Entity element 605 (as shown in FIG. 5) describes the details of any legal entities (e.g., subsidiaries or affiliate companies) associate with an Internal Party 600 (as shown in FIG. 5). Legal Entity element 605 includes the following sub-elements and attributes:
"ID" 608: the identifier of the legal entity.
"Short Name" 610: the short name of the legal entity.
"Description" 615: the description of the legal entity.
"Parent" 620: the name of the parent organization of the legal entity.
In the present embodiment of this invention, Legal Entity element 605 has the following XML definition:
<!ELEMENT legalEntity (shortName, description, parent)> <!ATTLIST legalEntity id ID #IMPLIED>
(f) Trading Book
Book element 625 (as shown in FIG. 5) describes the details of any internal trading book associated with the transaction by a party. Book element 625 includes the following sub-elements and attributes:
"ID": the identifier of the trading book.
"Type": the type of trading book.
"Short Name" 630: the short name of the trading book.
"Name" 635: the full name of the trading book.
"Description" 640: the description of the trading book.
"Reporting Currency" 645: the reporting currency of the trading book.
In the present embodiment of this invention, Book element 625 has the foll