Design Review Session: Physical Commodities

FpML Commodities Working Group

Scope

Commodity Underlyer Vanilla Fixed/Floating Swaps Basis Swaps and Options (European,

American, and Asian style) "Shaped" Swaps/Basis Swaps and

strips of Options were also covered. Physically-settled trades

Swaps Bullion Forwards

FpML 4.5

Current work (expected FpML 4.6 WD 3)

Physically-settled trades

• Asset support:– Natural Gas– Oil– Electricity– Bullion (for Forwards)

• The following structures vary between all these commodities:– Delivery– Product– Delivery periods– Quantities

Asset Support: detailsSwaps/Forwards Options

North America Europe/Other All

Crude Oil and Refined Products

(Yes)ISDA/Leap

Pipeline Title Transfer

No Some analysis on Leap

NWE barges started

No

Natural Gas YesISDA/NAESB

YesISDA/EFET

No

Electricity YesISDA/EEI

Further validation required for WSPP

(Yes UK)ISDA/GTMA

Further validation required for EFET

No

Bullion YesISDA

YesISDA

No

Coal No No No

Yes – supported(Yes) – partially supportedNo – not supportedISDA/GTMA - supported documentation (e.g. ISDA Master Agreement and Commodity Definitions or Grid Trade Master Agreement)

Product representation

• New physical leg, adding it within the existing commoditySwap product element– Fixed price transaction = xxxPhysicalLeg +

fixedLeg– Floating price transaction = xxxPhysicalLeg +

floatingLeg

• New commodityForward product element– fixedLeg + bullionPhysicalLeg

Note: xxx gets replaced by oil, gas, electricity, etc.

commoditySwap

oilPhysicalLeg-deliveryPeriods

oilPhysicalLeg-product

oilPhysicalLeg-delivery

oilPhysicalLeg-deliveryQuantity

Schema Review

• oilPhysicalLeg

• gasPhysicalLeg

• electricityPhysicalLeg

commodityForward

Schema Review

• bullionPhysicalLeg

Open Questions

• Naming of product element: oilProduct, gasProduct, etc. instead?

• Use of xsd:choice for picking the appropriate legs

• Delivery offsets for electricity are different than regular offsets (prevailing time): businessCenterTime or commodity specific structure for this?