Global derivatives markets continue to enjoy strong growth. The Bank for International Settlements Quarterly Review for June 2003 notes "Data from the semiannual BIS survey on positions in global OTC derivatives markets at the end of December 2003 show there was an exceptionally sharp increase in gross market values, up by 43% to $6.4 trillion."

The International Swaps and Derivatives Association (ISDA) is the global trade association representing participants in the privately negotiated derivatives industry, a business covering swaps and options across all asset classes. One of its most notable achievements has been the formation of a standardized document architecture that has greatly facilitated market evolution.

As a natural next step in market evolution, ISDA is working with market participants to express the hardcopy document architecture in softcopy form to allow increasing volumes in the derivatives markets to be handled with greater accuracy and lower cost, through extensive use of automation. As part of this process, ISDA formally adopted FpML.org, the organization that developed Financial products Mark-Up Language, a business information exchange standard for electronic dealing and processing of financial derivatives instruments. Based on XML, FpML establishes the industry protocol for sharing information and dealing in, financial swaps, derivatives, and structured products (see Figure 1).

 

FpML 4.0 provides XML Schema objects to describe the majority of derivative contracts by volume, derived directly from the legal framework established by ISDA, and is made freely available by them under public license. ISDA does not provide "off-theshelf" support in the public standard; it is straightforward to create private extensions, for product description or workflow reasons.

These XML Schema objects are composed to form different distinct document prototypes, such as a Trade Confirmation. This document-centric approach allows us to form document instances that represent both the full economics of the deal (or optionally, a reference to it) and the workflow state the document instance is currently in.

Web services provide an ideal interface to services that operate on document instances given the support provided for structure, data typing, and platform neutrality. Support can be provided at all stages of process flow (see Figure 2).

 

Several services are outlined below, some of which focus on the theme of traversal, either locally within the FpML document instance, or remotely to related document instances, such as legal FpML document instances. Techniques for traversal are well established within the rich heritage of SGML, and by applications such as Boeing Data Renaissance Suite 4, which are applied to critical systems. Such services allow all elements of the trade "package" to be traversed, most commonly for software automation, but also for the benefit of end users who may need to inspect legal definitions or applicable business rules.

Other services fit more directly into a conventional framework of interactive Web application technology, such as exposing services using JAX-RPC, to support interaction between components, both within and without the organization. These more typically operate on the document to perform a business action, resulting in a workflow state transition, as opposed to traversal services.