Messaging Patterns

Proposal to change FpML Messaging

Content

• Correlation• Acknowledgements• Exception modelling• Advice vs. Notification• Corrections• On behalf of• Trade Roles• Trade vs. Contract• Messaging Gaps

Correlation

• Confusion in the current model on how to identify the context in which the messages will be interpreted– conversationId

• Optional• Not well-defined

– eventId• Optional• Not in all messages (before 4.2)• Forces common content for all messages

Correlation: solution (I)

• correlationId– Applied to all messages– Allocated by the initiator of the business

process

Correlation-Sequencing

• In a long running operation message ordering is important

• Each message’s ‘messageId’ is unique

• But the order of messages can not be inferred by comparing two identifiers

• Existing implementations (SWIFT-CUG) use trade versioning to derive ordering

Sequencing: solution (II)

• sequenceNo– To define a sequence number– Although sequence numbers should be

consistently increasing in value they do not have to form a gapless sequence

Example<tradeExecutionAdvice>

<messageHeader>

</messageHeader>…

<correlationId correlationIdScheme=”http…BANK…”>7</correlationnId> <sequenceNo sequenceNoScheme=”http…BANK…”>1</sequenceNo>

… <execution> <trade> … Lots more here </trade> </execution> <party id=”BNK”>…</party> <party id=”SRV”>…</party>

</tradeExecutionAdvice>

ExampleMessage Type Sender Receiver MessageI

dInReplyT

oCorrelationI

dSequenceN

o

RequestTradeConfirmation

BANK SERVICE AB/123 - BANK/7 BANK/1

RequestAcknowledged SERVICE BANK XZ/567 AB/123 BANK/7

ModifyTradeConfirmation BANK SERVICE AB/126 - BANK/7 BANK/2

RequestAcknowledged SERVICE BANK ZX/599 AB/126 BANK/7

TradeMatched SERVICE BANK ZX/610 - BANK/7 SERVICE/1

EventAcknowledged BANK SERVICE AB/145 ZX/610 BANK/7

Acknowledgements

• All requests messages must have an immediate response

• It allows a more synchronous style of design

Requestor Responder

Request

Response

Exception modelling

• Worth recognizing errors separately from normal responses

• Add consistency across exceptions

Exception modelling

• All existing errors can be adjusted to derive from the ExceptionMessage type rather than ‘ResponseMessage’

Document

Message

Response Message

Notification Message

Request Message

Exception Message

Advice vs. Notification

• A true notification should be something that we can choose to disregard without having to inform anyone else

Informer Informed

Notification

Advice vs. Notification

• Most of the information we distribute as notifications we expect the receiver act upon rather than ignore

• Often we would like an acknowledgement of that action (e.g. ContractNotifications, matching results, etc)

• Really this should be implemented as an ‘advice’ pattern using a request/response style pattern.

Informer Informed

Advice

Acknowledgement or

Exception

Corrections

• Lack of consistency defining correction messages– <isCorrection> flag has been added to

distinguish between correcting vs. Non-correcting messages

– Used in patterns like distribution

onBehalfOf

• There are situations where a third party can not easily tell which side of the trade he is supposed to be processing– Neutral view principle– Communication to a common third party

onBehalfOf

• An explicit indication of the party for whom the trade should be processed is needed– It should be included in every message

<someRequest> <messageHeader> … Basic message details </messageHeader> … <onBehalfOf> <partyReference href=”JPM”/> <accountReference href=”PORTFOLIO1”/> </onBehalfOf> … Request specification here</someRequest>

Example<tradeExecutionAdvice>

<messageHeader>

</messageHeader> <isCorrection>false</isCorrection> <correlationId correlationIdScheme=”http…BANK…”>7</correlationnId> <sequenceNo sequenceNoScheme=”http…BANK…”>1</sequenceNo> <onBehalfOf> <partReference href=”BNK”/> </onBehalfOf> <execution> <trade> … Lots more here </trade> </execution> <party id=”BNK”>…</party> <party id=”SRV”>…</party>

</tradeExecutionAdvice>

Trade Roles

• The addition in FpML 4.2 of the trade side structure allows party roles to be associated with a trade

• The TradeSide structure is used to capture the role information mixes contractual and processing information– Most of these values are only

relevant to specific business processes

– They should be properties of the supporting messages

Trade Roles: Solution (I)

• Separation of Party and Account– Make relationships

clearer

Trade Roles: Solution (II)

• Book-to-Book trades– Current model

assumes buyer & seller always different

• Difficulty to represent internal trades

– New optional account reference

• Single party in both sides is possible

• Info for settlement

Trade Roles: Solution (III)

• Other Roles and Accounts– Support ‘Give-

Ups’ and custodian account

– Simpler implementation

• Less indirection

Trade vs. Contract

• Two structures describing the same information

• Business process need to be duplicated– Examples: novations, terminations,…

• Validation rules need to be duplicated• ISDA legal documentation uses

transaction. ‘Trade’, ‘deal’, ‘contract’ and ‘transaction’ are often used interchangeably.

Trade vs. Contract (Solution)

• The ‘contract’ concept could be removed from the schema and the CUG messages reverted to a ‘trade’ based model

– Migrating Contract messages to trade has been analyzed (see separate presentation)

Messaging Gaps

• Requirements– Existing message sequences must follow a

Messaging Pattern• See Appendix for details on exchange patterns

– All processes must have an ‘observable completion’

• Messaging Gaps have been identified as result of the analysis

• Scripts for checking will be implemented to avoid future gaps

Appendix

Patterns

• The Negotiation Pattern

• The Distribution Pattern

• The Matching Pattern

• The Reconciliation Pattern

The Negotiation Pattern

• In many business processes a series of exchanges are needed between the participants before are an agreement can take place on the final outcome

Offer

Propose

Abandon

Agreement

Confirm

Accept

Proposal

Counter Propose

Reject

Abandoned

Confirm

The Negotiation Pattern

• The key points are:– The proposing party starts the negotiation and

decides when it has reached an outcome that he will accept or abandon the process

– The other party must always produce an offer based on the last proposal. He will only confirm an acceptance made on his last offer

The Distribution Pattern

• In many processes the outcome of the negotiated outcome often needs to be distributed to other parties not directly involved in the negotiation but who have a role in future operations

• The general pattern for distribution should follow the ‘advice’ style discussed earlier– The informer would normally like to know that the informed party

has received and understood the information.

Informing Party

Informed

Inform

Acknowledge or

Exception

The Distribution Pattern

• Sometimes an action cannot be accepted– At time t0 a contract notification is sent indicating that some

action is to be performed at t2 – Up until t1 the original notification can be changed or cancelled

because it has had no external effect– Between t1 and t2 modifying the action becomes more difficult

with associated financial costs. • Any attempt to modify the original notification should be refused to

force the informer to issue a ‘compensating transaction’ • The informer does not know when the informed has entered the

‘grey-area’ unless the notification can generate a response.

Time

Time when action is scheduled

Time when action processing begins

t0 t1 t2

Time when action can be cancelled

Time when action has already occured

Distribution: Correcting Mistakes

• Sometimes an advice is sent containing the wrong information– The message details are sent to entirely the

wrong party.– The message is sent to right party but the

details are incorrect.

• Retraction and correction is necessary Informing

Party Informed

Retract

Acknowledge or

Exception

Informing Party

Informed

Correct

Acknowledge or

Exception

The Matching Pattern

• Matching is the process of pairing trades submitted by their counterparties based on their definition

• The status of a trade held within a matching engine is ‘unmatched’ until one of three outcomes is decided– Matched– Mismatched– Unmatched

Request Match

Unmatched

Mismatched

Timeout 1/Allege

Timeout 2/ Unmatched

Matched atach found

Modify Match

Cancel Match

The Reconciliation Pattern

• Cash flow and portfolio reconciliation are both long running reconciliation processes.

• The process begins with the requester either creating a new data set or adjusting the content of an existing one.

Submitted

Create/Adjust

Unsubmitted

Submit

Report

Create/Adjust

Messaging Gaps

• Gaps have been identified to FpML 4.5 applying the patterns to the existing business processes

FpML 4.5 Message Updated Model Pattern Comments

RequestTradeConfirmation RequestTradeConfirmation Negotiation

‘Acknowledgement’ Negotiation New

ModifyTradeConfirmation ModifyTradeConfirmation Negotiation

‘Acknowledgement’ Negotiation New

CancelTradeConfirmation CancelTradeConfirmation Negotiation

‘Acknowledgement’ Negotiation New

TradeMatched TradeMatched Advice

‘Acknowledgement’ Advice New

TradeMismatched TradeMismatched Advice