Quiz: Data Standards

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3 questions to check your understanding of the chapter “Data Standards”. Choose an answer and select “Check answer” to see the answer and explanation. You can also open “Answer and explanation” to see the answer first.

1. Question 1

   What is FpML (Financial products Markup Language) a standard for?

   1. A.An international standard that defines the form of financial messages in general
   2. B.A standard for writing trade information in XML and exchanging it electronically
   3. C.A protocol used for securities trading messages
   4. D.A code that identifies the legal entities party to a trade in a globally common form
   Answer and explanation

   Answer: B

   FpML is an open-source XML standard created for electronic commerce in OTC derivatives. The International Swaps and Derivatives Association (ISDA) sponsored its development. XML is a format that labels each item of data with a name (a tag). Because there is an agreed way to write trade information in this format, the information can be shared and processed electronically.

   A Japanese source from March 2015 describes ISO 20022 as the international standard for financial messages. ISO 20022 is designed to be linked with FpML and with FIX, a protocol for securities trading messages, and it is a separate standard from FpML. A code that identifies legal entities plays the role of an identifier, which differs from FpML's role of defining how trade information is written.

   Learn more: FpML

2. Question 2

   The CDM (Common Domain Model) represents the lifecycle of a trade as "transitions between states." Suppose a lifecycle event, such as a floating rate reset, occurs on an executed interest rate swap. What happens to the trade's state?

   1. A.A new state is created by referring to the previous state, and the product definition does not change
   2. B.The product definition changes, and new product data is created and linked to the trade
   3. C.The previous state is not kept, and the trade's state is overwritten with the reset information
   4. D.No new state is created, and only the reset information remains as the product's history
   Answer and explanation

   Answer: A

   An automatic event such as a floating rate reset does not change the product definition. It links the reset information to the trade's state and adds it to the reset history. In the CDM, when an event has a previous state, as it does after execution, the new state is created by referring to the previous state, and this chain of references is called lineage. The principle is that the history of states can be reproduced at any point in the trade's lifecycle, so the previous state is not overwritten and discarded.

   The product definition changes when the parties agree to amend the terms and the trade's economic terms change, and then new product or trade data is created. A reset does not do this. States are also held for each trade, not for each product, so the reset information is linked to the trade's state and does not remain as the product's history.

   Learn more: The ISDA Common Domain Model (CDM)

3. Question 3

   Which of the following correctly describes the Legal Entity Identifier (LEI), the Unique Transaction Identifier (UTI) and the Unique Product Identifier (UPI) in the Financial Services Agency's guidelines on reporting items (established in December 2022, revised in November 2023)?

   1. A.An LEI has at most 52 characters, and its first 20 characters identify the party that assigned it
   2. B.A UPI is a 20-character alphanumeric code, assigned by an issuing organization (a LOU) according to the attributes of the product
   3. C.A UPI has 12 characters and is assigned by the designated provider, the DSB
   4. D.A UTI has 12 characters and is assigned for each trade by the designated provider, the DSB
   Answer and explanation

   Answer: C

   A UPI is a code that identifies the product of an OTC derivative trade, and it follows ISO 4914. In Japan's reporting items it has 12 characters. It is assigned by the Derivatives Service Bureau (DSB), which the Financial Stability Board (FSB) designated as the sole provider in May 2019.

   The other options mix up the features of the three identifiers. A code of at most 52 characters whose first 20 characters identify the party that assigned it is a UTI, and a 20-character alphanumeric code assigned by an issuing organization (a LOU) is an LEI (ISO 17442). A UTI is a code attached to one reportable trade, and the party that assigns it is determined for each trade by following the questions in the international guidance in order.

   Learn more: Identifiers: LEI, UTI, and UPI