New XML Protocol Aims At FX, Derivatives

NEW YORK--JP Morgan and PricewaterhouseCoopers (PWC) are introducing FpML (Financial products Markup Language), a new protocol for Internet-based electronic dealing and information sharing of financial derivatives.

FpML is targeting interest rate and foreign exchange products. While both firms expect to add additional instruments to that coverage, the idea is to work side by side with other protocols--including Financial Information eXchange (FIX)--rather than compete with them.

"The main focus of FIX is on equities, cash [and] securities," says Jeff Saltz, head of technology for markets e-commerce at JP Morgan. "We cover a different part of the capital markets--OTC--not exchange-traded products."

The two firms actually began work on the protocol independently. "We were interested in how the Internet would affect and enable consulting," says Adam Greissman, director in the financial services practice at PWC. Over the past year, PWC looked at applications that exchange complex financial information and calculated what was and wasn't available via existing protocols, he says.

Meanwhile, JP Morgan was heading the same way, though on a different path. It started with e-commerce. "We needed to streamline communications from our systems to our client services," Saltz says. As JP Morgan brought its experience in financial object modeling into the XML environment, it began exploring industry support and quickly discovered that PWC was working on a similar project.

In late April, the two decided to combine efforts. "We took the best of both," Saltz says. Now JP Morgan is developing a suite of client services that employ FpML, including trade execution, confirmation, valuation, risk analysis and the exchange of market data. PWC will use the protocol to address financial and operational risk management issues for its clients and will support the industry's adoption of FpML and related solutions.

In fact, the two hope that the protocol will become an industry standard. For one, JP Morgan--and its clients--weren't interested in a proprietary link. For another, the two like the idea of creating a global standard. "The goal is something useful on a global scale and as simple as possible," Greissman says. "In the long term, some standards body will eventually assume ownership of it." As part of that effort, JP Morgan and PWC are holding a series of workshops and seminars to start in July.