Semantics Working Group Status Report

December 13, 2011
 FpML can be currently be used to meet the analytical requirements 

needed for regulatory oversight but may not be the ideal long term 

solution for data extraction, classification and computation

 Semantics (including both business conceptual ontologies and 

semantic processing) offers a promising alternative pathway for 

meeting the objectives of 719(b)

 The semantic standards for both financial instruments and legal 

entities are underway but not yet fully complete and not an immediate 

option for CFTC rulemaking

 Semantics and XML schema are synergistic and complementary – the 

goal is to leverage FpML and incrementally enhance it with semantics 

as a leap forward for analysis and derivatives oversight

 A public/private partnership should be nurtured to expedite the 

completion of the semantic standards and demonstrate their 

application and business justification to the derivatives (and systemic 

risk) markets

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 Provides a precise and unambiguous way of identifying the contractual structure of 

derivatives contracts based on legal fact, rather than elements in a message

 Describes concepts in natural language/English grammar (subjects, predicates, objects) 

in ways that are understood by both computers and humans to promote 

interoperability across messaging protocols/data sources and reduce reliance on legacy 

data structures

 Facilitates classification based on the characteristics and attributes of the 

instrument/participant so one can construct new instrument types as the derivatives 

industry innovates

 Uses logically consistent rules and definitions to infer classification and create 

links/relationships from the structure of the contract in order to identify levels of 

exposure and links disparate information for risk analytics

 Allows data schemas to change as regulatory assumptions change without incurring 

high IT costs, applications restructuring efforts or implementation delays

 Can be implemented incrementally and work in conjunction with FpML and other data 

standards

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1. Evaluation of Canadian Securities Administrator consultation 

paper on derivatives trade repositories

2. Implementation of questions in established open standards 

FpML and Xquery

3. Data sufficiently structured to retrieve information in an 

unambiguous way

4. Identifiers (such as LEI and UPI) will further facilitate the 

implementation of the queries

5. Bespoke products through the generic product representation 

are supported 

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 XML schema is the best standard for messaging (tags data elements with 

standard labels organized in hierarchies)

 The meaning of the data labels are not designed to explicitly represent 

business terms and must use custom programming logic in order for them 

to be processed

 Classification is difficult with FpML because there are conflicting 

interpretations on how to define the product hierarchy

 Classification codes are fixed and hardcoded into the message making it 

hard to construct new instrument types and create new regulatory 

categories as the derivatives market evolves

 Complex queries in FpML requires programmers who are experts in 

derivatives to implement and is not conducive to analysis during “risk 

situations” 

 XML is ingested into relational databases frequently consisting of hundreds 

of complex tables/data relationships and needs specialized programming 

to extract meaningful content 

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 Document and verify the overall semantics business case (including how semantics 

and XML schema complement each other) among the participants in the 

derivatives industry

 Work collaboratively among EDM Council, ISDA, FPL, MISMO, OMG and XBRL under 

the coordination of ISO to align messaging and semantic standards 

 Create public/private partnership to expedite the completion of the semantic 

standard for financial instruments/entities and demonstrate its application to 

derivatives transparency, market surveillance and financial stability

◦ Demonstrate the metadata value of semantics by creating hyperlinks from regulatory rules 

to sources, examples, formal definitions, other instances

◦ Demonstrate the practical use of semantics by leveraging the existing derivatives POC into a 

reference benchmark for implementation

◦ Support the regulatory objectives of aligning data currently reported to various agencies 

with the semantic standard and in using semantics for internal analysis

◦ Bring in semantics experts from the intelligence, defense, logistics, information, medical, 

travel and scientific communities under coordination of NIST to share knowledge on 

operational semantics deployment

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 “We can’t solve problems by using the same 

kind of thinking we used when we created 

them” – Albert Einstein

“This is a once in a lifetime opportunity to 

change the market. This is the culmination of 

everything we have been training for in our 

quest to serve the public” – Andrei Kirilenko 

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