Project REDPresentation of Numbering System and XML feed forFpML Credit Derivatives Working Group

June 2003

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Presentation Topics

What is RED?

- Concept and Process- Numbering Methodology- Use in trade matching

RED data feed

- XML Schema Description- Integration with FpML

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What is RED?

RED - Reference Entity Database

• Set of “Pairs” – legal entities (Reference Entities) plus bonds (Reference Obligations) for use in trade confirmations

• Addresses the need to get Reference Entity name correct, for example-ConocoPhillips Company versus ConocoPhillips-J.C. Penney Corporation, Inc versus J.C. Penney Company. Inc

• Addresses the need to prove the relationship between the Reference Entity and the Reference Obligation, for example

- Seibe plc issued 6.5% 15-Jan-2010 bond in January 1998, - This is an appropriate obligation to use on a trade on Invensys plc because the issuer as per the bond prospectus, Seibe plc, became BTR Seibe plc in Feb 1999 and then Invensys plc in April 1999

• Also establishes relationships in the case of guarantors, for example- Fosters Securities issued 4.75% 15-Oct-2003 bond in November 2000- This is an appropriate obligation to use on a trade on Fosters Group Limited because the guarantor as per the prospectus, Fosters Brewing Group Limited, became Fosters Group Limited in July 2001

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The RED Scrubbing Process

Take a Reference Entity (name) and a Reference Obligation document (bond prospectus) as provided by a customer (so far, one of Goldman Sachs, JP Morgan or Deutsche Bank)

• For either the Obligation Issuer or Guarantor, obtain jurisdictional documents to show its history from date of issue of the obligation to now (e.g. Company Charters, UK Companies House records etc)

• Check that the Obligation details (coupon, maturity, ISIN, CUSIP etc) match details given by the customer

• Check that the Issuer or Guarantor (as appropriate) is the Reference Entity

• Assuming the relationship is as the customer postulated, add the pair to the database and update regularly

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The two basic RED products

“Names and Numbers” Service

• Database of scrubbed legal entity names, each with a unique 6-character code

There will be over 2000 entities in the database, of which

• about 500 will have been scrubbed since May 2003• about 500 will have been scrubbed prior to May 2003 but will be rescrubbed by

September 2003• the rest will be from Mark-it’s name database but will be scrubbed within 12 months

Full Service

• Entity names and codes as above• Database of pairs of scrubbed entity names and scrubbed bonds, each with a unique

9-character code

There will be about 1500 pairs in the database, of which

• about 600-750 will have been scrubbed since May 2003• about 750-900 will have been scrubbed prior to May 2003 but will be rescrubbed by

September 2003

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Numbering Methodology

Numbering methodology developed jointly by Mark-it and CUSIP, to be managed by CUSIP but differs from existing CUSIPs

6-character Entity Codes

• Derived from Issuer CUSIPs or CINS but..• Although structurally similar to issuer CUSIPs, they are unique i.e. there are never 2 or

more codes for one entity (which is the case with issuer CUSIPs)

9-character Pair Codes• Structurally similar to bond CUSIPs or CINS (6 characters representing Entity Code plus 2 characters for the security plus a check-digit)• Since they represent a pair, not a bond, the same bond can be associated with more than one code when it has a guarantor because one code represents bond+issuer and another bond+guarantor• Not directly derived from the associated bond CUSIP or CINS

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Sample Entity Numbers (tabular form)

Entity Full Legal Name Ticker Issuer CUSIP Entity Code

ABB Finance Inc ABB-FinInc U00024 UU0026

ABB Ltd ABB H0010V HH011V

ABN AMRO Bank N.V. AAB-Bank N0028F NN02AN

ABN Amro Holding N.V. AAB N0030P NN033P

ACE Limited ACE G0070K GG077K

AFLAC Incorporated AFL 001055 00115A

AGFA-Gevaert NV AGFAG B0302M BB332O

AGL Resources Inc. ATG 001204 001324

AK Steel Corporation AKS-Corp 001547 00169B

Aktiebolaget Electrolux ELTLX W0074M WW07BQ

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Entity Full Legal Name Ticker Obligation Pair Code

Ford Motor Company F None 020G01006

Ford Motor Company F US345370CA64 020G01AA3

Ford Motor Company F US345370BZ25 020G01AB7

Ford Motor Credit F-MotorCred None 020A45004

Ford Motor Credit F-MotorCred US345397TS23 020A45AA8

Sample Pair Numbers (tabular form)

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Use in Trade Matching

Mark-it is making the RED database available to both DTCC and SwapsWire

DTCC system matches names and 6-or-9 character codes

• Version 1: Both parties submit name, RED code (if RED subscriber) and ISIN; Name and ISIN must match, RED codes must match on first 6 characters• Version 2: A party may submit 9-character RED code only; this can be matched not only against the other party’s 9-character code but also against a cross-check to a 6-character code+ISIN or a Name+ISIN• Non-RED subscribers can match entity on text name only

SwapsWire system

• Trade affirmation system, first party may use RED names and codes to minimise ambiguity for the affirming party

Use of RED codes should make operation of both systems much smoother

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RED data feed

Both Names and Numbers and Full Service will be available in July as an XML feed and(later) via a web-based look-up

• For Names and Numbers, the feed is very simple

- Consists of a simple entity type with a relatively small number of attributes- Key feature is ability to track corporate history - validto attribute non-blank for superseded entities- updated attribute gives most recent pair scrub date including this entity- previous and next attributes point to successor(s) and predecessor(s) although not necessarily in the ISDA confirmation sense

• For Full Service

- Bond type in addition to entity type- Bond type contains issuer and guarantor pair elements- Updated attribute is the most recent pair scrub date- Updated attribute can be different for issuer and guarantor as pair dates may differ- User can assemble a “square” table of pairs from the entity and bond feeds - Structuring the feed as 2 types removes the need to send duplicate entity information

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Entity Type Example – National Power Demerger

<entity> <name> National Power </name> <red> 999781 </red> <cusip> 887234 </cusip> <type> Corporate </type> <jurisdiction> England </jurisdiction> <updated> 2003-03-07 </updated> <validto> 2000-03-07 </validto> <next> 999782 </next> <next> 999783 </next> </entity> <entity> <name> International Power </name> <red> 999782 </red> <cusip> 887272 </cusip> <type> Corporate </type> <jurisdiction> England </jurisdiction> <updated> 2003-02-22 </updated> <validfrom> 2000-03-07 </validfrom> <action> demerger </action> <prev> 999781 </prev> </entity> <entity> <name> Inogy </name> <red> 999783 </red> <cusip> 887256 </cusip> <type> Corporate </type> <jurisdiction> England </jurisdiction> <updated> 2003-02-22 </updated> <validfrom> 2000-03-07 </validfrom> <action> demerger </action> <prev> 999781 </prev> </entity>

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<bond> <name>ABBEY-Treas 6.125 15Apr06</name> <issuer> <name>Abbey National Treasury Services plc</name> <red>892G94AA1</red> <updated>2003-05-01</updated> </issuer> <guarantor> <name>Abbey National plc</name> <red>892760AA3</red> <updated>2003-05-01</updated> </guarantor> <type>Bond</type> <tier>SNRFOR</tier> <ccy>GBP</ccy> <maturity>2006-04-15</maturity> <coupon>0.06125</coupon> <originalIsin>US00184AAA34</originalIsin> <isin>US00184AAA34</isin> <cusip>00184AAA3</cusip> <updated>2003-05-01</updated> <validto>2003-06-23</validto> <event>Bought Back</event> </bond>

Bond Type Example – Abbey National Treasury Services plc Bond with Issuer and Guarantor Pairs

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Use of RED XML with FpML

Including Entity Name and Code in referenceEntity – RED code only as a reference?

<referenceEntity id="892760" referenceEntityScheme="http://www.mark-it.com/red/entity">Abbey National plc</referenceEntity>

How to include Entity code and ISIN in referenceObligation<referenceObligation>

<bond>  <instrumentId instrumentIdScheme="http://www.mark- it.com/red/isin">US00184AAA34</instrumentId>   <couponRate>.06125</couponRate> <maturity>2006-04-15</maturity>

  </bond> <guarantorReference href=“892760"/>   <referencePrice>1</referencePrice>   </referenceObligation>

How to include Pair Code in when it specifies Entity and Obligation?

 <instrumentId instrumentIdScheme="http://www.mark- it.com/red/pairs">892760AB2</instrumentId>  

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Discussion

RED has not explicitly been designed with FpML in mind nor FpML with RED in mind

• How (or if) to incorporate the Entity Code as well as the name in FpML?

• How (or if) to incorporate the Pair Code in FpML – is ISIN better?

• What should be on/in the RED u.r.i and what if anything should it do to help FpML?