Exchange Traded Derivatives Archives

OSTTRA becomes a Derivatives Market Institute for Standards (DMIST) ambassador

In response to the FIA’s report calling on participants in the futures and options industry to work together on a major initiative to improve the efficiency of the trading and clearing process for exchange-traded derivatives, we are proud to have become ambassadors of the independent standards body called DMIST in Q2 2022.

As DMIST ambassadors, we will support DMIST’s mission to continue defining solid best practice standards and provide a foundation for the futures industry to improve risk management, increase operational resilience, and grow capacity. This is central to OSTTRA’s objective to be at the centre of the post-trade community and drive the post-trade innovation that is pivotal to industry evolution.

Robert Costick, Director of New Business Initiatives FX & Securities at OSTTRA, explains: “We believe that the cornerstone of this initiative is the propagation of a commonly known Parent Order ID throughout the entire T-zero workflow, to which all subsequent Child Orders are linked and which is recognised by all parties involved in the trade. This Order ID creates an irrefutable link between Executions, Orders and Allocations, ensuring that the right trade will be booked to the right account, at the right clearer, at the right time. At OSTTRA, we have already delivered this Order ID matching capability to production and are now working with a core group of futures commission merchants and investment management firms to advance widespread adoption of this initiative, which we believe will become an integral component of the standards to be set out by DMIST.”

We believe that standardisation will help solve painful inefficiencies in the futures market. As DMIST ambassadors, our team of subject matter experts will help identify, develop, and submit standards to the DMIST Sponsor Board for consideration. By bringing together the people, processes and networks to solve the markets’ most challenging problems, we will help innovate, integrate and optimise the post-trade workflow for exchange traded and cleared derivatives.

OSTTRA and FIA’s DMIST Partner with Key Industry Participants to Establish ETD Post-trade Data Standards

LONDON, 09 March, 2023 – OSTTRA, the global post-trade solutions company and a member of the FIA’s Derivatives Market Institute for Standards (DMIST), confirmed they are working with fellow DMIST members to identify a data standard for post-trade processing of exchange traded derivatives (ETD). Significantly, as part of this process, OSTTRA has provided data & analysis that takes the industry much closer to defining this standard, as detailed in the soon to be released DMIST Annual Progress Report for 2023.

The application of a common data standard is required to increase data quality, create operational efficiency, and reduce systemic risk by minimising breaks on trade date. OSTTRA and DMIST have been working with key industry participants to identify the data set required at five stages of the ETD post-trade workflow, from voice trade recaps to clearing broker booking confirmations, addressing the most persistent causes of trade breaks.

Data and analysis from OSTTRA-led sessions with other DMIST participants has been contributed to DMIST’s data and information working group, resulting in significant progress in defining the data standard, which will support the DMIST draft standard on timeliness currently under review by the industry. Together, these standards represent a significant step towards increasing efficiency and resiliency in ETD markets.

Don Byron, Head of Global Industry Operations & Execution, FIA, said: “Building on our initial timeliness standards set out in the first phase of DMIST, it’s become increasingly clear that data standardisation is fundamental to completing the transformation of ETD post-trade workflows. The work is uniting key market participants around a common set of data fields, bringing us closer to valuable efficiencies in ETD markets, as outlined in our recent DMIST annual report.”

Joanna Davies Head of FX and Securities, OSTTRA, commented: “The persistence of common data fields is the key to unlocking efficiency in the current ETD post-trade workflow. This data standard is the clear next step on the roadmap for evolutionary change in ETD processing and illustrates further industry collaboration around the DMIST initiative. We will continue to work within the FIA DMIST framework to refine the dataset that will contribute to the core requirement of any suggested standard.”

Samina Anwar, Global Derivatives Operations Director for Cargill added: “The adoption of common data fields in ETD is the next step toward reducing hedging risk through data standardisation for voice trading. We’re delighted that market participants are working together to reach this milestone, which presents real practical progress in the effort to foster cross-industry engagement on the DMIST 30/30/30 standard.”

If you’d like more information on the work OSTTRA is undertaking with the industry to achieve efficiencies in ETD trade processing, please contact us.

OSTTRA to provide real-time visibility of Eurex exchange-traded derivative trade status

NEW YORK, LONDON, 18th January 2023 – OSTTRA, the global post-trade solutions company, is enhancing its network to give market participants a real-time view into the status of Exchange Traded Derivative trades being cleared through Eurex.

The enhanced connectivity will enable Eurex to send investment managers booking confirmations for their allocations via OSTTRA ClientLink for ETD, delivering live status updates on which trades have been given up, claimed and cleared – providing trade certainty in fast-moving markets.

Eurex Clearing plans to become the second central clearing counterparty (CCP) after the CME to connect to OSTTRA ClientLink for ETD, the post-trade network of close to 200 market participants. Real-time information on trade status is increasingly important in futures markets as more frequent volume spikes create bottlenecks in processing flows. A third CCP is close to completing connectivity to the network and more are lined up for delivery in 2023.

OSTTRA has also worked closely with Eurex on an additional project to enable clients to manage the Next Generation ETD Contracts currently under development by Eurex and scheduled to go live in March 2023. OSTTRA ClientLink for ETD users are already able to test the new functionality.

“We are pleased to support vendors like OSTTRA to deliver much needed transparency to all parties on the trade,” said Melanie Weber, SVP Derivatives Clearing Design, Eurex Clearing. “By receiving real-time updates, clients will be able to manage operational risk and capital more effectively throughout the trading day. In parallel to the ETD transformation initiative, OSTTRA and Eurex Clearing are aligned on the Next Generation ETD Contracts, which Eurex is implementing to allow more than one expiration per month under a single product ID, providing clients with additional flexibility.”

“The ETD industry needs greater visibility and efficiency as demonstrated by the ongoing commitment of industry participants to the FIA DMIST standards development. In the past, volumes would increase as a reaction to significant macroeconomic events. Now, every month, we are consistently seeing volume spikes, thus urgently increasing demand for a real-time solution that provides a window into every aspect of the give up and allocations workflow”, added Joanna Davies, Head of FX and Securities, OSTTRA. “The ability to support the entire ETD community with this new flexibility and transparency presents a huge leap in the evolution of both the ETD trade allocation process and the transformation of the ETD workflow.”

OSTTRA – The home of MarkitServ, Traiana, TriOptima and Reset, OSTTRA (www.osttra.com) brings processes and networks together along with expertise to solve post-trade challenges in the global financial markets. OSTTRA strengthens the post-trade infrastructure and ecosystem with robust end-to-end post-trade solutions and unrivalled connectivity.

If Amazon did T+1 Settlement: How Post-Trade Operations Are Moving Towards Real-Time Control

From monitoring bank balances to tracking package deliveries, we’ve grown accustomed to having information at our fingertips. But what about the state of post-trade operations in the capital markets? As regulations tighten and demands for efficiency are increased by the transition to one-day settlement cycles in US securities, the need for real-time visibility and control in post-trade operations is becoming paramount.

The act of onboarding clients and the processes around trade allocation, confirmation and affirmation are unlikely candidates for headlines about transformative technology innovation when pitched against the thrill of front office trading and the excitement that AI and blockchain technologies still generate. And usually they can’t compete – even if all institutional trading relies on the efficient and robust running of post-trade systems behind the scenes.

But this year is post-trade’s time to shine. The SEC’s decision to shorten settlement times to T+1 has sparked a rush of interest in the sector: once the bonnet was opened, market participants started wondering if it was time for a full vehicle inspection. Even though the focus of the regulation for T+1 settlement is securities, there is an indirect effect on FX and fixed income too, and many firms are now taking an holistic view on operations processes across all asset classes. Shorter FX trading-settlement timeframes reduce the window for resolving issues, necessitating efficient and timely technical account onboarding, data completion, and issue escalation, especially given the complex, multi-regional nature of cross-asset processes.

Our Onboarding, Connectivity and Operations service enhances post-trade operations and connectivity, enabling clients to efficiently monitor and manage their networks. Just as your smartphone app keeps you informed about your financial health and the whereabouts of your Uber ride, post-trade operations now require a similar level of real-time transparency and accessibility at a time when supervisors’ stance towards operational challenges is becoming increasingly unforgiving. The pressure is on for banks and investment managers to demonstrate full control over their post-trade processes. Like tracking your Uber’s journey, operational teams need to know where trades stand, identify bottlenecks and errors, and take proactive measures to ensure timely settlement.

Regulation and oversight as key drivers

A single change in the overall financial market ecosystem often has ripple effects across the whole network, with some consequences more noticeable than others.

In the case of moving to a 50% shorter settlement time for US securities, market participants in FX will have 83% less time to perform post-trade processes than in the current regime, according to calculations from industry association AFME.(Source)

Another key consideration is whether the shorter timeframe will affect performance, or in other words whether the risks of failed trades and operational errors would increase. The short answer, according to both AFME and buy-side industry participants, is an overwhelming yes.

Post-trade efficiency is firmly in the sights of regulators and industry oversight bodies. In currency markets, the FX Global Code of Conduct is calling for better operational processes, including more timely confirmations as well as a general technology upgrade to increase efficiency and accuracy. The standard-setting body for OTC derivatives, ISDA, continues to focus on give-ups and the timings associated with communications around them.

In European securities markets, the settlement discipline regime of the Central Securities Depositories Regulation (CSDR) has introduced several measures to reduce the number of settlement fails, to prevent such failures and to cajole market participants into settling accurately on the intended dates.

In the futures markets, FIA and DMIST, the Derivatives Market Institute for Standards, jointly announced the publication of the Final Standard for Improving Timeliness of Trade Give-Ups and Allocations, designed to improve the delivery and processing of allocation instructions by establishing 30-minute timeframes for completing steps in the allocation process .

In summary, regulators and oversight bodies are quite clear in their messaging to market participants: operational failures such as trade breaks, and system outages will be met with a zero-tolerance policy from rule makers, and full historical post-trade transparency and visibility is a must.
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Change for the better: real-time service monitoring and more

To comply with these rules, market participants need to have more granular visibility into what happens to trades after execution, which in turn requires infrastructure and service providers to step up their game in areas such as flexibility of access, onboarding and integration, among others. That means it’s all eyes on onboarding, connectivity and operations.

Achieving this operational upgrade is more complicated than it sounds, due to the complexity of the post-trade ecosystem and the varying levels of technology requirements participants have. Legacy and fragmented post-trade infrastructures across multiple systems and vendors have to be consigned to the past in favour of a single, more closely-coupled system.

It’s in everyone’s interest to have better visibility into the health of the systems, services and counterparties involved in the affirmation, matching, confirmation and clearing of trades. Consider your Fitbit alerting you when your heart rate spikes unexpectedly. Similarly, in post-trade operations, timely alerts and diagnostics are crucial for identifying and resolving issues before they escalate. Whether it’s pinpointing delays in trade processing or diagnosing connectivity issues with counterparties, the ability to swiftly address problems is vital. With T+1 settlement approaching, the stakes are higher than ever, akin to keeping a close eye on your health indicators to prevent potential complications and unpleasant surprises.

Just like we have become accustomed to skipping queues through self-service, banks and investment management firms are requesting greater autonomy with respect to the initial integration and technical onboarding of their systems and underlying clients through self-service tools. The expectation is that this should be combined with greater visibility into the health of their post-trade networks and services including the physical and logical connections used to carry messages between market participants, all supported by a comprehensive customisable reporting suite. This includes greater flexibility with respect to accessing services, which is fueling demand for Single-Sign-On (SSO) and operational dashboards driven by real-time data accessed via API.

In response, OSTTRA has developed a new service for its clients – OSTTRA’s Onboarding, Connectivity and Operations (OCO) Suite – enabling network participants to track the health of their post-trade operations across asset classes and counterparties. The initial release provides enhanced system monitoring:

OSTTRA for Onboarding, Connectivity and Operations provides granular visibility into what happens to trades after execution.

Get granular visibility into what happens to trades after execution with OSTTRA OCO.

While the cost of operational failures has never been higher, regulatory and supervisory forces are combining with business needs to create an unusually difficult landscape to navigate. This is why market participants need to move towards a single screen to view operational processes and away from the current, fragmented approach.

This desire is reflected in the exchange traded derivatives (ETD) market, according to the findings of a March 2024 listed derivatives study, produced by Acuiti in association with OSTTRA: Almost 90% of ETD market participants surveyed said that it would be either crucially or very important to have a consolidated view of T+0 and T+1 processes, a desire particularly evident among the sell-side. The biggest benefits of such a view would be in risk reduction according to survey respondents, but there are also perceived upsides in operational efficiency and costs.

Clearly, as the industry prepares for an unyielding approach from regulators around trade breaks and systems down time, market participants need better visibility into the health of their systems, networks and trade status as well as an easier ride in terms of interacting with and managing processes.

When a Prime Experience Comes to Post-Trade Operations

Against an accelerated market dynamic, market participants want greater autonomy to go at the pace needed to bring solutions to market quickly. They are asking for the ability to use self-service tools during the initial integration and technical onboarding of their systems and underlying clients and they want to combine these with a greater level of visibility into post-trade networks and services, in a way that’s personalised and intuitive, just like the everyday instances of self-service we’ve all become used to.

After all, this already happens in other areas of life: the ability to track packages, taxis and food orders after the purchase is taken for granted in most customer-facing areas. Amazon customers rarely need to call the Amazon helpdesk because the service interface gives you all the info you need about your past and pending orders, orders currently out for delivery, mechanisms for raising queries and product how-to features, among other things.

For post-trade, this means an increased granularity and visibility into connections that handle messages between participants, both physical and logical, and a comprehensive and customisable monitoring suite. There is also growing demand for creating a Single Sign-On entry point for services in the same bucket to streamline workflows and step-up efficiencies.

Abundant data and the ability to easily channel information through automatic API connections has given rise to expectations that processes and exceptions should be viewed in real-time in a convenient format such as a dashboard.

But it’s not just ease of access and user experience that’s driving the quest for efficiency in post-trade, and it’s not just regulatory change either. As large financial market players continue to face headwinds, even marginal improvements along the post-trade lifecycle can make a meaningful difference to balance sheets.

In the year ahead, these headwinds will persist, according to consulting firm Deloitte, which predicted in its 2024 outlook for financial services that “banks’ ability to generate income and manage costs will be tested in new ways” while noting that “multiple disruptive forces” are conspiring to reshape the foundations and the architecture of banking and the capital markets industry.

These factors are making it imperative for market participants to see and manage the whole picture, not just parts of the post-trade jigsaw puzzle. It’s a small surprise, then, that Acuiti’s study predicts a push towards consolidation of vendors and processes, as market participants strive to reduce complexity. The survey found that the overwhelming majority of companies are now looking to consolidate their relationships with vendors to those that can offer comprehensive post-trade services covering the full lifecycle of trades.

What It Takes To Turn Post-Trade Into A Five-Star Rated Experience

Just like when you decide to cancel your booked Uber ride when your driver is stuck in unexpected traffic, market participants should be notified about any and all events that impact trade matching. Factors to monitor should include physical and logical connectivity, system outages, platform performance as well as failed and pending messages, which impact match statuses, trades processed and associated market participants.

Trades could fail for a variety of reasons but market participants get little actionable information about such events at the moment. Better visibility into what happens to trades before they arrive at the back office is one of the key areas where there is demand for improvements, especially if there are operational reasons involved in a failure.

Rather than just identifying that there is a discrepancy, market participants should be able to tell which trades are having issues due to operational reasons and where those problems are before failures happen. The ability to see in real-time the status and health of trades as they traverse trade lifecycles and ecosystems would reduce the chances of errors creeping in unnoticed and resulting in failures or broken trades.

Similarly, dealing with exceptions should be easier and solved in a way that allows firms to track, manage and resolve these issues as soon as possible and in a structured manner. Automating incident management and allowing both parties to track them, enhancing both inter- and intra-company collaboration and enabling remediation are actionable steps for the industry.

Reporting is also ripe for upgrades and it’s an area where market participants would benefit from better visibility into operational and trade level metrics as well as the ability to compare and benchmark firm-level performance against peers. Having more control and autonomy over the format and frequency of these summaries and insights would allow institutions more flexibility to prove good performance and regulatory compliance.

Standardising how post-trade information is accessed and distributed is also something where efficiency gains need to be made. Adopting API connectivity for post-trade workflows and operational data access would significantly upgrade the quality of the user experience and increase the utility of the data and information.

These are just some of the examples that could benefit the overall ecosystem and promote the health of both the post-trade networks and its participants. The Onboarding, Connectivity and Operations service for OSTTRA clients aims to address this challenge by offering a seamless way of increasing transparency and control of post-trade operations:

OSTTRA for Onboarding, Connectivity and Operations

What three words for the post-trade path ahead: volatility, risk and control

Equity markets are surging to new highs and risky assets continue to remain buoyant despite interest rates in major economies staying at multi-decade highs. The approval of Bitcoin ETFs has launched crypto on Wall Street for real, in a year when the world’s population is heading into a record number of elections. Rate cuts, new dynamics in some markets and quite a lot of event risk are conspiring to lay the groundwork for elevated volatility.

For traders, this is great news because high volumes and volatility promise the possibility of rich pickings. From an operational point of view, it’s a more mixed outlook that will be about balancing the need to manage operational risk with the need to heed the shareholder call to achieve operational efficiencies that shore up margins.

As this financial landscape evolves rapidly over the next year, the accelerated evolution of post-trade towards on-demand operational insight and real-time monitoring is not merely a regulatory necessity but a strategic business imperative. Just as we rely on seamless digital experiences in our daily lives, financial institutions must adapt to this new paradigm: Instantaneous visibility and control aren’t just conveniences; they’re essential tools for mitigating risk, ensuring compliance, and optimising performance. With T+1 settlement leading the charge, the push for transparency and efficiency will extend beyond equities to encompass other asset classes like FX and fixed income, and far beyond the borders of the United States of America, with post-trade pundits expecting a move to T+1 in the UK and the EU in 2025.

Learn more

Our OCO suite helps OSTTRA clients improve operational control and reduce operational risk through the delivery of automated service connectivity, self-service onboarding, real-time service monitoring and exception management, and customisable reporting. To find out more, please visit OSTTRA for Onboarding, Connectivity & Operations.

Futureproofing Listed Derivatives:
Building operational resilience across the market

This study on the state of ETD post-trade operations shows significant progress has been made, but major risks remain.

Download the ‘Futureproofing Listed Derivatives Post-trade’ Report here.

In March 2020, the volatility and record volumes triggered by the initial outbreak of Covid-19 overwhelmed post-trade infrastructure. Our study, produced by Acuiti in association with OSTTRA, finds that whilst a significant majority believe that progress on resilience has been made since 2020, 61% of respondents feel that there are still major risks in the listed derivatives post-trade environment, with allocations and give-ups key areas of concern. “Futureproofing Listed Derivatives Post-trade” is based on a survey and series of interviews with senior executives at 57 of the major sell-side and buy-side firms operating in listed derivatives.

The key findings of our ETD Industry Survey include:

Top Investment Priorities: Discover the top three areas where organisations are planning substantial investments over the next three years, providing critical insights into industry trends and future focus areas.
Cloud Evolution: Explore how organisations’ attitudes towards cloud-based software have transformed over the past five years, with 55% expressing significantly increased openness to cloud solutions.
Post-Trade Complexities: Uncover the top three areas of complexity for both buy-side and sell-side institutions, shedding light on challenges faced in collateral optimisation, margin processing, and reconciliations.
Data Standardisation: Learn about the industry’s stance on a mandatory, expanded data set for each trade, with 43% expressing a strong belief in its necessity and 57% considering its potential benefits.
DMIST’s 30/30/30 Proposals: Gain insights into industry perceptions of DMIST’s 30/30/30 proposals, with 49% highlighting concerns about high volume trading sessions continuing to cause issues.

To find out more about our end-to-end ETD post-trade processing capabilities, please contact us at info@osttra.com.

OSTTRA Awarded ‘Post-Trade ETD Provider of the Year’ at the FinanceFeeds Awards

OSTTRA is pleased to announce its recognition as the ‘Post-Trade ETD Provider of the Year’ at the FinanceFeeds Awards. This achievement underscores OSTTRA’s commitment to innovation and excellence in the ETD post-trade landscape.

The accolade is a result of OSTTRA’s ongoing efforts to simplify and optimise ETD post-trade processes. Collaborative endeavours with industry stakeholders have yielded significant improvements, including streamlined order IDs to enhance the give-up process and enhanced allocation records, reducing the need for manual commission schedule checks, thereby enhancing operational efficiency.

OSTTRA’s robust connectivity with Clearing Houses has facilitated trade record enrichment through the sourcing of the Exchange Order ID, providing improved trade visibility. Additionally, direct client allocation submissions to Clearing Houses have minimised delays and offered real-time insights into trade clearing status.

Joanna Davies, Managing Director FX & Securities at OSTTRA, expressed appreciation for the recognition, stating, “This award is a testament to the dedication and collective efforts of our teams and the commitment of our valued ETD network participants.”

FinanceFeeds acknowledged OSTTRA’s contributions to the industry, noting, “As OSTTRA’s achievements continue to shine, their remarkable contributions to the industry’s evolution have not gone unnoticed. Our gratitude goes to OSTTRA and their team for their commitment to transforming the ETD post-trade landscape.”

In conclusion, OSTTRA winning the ‘Post-Trade ETD Provider of the Year’ award affirms its commitment to delivering practical, impactful solutions in the ETD post-trade space. This recognition reflects OSTTRA’s longstanding leadership and continued dedication to innovation in the industry.

To find out more about our end-to-end ETD post-trade processing capabilities, please contact us at info@osttra.com.

The next chapter in the saga of delayed ETD trade allocations

A never-ending story where everyone waits in anticipation for the next instalment. Well, it is Oscar season after all. But for those of us immersed in the world of market infrastructure, there is a more esoteric narrative developing that would rival any academy award winning script. While the story of enabling greater visibility and efficiency in exchange-traded derivatives (ETD) markets is far from complete, there are more than a few signs of progress.

In part one this time last year, we talked extensively about how the industry, as a whole, needed to work together. Only through collaboration can firms have real-time transparency into the status of the executions, and control over the allocation of risk to the correct accounts at the clearing brokers. This transparency is key in driving a significant reduction in operational risk and cost for all participants, as well as significant capital cost reduction for executing brokers.

Exploring these issues through industry dialogue and fostering a spirit of collaboration, we are delighted to report that we have made real progress in developing solutions to help mitigate these challenges. Take the issue of order IDs as a prime case in point. By uplifting our services to support the matching of order IDs from both buy-side and executing brokers, clearing firms will no longer be encumbered with an imperfect process of hunting for fills to pair off with allocations submitted using average price, enabling a smoother and more expedient give up process and submission onwards for clearing. If standardisation is the key to unlocking the door to success, as per the broader blueprint published by the FIA back in October, then our uplifting of the trade order ID component takes the industry a further step forward.

However, while finding a solution to the ID component is unquestionably a mark of progress, there are additional chapters to come in the ETD trade workflow story. Reconciling the correct execution commissions remains a significant headache for the FCM community. In response, we are enriching allocation records with the appropriate data, removing the need for brokers to manually look up commission schedules and append trades with the correct amounts.

We’re also looking to drive further efficiencies by connecting bi-directionally to Clearing Houses in order to deliver two clear benefits. Firstly, the further enrichment of trade records by sourcing the Exchange Order ID which will provide an irrefutable link between EB Fills, Client allocations and the trade held at the clearing house. Secondly, by directly submitting client allocations to Clearing Houses, we can remove potential delays and provide investment firms with a direct a view into the clearing status of their trades across their entire broker network. We began this journey by connecting to CME clearing and are working to integrate a further four major CCPs in the coming year.

Our ongoing talks with many industry participants suggest that continuing to adopt a pragmatic and expedient way to solve the functional issues is the right approach and starts the ETD community on the path to implementing standards, as guided by the FIA blueprint. It all comes down to bringing operational efficiency, transparency, and timely processing, while giving buy-side firms the necessary flexibility to meet their mandates. Ultimately, the transformation of the workflow should be the primary goal for all parties but, for ETD, most participants are still talking about evolution as opposed to revolution – and our progress at OSTTRA clearly aligns with that sentiment.

So, while the award winners at this year’s Oscars may well feature exciting plot twists and taut psychological drama, we’re backing a more predictable script for our industry in the coming years. A storyline built on careful analysis, step by step change and, above all, continued collaboration among all ETD market participants.

Enhanced ETD network streamlines post-trade processing

We have enhanced our OSTTRA ETD ClientLink service, to address inefficiencies in ETD trade processing in line with the FIAs blueprint to modernize trading and clearing processes.

These changes enhance our existing network of more than 180 industry participants to address key workflow challenges in give-up, allocation and clearing processes, aimed at reducing delays and errors in achieving trade finality and thus reducing systemic risk for the industry.

Firms will be able to take advantage of the following key enhancements:

- Allocation and Fill Matching based on common order IDs contributed by brokers and clients, ensuring correctly linked give-ups to FCMs
- Commission Fee Enrichment automating the enrichment of fully allocated trades with execution commissions and applicable taxes
- CCP Connectivity for the enrichment of allocated trades with Clearing house IDs and direct submission of client allocations

Key benefits for participating firms include:

- Enriched trade records that reduce error rates and speed up trade finality
- Certainty for FCMs that fills/allocations have been correctly linked by a common ID
- Increased efficiencies via direct delivery of allocations to CCPs and FCMs
- Enhancement to an existing service using established integrations

Collaboration is King at FIA IDX 2021

Decades of delayed trade allocation issues in exchange traded futures markets can only be resolved by the industry working together, according to industry experts at the FIA IDX conference in London this week.

Speaking at the ‘working together for post-trade evolution’ panel discussion on Monday, Joanna Davies, Managing Director at OSTTRA, said: “In many respects, we already know about the operational challenges we face, as they have been around for what seems like an eternity. The COVID-induced volatility last March put the issue of delayed trade allocations into sharp focus as we saw certain clearing brokers at risk. The stark reality is that if we as an industry can’t get together to do something about it, regulators may force the point on their own and implement a proposed solution that is not ideal.”

On an average day in exchange traded futures, 4% of global trading volume is given up more than a day late. During the height of the global sell-off in Q1 2020, the figure spiked to 7% (Source: FIA). “The pandemic fuelled volatility reinforced just how problematic the give-up process is, and the impact on operational resources when things go wrong,” added Nick Solinger, President & CEO at FIA Tech, who joined Davies on the panel.

One of the biggest challenges around trade allocations outlined by the panel was around order IDs. While all market participants have an order ID on a trade, there is currently no link between everyone’s order ID from trade execution right the way through to allocation and clearing. According to Davies, getting the right data in the right place is the key to making allocations more efficient.

“The information needed to ensure a stronger allocation process is available, the trouble is that the industry have not been attaching allocation instructions to orders at the point of trade. Some may say a behavioural change amongst the buy-side is needed, but it is actually a process change that is required. There needs to be a desire to enrich trade notifications to reduce congestion at the end of the trading day. The buy-side should be allowed to trade as they wish. It is not about asking them to change, instead we should enrich allocations with information already in existence to try and solve this particular issue.”

“That collaborative work has only just started, and will require all industry stakeholders to put talent, energy and resources behind standardisation efforts. This won’t always be easy, but it’s necessary to seize future opportunities as well as to ensure that futures markets are not forced to deal with unwanted attention from regulators,” concluded Davies.