WASHINGTON, DC—FIA and DMIST, the Derivatives Market Institute for Standards, jointly announce the publication of the Final Standard for Improving Timeliness of Trade Give-Ups and Allocations. DMIST also released a consultation paper on average pricing.
This is the first standard finalized by DMIST and an important milestone in its work to improve operational efficiency in futures trading and clearing. DMIST was established by FIA in April 2022 as an independent standards body. Its purpose is to encourage widespread adoption of standards that will help make markets more efficient, resilient, and competitive.
The Final Standard on Improving Timeliness of Trade Give-Ups and Allocations is designed to improve the delivery and processing of allocation instructions by establishing 30-minute timeframes for completing steps in the allocation process. It defines start and stop points for the 30-minute clock from confirming orders to booking trades. It also defines metrics for measuring progress against the Final Standard.
A consultation paper describing the proposed 30/30/30 standard was released for comment in November 2022 with comments due in January 2023. A Working Group met regularly from January onwards to consider the comments and develop the Final Standard. The Final Standard was approved by the DMIST Sponsor Board on 8 June and reflects comments received and ongoing meetings with a wide variety of market participants.
The Consultation Paper on a Standard Regarding Average Pricing addresses the lack of consistency in average pricing functionality across central counterparties (CCPs). This lack of consistency impacts the timeliness of give-ups and allocations and can require manual intervention. Average Pricing is being used extensively because electronic trading technology allows firms to break large trades into many smaller-sized orders to minimize market impact.
Looking ahead, DMIST has begun working on standards for the reference data and other information that are attached to a trade as it moves through the trading and clearing workflow. Clearing brokers often find that certain data and information have been deleted or truncated as the trade records move from firm to firm, and from system to system. This can lead to delays in the processing of trades. A standard that clarifies which fields need to be populated as a trade moves from execution to settlement, and in what format, would reduce these delays and make the processing of trades more efficient.
Jeff Arnold, Chief Operations Officer, ABN AMRO Clearing USA: "The surge in volumes that began with the pandemic in 2020, along with a number of market-moving events over the past two years, illuminated the interdependencies of the global clearing market. The 30/30/30 proposal is a major step forward in supporting efficient markets while reducing clearing risks. The adoption of these timeframes will increase efficiencies throughout the lifecycle of an allocated trade."
Samina Anwar, Derivatives Operations Director, Cargill: "The 30/30/30 final standard has significant benefits for commodity companies. Adoption of the standard by the industry will improve Cargill’s ability to reduce its hedging risk considerably for validation of voice trades. Cargill will continue to work with its executing brokers on delays associated with give-ups."
Chris Edmonds, Chief Development Officer, Intercontinental Exchange: “The 30/30/30 Standard is an example of how the industry identified an area that needed attention and worked together to create a solution. ICE’s focus every single day is to deliver orderly, efficient and transparent markets for our customers. The 30-minute timeframes will help clarify a crucial period which falls between trades being executed and settled to make the post trade journey even more efficient and further reduce any potential for unnecessary risk to develop during periods of high-volume trading."
Don Byron, Global Head of Industry Operations and Execution, FIA: “The vast majority of give-up transactions are processed in much less than 30 minutes. This Standard addresses the small percentage of trades that are not processed on Trade Day due to market inefficiencies and helps address processing problems that are magnified in periods of high market volatility and high volume.”
Walt Lukken, President and Chief Executive Officer, FIA: “Developing this Final Standard was truly an industry effort. We appreciate the input we received from clients, intermediaries, exchanges, clearinghouses, and vendors. Their feedback and support will help make this standard broadly adopted and improve the efficiency and resiliency of the markets.”
Final Standard
The Final Standard that has been published:
- Identifies four distinct 30-minute activity windows for clients, executing and clearing brokers:
- Specifies that allocation instructions should be sent simultaneously to executing and clearing brokers.
- Emphasizes that the Final Standard will remain in effect during high-volume periods. DMIST will gather information during these periods and consider adjustments to the Final Standard, if necessary.
This Final Standard is designed to improve the delivery and processing of allocation instructions in order to:
- Increase the number of trades processed on trade day;
- Reduce the number of unclaimed and rejected trades;
- Improve straight-through processing and eliminate manual intervention;
- Eliminate uncertainty around positions; and
- Produce more accurate customer statements on T+1.
To support the adoption of this standard, DMIST will form a focus group comprised of representatives from participant firms. The focus group will finalize metrics to measure progress in adopting the standard. DMIST plans to publish aggregated and anonymized industry-wide metrics that can be made publicly available. The focus group also will engage with market participants to determine what issues are impacting adoption of the Final Standard.
Consultation Paper on Average Pricing
To support the Final Standard, DMIST is releasing a consultation paper on average pricing. The consultation paper proposes a standard regarding minimum average pricing functionality on CCPs.
The 17 functions proposed are prioritized into Phase 1 and Phase 2 adoption. Market participants are asked to respond to specific questions including the benefits of a standardized approach to average pricing, optimal number of decimal places, products that can be grouped for average pricing, and trade-specific attributes that would improve allocation processing.
Any member of the public may submit a comment and all comments will be made publicly available. Comments are due September 12.
Background on FIA and DMIST
DMIST is an independent standards body established by FIA to encourage widespread adoption of standards in the exchange-traded derivatives industry that will help make markets more efficient, resilient, and competitive for all. Read more about DMIST and learn about how to participate at Derivatives Market Institute for Standards (DMIST)
FIA is the leading global trade organization for the listed and cleared derivatives markets. FIA’s membership includes brokers, clearing firms, exchanges, clearinghouses, trading companies and commodity specialists as well as technology vendors, law firms and other professionals serving the industry.
