comment letter 4-14

Informations

• Publié par: Mocel
• Nombre de lectures: 12
• Langue: English

Extrait

April 14, 2005

Mr. Andrew Douglas

SWIFT s.c.

The Corn Exchange

55 Mark Lane

London EC3R 7NE

United Kingdom

RE: Consultation Paper on The Proposal for the Removal of Barrier 1 of the Giovannini Report

Dear Mr. Douglas:

The Futures Industry Association (“FIA”) appreciates the opportunity to comment on “The

Proposal for the Removal of Barrier 1 of the Giovannini Report.”

The FIA is pleased that The

Giovannini Group has recognized the need for an EU-wide standard protocol for clearing and

settlement to create an effi

cient and safe European clearing and settlement system. We com-

mend the work of SWIFT in putting together the consultation paper requested by The Giovannini

Group and believe it provides a solid base in moving forward over the next year; however, we

believe fi

nal recommendations should be developed by a broad industry-wide group, and not by

any one standard-setting body. In addition, the FIA believes the specifi

c method of standardiza-

tion should be a fi

nancial services industry-driven initiative that addresses global clearing and

settlement across asset classes, and not mandated in scope or timing by any regulatory authority.

FIA is a principal spokesman for the commodity futures and options industry.

Our regular mem-

bership is comprised of approximately 40 of the largest futures commission merchants (“FCMs”)

in the United States, and all 40 fi

rms have offi

ces, affi

liates or relationships in Europe and Asia.

Among our approximately 170 associate members are representatives of virtually all other seg-

ments of the futures industry, both national and international, including U.S. and international

exchanges, banks, legal and accounting fi

rms, introducing brokers, commodity trading advisors,

commodity pool operators and other market participants, and information and equipment provid-

ers. All major European derivatives exchanges and clearing organizations are members of the

FIA.

Refl

ecting the scope and diversity of our membership, FIA estimates that our members

effect more than 90 percent of all customer transactions executed on U.S. contract markets.

Mr. Andrew Douglas

- 2 -

April 14, 2005

FIA Promotes Standardization

FIA supports and facilitates standardization of business practices, trade entry, and post-trade pro-

cessing for exchange-trade derivatives (“ETDs”) in order to achieve cost effi

ciencies for market

participants and encourage competition. In the last quarter of 2004, the combined value of trad-

ing in interest rate, stock index and currency contracts on organized exchanges world-wide ex-

ceeded $279 trillion, according to a survey by the Bank for International Settlements. This fi

gure

does not include the considerable amount of trading done in precious metals, energy, grains and

other agricultural products.

Exchange-traded derivatives is very much a global business with contracts traded on more than

60 exchanges around the world. When adopting industry standards, the FIA has had to consider

models that could be applied across all geographic regions and all asset classes: fi

xed income,

securities, and commodities.

In March 2001, the FIA released a white paper which included a “Standard Protocol for Trading,

Clearing and Risk Management” which generally supported moving towards a standard protocol

for the industry with a view to co-ordination of all exchanges and clearinghouses (whether or not

electronic) and, to the extent possible, OTC derivatives.

The white paper instructed FIA to organize a technical committee including representatives from

brokerage fi

rms, exchanges, clearinghouses and end users to identify the potential for common

standards. The FIA Standards Working Group began meeting in the spring of 2002 on standards

for order routing.

FIA helped enhance FIX 4.3 to be ready to support ETDs. Since June 2002,

the FIA has been working with all U.S. futures exchanges to create a standard for post-trade pro-

cessing using FIXML 4.4. All U.S. futures clearinghouses in the Working Group, including the

Options Clearing Corporation, have signifi

cant FIXML projects underway and we have hosted

meetings with European exchanges, clearinghouses and fi

rms to encourage adoption. Some

exchanges have several fi

rms using FIXML for trade messaging in production at the time of this

writing.

The FIA has responded to and supported regulator requests for standardization initiatives by

marshalling industry resources to create market-driven standards. This model of partnering with

industry associations and standards organizations has proven to be highly effective. The Bond

Market Association, International Swaps and Derivatives Association and the FIA play an im-

portant role in bringing a wide variety of perspectives to the table to develop and promote the

adoption of standards. As a result, U.S. regulators to date have not found it necessary to mandate

communication standards.

The Consultation Paper

We applaud the principles applied in creating the consultation paper: leveraging existing activ-

ity, inclusiveness, openness, and neutrality. The consultation paper sought to leverage existing

industry initiatives in order to be “evolutionary rather than revolutionary,” however, it did not in-

clude the considerable work being done by the FIX Protocol Organization and the FIA Standards

Working Group in the post-trade processing space. With regard to neutrality, SWIFT has consid-

erable expertise in the standards area, but is also a major purveyor of a standard. We believe the

Mr. Andrew Douglas

- 3 -

April 14, 2005

process outlined in The Giovannini Report which tasks SWIFT, working with Securities Market

Practice Group, should be broadened to become a collaborative effort of all industry participants

and not delegated to a single organization.

The standards space is very competitive with FIX, SWIFT, ISITC, TWIST, FISD and FpML vy-

ing to become industry standards. Broadening the effort to include these organizations in draft-

ing the fi

nal recommendations would support the principle of openness put forth in the paper. In

addition this collaborative effort should include representatives from interested associations such

as the FIA, Securities Industry Association, Bond Market Association, International Swaps &

Derivatives Association, Futures and Options Association, International Securities Market As-

sociation, and the Federation of European Securities Exchanges. These organizations provide

considerable resources for cross-industry efforts. Coordination of industry-wide testing for Y2K,

Euro conversion and disaster recovery are examples of the ability of these associations to bring

their industries together to support a common initiative.

We understand the purpose of The Giovannini Group is to look at removing barriers to cross-

border business. It is important, therefore, to take into account the ongoing work in the standards

area, the cost of global implementation of standards, and most important, a fl

exible and robust

standard that takes into account the global and evolving nature of clearing and settlement. We

would like to strongly urge The Giovannini Group to broaden this effort to include all standard-

setting bodies and associations representing various market constituencies. A working group

comprised of these entities could be asked to make an inventory of existing standards and identi-

fy gaps that exist. The group could then determine how best these gaps can be fi

lled by extending

current standards rather than creating new solutions or government-regulated standards.

The FIA is extremely supportive of creating a clearing and settlement standard that will be fully

usable and applicable across industries and global in scope. We have a deep interest in standard-

ization efforts in Europe and would like to be involved in the process. Because we have been

addressing this issue in the U.S., we would be willing to share our experience and help organize a

meeting of interested groups.

Thank you very much for the opportunity to comment on this comprehensive and far-reaching

proposal. We are available to assist The Giovannini Group in its work on standardizing message

content in any way we can.

Sincerely,

John M. Damgard

President

cc: Sharon Brown-Hruska

Acting Chairman

Commodity Futures Trading Commission