FIA has released a 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.
The report, “Modernizing the Listed Derivatives Workflow: A Blueprint for Change”, addresses the challenge of achieving industry-wide improvements by establishing a framework for building consensus and collaboration among all segments of the industry, including clearing firms, executing brokers, exchanges, clearinghouses, customers and technology vendors.
“When Covid abruptly shut down the world economy in March 2020, the global futures and options markets experienced record trading activity and extreme volatility,” said Walt Lukken, FIA President and CEO.
“This period of stress exposed several long-standing bottlenecks in the trading and clearing infrastructure that cause costly delays in the processing of trades.”
Efforts to improve the workflow in the trading and clearing process have been limited by bespoke processes and the lack of interoperability of systems.
The report recommends that the industry overcomes these challenges by forming an independent standards body.
To encourage the work of this standards body to be widely accepted and adopted, the report recommends that it have a governance structure that represents a broad cross-section of industry stakeholders, and that its deliberations be open and transparent to the marketplace.
The Blueprint also recommends developing a consensus agenda supported by the industry that will provide a foundation for greater standardization.
The report was drafted by JDX Consulting, a consulting firm with expertise in post-trade operations, based on input from 25 firms and 60 individuals representing a cross-section of the industry.
“FIA embarked on this open standards initiative to understand how we can make the ecosystem for trading and clearing more efficient through the adoption of standards and best practices. Today’s Blueprint gives us a pathway for success, but more work needs to be done. FIA looks forward to beginning that dialogue and education with our industry,” continued Lukken.
FIA plans to work with its Taskforce and other market stakeholders in the coming weeks and months to consider the report’s recommendations and to build support for this initiative.