19 September 2018, London, UK – FIA Tech today launched a new Transfer Protocol to help firms prepare for the transitioning of execution and clearing businesses triggered by the UK’s departure from the European Union.
By adopting the Transfer Protocol, brokers transitioning their exchange-traded derivatives execution or clearing business to EU27 affiliates can simplify and automate the creation of new client agreements with all counterparties. These brokerage execution agreements, commonly called Give-Up Agreements, typically involve three or four parties and are widely used by asset managers, hedge funds, commodity trading advisors and pension managers. The Transfer Protocol automates the agreement transition process, including any related reference and account data changes required in trading and clearing systems. Without the Transfer Protocol, these agreements would require redrafting and execution by all parties which would add significant cost and take months to complete.
“With a great deal of uncertainty still facing the industry, firms want to be prepared and have asked us to help them be nimble,” said FIA Tech President and CEO Nick Solinger. “Our goal with the Transfer Protocol was to ease the burden of contingency planning as firms assess the changing Brexit landscape and evaluate business relocation requirements with their clients.”
As clearing firms prepare for the potential disruption of Brexit, a significant number Give-Up Agreements may need to be transitioned to service clients via EU27-based affiliates or branches. The Transfer Protocol provides the legal and technical requirements for the bulk transfer of Give-Up Agreements from one entity to a qualified affiliate without the need to obtain individual consent of all counterparties. Give-Up Agreements housed on FIA Tech’s Docs platform cover the execution and clearing activity for more than 30,000 legal entities and over 700,000 individual investors and account holders. Most of these agreements cover trading activity around the globe and over 40 percent are in the England & Wales jurisdiction with one or more UK-based entities trading on EU venues.
Developed in consultation with FIA and FIA’s legal community, the Transfer Protocol was fast- tracked onto FIA Tech’s Docs platform, allowing firms to maximize the remaining time prior to the end of March 2019 Brexit deadline to fully engage with clients on Brexit plans and transitions. Larger clients often have hundreds of give-up agreements, and large clearing firms have thousands of agreements which would create significant obstacles to business relocations if required.
“This Transfer Protocol is a tool that will allow our members and their clients to better cope with the disruption of Brexit,” said FIA President and CEO Walt Lukken. “With the alternative being significant legal and operational disruption, I commend FIA’s Law and Compliance Division and Legal Working Group in London on working closely with FIA Tech on this industry-wide solution.”
By adopting the Transfer Protocol once, at no cost, parties to existing Give-Up Agreements agree to a specific legal process of cloning the terms of existing agreements and transferring obligations to a qualified broker affiliate or branch. While created with careful consideration of Brexit-driven transitions, the Protocol has been designed to support other types of corporate or regulatory-driven transitions as well.
FIA Technology Services, Inc. (FIA Tech) is a wholly-owned subsidiary of FIA, the global trade association for futures, options and centrally cleared derivatives markets. We collaborate with the global futures industry to improve operational efficiency via integrated, cloud-based systems. FIA Tech provides key services and processes including managing legal agreements, settling brokerage, meeting compliance requirements and automating reconciliation. Our current core applications and services include Docs (EGUS agreements), Atlantis (brokerage settlement), eRecs (reconciliation), OCR data service (regulatory compliance), MiFID lockbox and the FIA Tech Databank with its suite of position limits and exchanges fees data.
For more information, please visit www.fia-tech.com
FIA is the leading global trade organization for the futures, options and centrally cleared derivatives markets, with offices in Brussels, London, Singapore and Washington, D.C. FIA’s membership includes clearing firms, exchanges, clearinghouses, trading firms and commodities specialists from more than 48 countries as well as technology vendors, lawyers and other professionals serving the industry. FIA’s mission is to support open, transparent and competitive markets, protect and enhance the integrity of the financial system, and promote high standards of professional conduct. As the principal members of derivatives clearinghouses worldwide, FIA’s member firms play a critical role in the reduction of systemic risk in global financial markets.