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FIA Asia Derivatives Conference

Brokerage WorkshopBrokerage Workshop

FIA Technology Services, Inc.

November 2011

Brokerage Workshop Agenda

• Background: FIA Tech/EGUS/eGAINS

• Overview of EGUS and eGAINS• Overview of EGUS and eGAINS

• Benefits From A Firm’s Perspective

• Onboarding eGAINS

2

Background

• Brokerage settlement process is historically inefficient

• Firm’s backlog of settlements spanned months & years• Firm’s backlog of settlements spanned months & years

• FIA was approached to help establish efficiencies

• FIA established FIA Tech to provide software, services

• FIA Tech serves EGUS & eGAINS to firms globally

3

Background – Timeline

2006 – Industry approaches FIA to help establish back office efficienciesefficiencies

Nov 2007 – FIA launches EGUS to automate give-up agreement workflow

May 2008 – FIA acquires eGAINS to automate brokerage settlements - EGUS and eGAINS are integrated

Nov 2008 – eGAINS launches in the UK with ICE Europe and 10 supporting firms

May 2009 – FIA brings the LIFFE exchange into eGAINS4

Background – Timeline cont.

Jan 2010 – FIA Technology Services (FIA Tech) is incorporated

Apr 2010 – FIA Tech brings Eurex into eGAINSApr 2010 – FIA Tech brings Eurex into eGAINS

Jan 2011 – FIA Tech brings ICE Futures U.S. into eGAINS

Jul 2011 - Firms in eGAINS grows to 22, representing the majority of give-ups for participating exchanges

5

Background – EGUS At A GlanceIn production November, 2007

# Of brokers’ legal entities using EGUS: 2,705

# Of customer and trader entities using EGUS: 23,256

# Of executed agreements: 89,194

New developments: EGUS 3.0 in 2012

6

Background – eGAINS At A GlanceIn production November, 2008

Participating exchanges: Eurex, LIFFE, ICE Europe/US

Number of firms using eGAINS: 21 representing the UK and US

Contract volume since launch: Over 550 million contracts

New developments: Reconciliation software launching early ’12, SGX exchange launch early ‘12

7

EGUS/eGAINS Firms

1. ABN AMRO* 8. Deutsche Bank*# 15. Morgan Stanley*#

2. ADM 9. FC Stone 16. Newedge*#

* EGUS Supporting FCM, # eGAINS Supporting Firm

2. ADM 9. FC Stone 16. Newedge*#

3. B of A/Merrill Lynch*# 10. Goldman Sachs*# 17. RJ O’Brien

4. Barclays*# 11. HSBC*# 18. Royal Bank of Scotland*#

5. Citigroup*# 12. ICAP US 19. SCS Commodities

6. Credit Suisse*# 13. Jefferies Bache* 20. Term Commodities

7. Daman Quattro 14. JP Morgan*# 22. UBS*#

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EGUS/eGAINS High Level Overview

• Exchange To eGAINS Give-up Data Flow

• EGUS Give-up Agreement Flow

• eGAINS Matching Criteria

• eGAINS Payment Processing And Workflow

• eGAINS Report Schedule

• eGAINS Banking Processing Schedule

9

Exchange to eGAINS GiveExchange to eGAINS Give--up Data Flowup Data Flow

10

EGUS GiveEGUS Give--up Agreement Flowup Agreement Flow

11

EGUS GiveEGUS Give--up Agreement Flow (continued)up Agreement Flow (continued)

12

eGAINS Matching CriteriaeGAINS Matching Criteria

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eGAINS Payment ProcessingeGAINS Payment Processing

14

eGAINS Payment ProcessingeGAINS Payment Processing

15

eGAINS Payment ProcessingeGAINS Payment Processing

16

EGUS

• Web based application for industry use

• Brokers and/or customers/traders can sign up for EGUS

• Participants use EGUS to manage agreements

• Participants can attach electronic rates or upload pdfs

• EGUS allows storage/retrieval of executed agreements

• EGUS feeds downstream billing and accounting systems

• Participants can also upload legacy agreements

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18

19

20

21

22

23

24

25

26

27

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eGAINS

• Web based

• “Participant-centric” setup

• Facilitates brokerage payments between participants

• Multi currency, multi exchange

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30

31

32

33

34

35

36

37

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EGUS/eGAINS – The Benefits

From a Firm’s PerspectiveFrom a Firm’s Perspective

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EGUS/eGAINS Benefits

• Data Integrity – exchange data

• Better data quality – correct rates (fewer disputes)• Better data quality – correct rates (fewer disputes)

• Improved MI for the business to better manage brokerage

• On-line automated reconciliation

• Execution Only

• Cash flow benefits

• Less outstanding Total Debt & in particular Aged Debt

• Operational efficiencies (less headcount) 40

• Clearing Only

• Operational efficiencies (less headcount) to a greater extend

EGUS/eGAINS Benefits, cont.

• Operational efficiencies (less headcount) to a greater extend

than EO

• Robust industry wide platform

• Industry-wide consistency and conformity

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• Execution Only – Improved Cash Flow

• eGAINS settles the vast majority of current trades

Benefits from EGUS/eGAINS, cont.

• eGAINS settles the vast majority of current trades

• Aged Brokerage, eGAINS prevents future build-up, working

groups established to clear legacy Aged Brokerage (e.g., FOA

Brokerage group)

• High eGAINS match percentages reduces the risk of Total

Receivables and Total Aged Debt build-up

• Trades settled via Direct Debit – no lost payments, complete

clarity as to which trades have been settled – improved

reporting42

• Data Integrity & Better Data Quality

• Only executed/valid agreements can rate eGAINS trades

Benefits from EGUS/eGAINS, cont.

• Only executed/valid agreements can rate eGAINS trades

• Minimal rate issues – as a result should improve STP

• eGAINS receives a direct interface from Exchanges –

reduction of reconciliation and DK issues

• Amendments to rates marked in eGAINS

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eGAINSeGAINS match percentages and Aged Debtmatch percentages and Aged Debt

30%

35%

40%

80%

90%

100%

Aged Debt % of total Debt

eGAINS Match

% rates

•• Aged Debt continues to Aged Debt continues to

reduce reduce

•• Level of Total Debt also Level of Total Debt also

significantly reduced significantly reduced

Reconciliation Match Rates 90%Reconciliation Match Rates 90%

0%

5%

10%

15%

20%

25%

30%

0%

10%

20%

30%

40%

50%

60%

70%

Aug-0

9

Sep-0

9

Oct-

09

Nov-0

9

Dec-0

9

Jan-1

0

Feb-1

0

Mar-

10

Apr-

10

May-

10

Jun-1

0

Jul-10

Aug-1

0

Sep-1

0

Oct-

10

Nov-1

0

Dec-1

0

Jan-1

1

Feb-1

1

Mar-

11

Apr-

11

May-

11

Jun-1

1

Jul-11

Aug-1

1

Sep-1

1

Receivables %

Payables %

Aged Debt %

Eurex Eurex GoGo--

LiveLive

Aged debt Aged debt

target = zerotarget = zero

Reconciliation Match Rates 90%Reconciliation Match Rates 90%

Banking Match Rates 60%Banking Match Rates 60%

Matching may be achieved but gMatching may be achieved but g

to banking is essential for succesto banking is essential for succes

How do we close the gap;How do we close the gap;

•• Closer/enhanced collaborationCloser/enhanced collaboration

•• EGUS API EGUS API

•• Unsigned GUA’sUnsigned GUA’s

•• Electronic GUA’sElectronic GUA’s

•• Third Party BillingThird Party Billing

•• Voice v ElectronicVoice v Electronic

•• Reconciliation ToolReconciliation Tool

•• OtherOther

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• Dedicated resource – concentrated solely on improving

match percentages/settlement via eGAINS

• Increased knowledge of EGAINS system, leading to greater

Why eGAINS has been a success at Morgan Stanley:

• Increased knowledge of EGAINS system, leading to greater

efficiency

• Significant “buy-in” from key internal stakeholders

• Effective in-house reconciliation tool – built around eGAINS

process

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How can eGAINS be utilised further:

• Further exchange on-boarding – increased volumes =

increase electronic settlement and quicker cashflow

• Further firm on-boarding• Further firm on-boarding

• Voice/Electronic fix – currently ongoing – Majority of DK

trades eliminated

• Integration and adoption by the eGAINS community of the

reconciliation tool

• Increase awareness of the eGAINS system across the

industry

46

eGAINS Onboarding

• Exchange Onboarding

• Firm Participant Setup

• Participant Training

• Coordinate Firm Launch

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eGAINS – Exchange Onboarding - Phases

• Project Initiation and Analysis

• Exchange Development

• Interface Testing

• Exchange Production Implementation

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eGAINS – Firm Participant Setup - Forms

• eGAINS processing agreement

• eGAINS initial setup form

• eGAINS user ID request form

• eGAINS exchange instruction form(s)

• Www.Futuresindustry.Org

• Give-up projects/EGAINS

• Resources/documentation

• On-boarding documentation49

eGAINS – Firm Participant Setup, cont.

• Firm setup in QA

• Initial EGUS agreement load

• Initial firm training sessions

• Bank account and instructions setup

50

eGAINS – Firm Training

• eGAINS QA system – real give-ups and agreements

• Individualized training sessions for each firm

• Firms train on eGAINS, reports, and banking

• Firms typically train 2 – 4 months in QA

51

eGAINS – Coordinate Firm Launch

• Firms individually work on match percentages

• Firm “launch committee” is formed

• All documentation is finalized

• Launch committee sets production date

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FIA Asia Derivatives Conference

Brokerage WorkshopBrokerage Workshop