OSTTRA’s Joanna Davies goes beyond 30-30-30 data standard at FIA Boca 2023

Rick Steves

FinanceFeeds Editor-in-Chief Nikolai Isayev spoke with Joanna Davies about OSTTRA.

The Futures Industry Association (FIA) welcomed the global derivatives industry to the 48th annual Boca International Derivatives Conference, held on 14-16 March in Boca Raton, Florida.

FIA Boca 2023 attracted more than 40 exchanges and trading venues as well as regulators looking to take the pulse of the industry as trading volumes in global exchange-traded derivatives rose by 34%, printing a new record for the 4th consecutive year.

OSTTRA, home of post-trade 50/50 owned by CME Group and S&P Global

Among the attendees was Joanna Davies, Head of FX and Securities at OSTTRA, “home of post-trade” and parent company of MarkitServ, Traiana, TriOptima & Reset. The progressive end-to-end post-trade solutions is a JV, 50/50 owned by CME Group and S&P Global, focused on the global capital markets across interest rate, FX, equity and credit asset classes.

OSTTRA identified further issues across ETD workflow

OSTTRA was present at FIA Boca 2023 a few days after announcing it was closely working with FIA’s DMIST to help identify a data standard for post-trade processing of exchange traded derivatives (ETD).

Joanna Davies, who led Traiana several years prior to the launch of OSTTRA, is an undisputed authority in ETDs with over 30 years of experience in the space, with prior roles including exchange traded derivatives broker and ETD European Head of Operations amongst others. Such diversified experience allows her to easily identify value in standardization.

“I was a futures practitioner for about 30 years, involved in every aspect of the futures industry, from futures broking to head of operations of one of the big banks, to relationship management, and have spent an awful lot of time trying to overcome the systemic problems that exist in the futures workflow.”

The 30-30-30 standard for post-trade processing of ETDs

Joanna Davies further explained how the idea of making the change came about. “Over the last two years we have seen a huge amount of risk entering the futures markets due to regular spikes in volatility. This has prompted a desire as an industry to self-regulate or solve, for the first time in a long time , the inefficiencies in that futures workflow”. Market participants came together and leveraged their experience and competencies in order to reach an agreement on a data standard.

In November 2022, FIA’s DMIST had released a consultation paper for the proposed 30-30-30 standard aimed at improving the processing of certain types of transactions in the exchange-traded derivatives markets.

DMIST, an independent organization created by FIA in 2022 to promote greater efficiency in the trading and clearing workflow for derivatives, is proposing that each client, executing broker, and clearing broker should submit and process their give-up and allocation messages within 30 minutes of the relevant event that triggers their action.

“If you speed up finality of trade in futures markets then you reduce risk, you meet clearing windows, and resolve problems and exceptions as quickly and as early as possible”, Joanna Davies explained, pointing to the problem: the data that is being passed down is not accurate. “You can meet the time in a standard and the trade that ends up in the end account is still wrong. The need for standardization is spot on. I’m a massive supporter of it.”

Joanna Davies and OSTTRA want to take the conversation further as there is significant data inconsistency causing problems across the workflow.

“We took it out upon ourselves at OSTTRA to go to market participants and track how data persisted or didn’t persist across the ETD workflow. From there, we identified an opportunity to contribute or put forward a data set that could form or contribute to a data standard that could sit behind the timeliness standard the FIA already proposed. That’s the idea: to bring these two things together and put it up for broader debate and consultation.”

Voice broking is one example when it comes to data and time inaccuracies. “Getting an executing broker notification for voice executed transactions in a timely fashion seems to be one problem that is coming up a lot. I think it’s fair to say that a significant proportion of futures transactions process accurately in a very short period of time, well within the 90-minute proposed window. But about 5-6 percent can reate enormous risk.”

Regarding the most persistent causes of trade breaks, Joanna Davies counted four or five that “really cause the bulk of the issues and these are things that we’ve been exploring with market participants. It’s the output from these conversations that has directly contributed to the data set that we feel can help build the backbone of a standard.”

“I’m surprised we still do voice broking”, Nikolai Isayev said half-jokingly, to which Joanna Davies replied she was a voice broker when her 18-year-old self joined the trading industry in 1991. Since then, most markets have moved to electronic execution, but some historic markets remain voice-prevalent. “We still need to have a process that allows automation and efficiency regardless of being voice or electronic”, she said, pointing to the 30-30-30 standard as the way to go.

OSTTRA offers real-time post-trade solution with trade order ID

OSTTRA, however, already offers a solution that solves these post-trade inefficiencies and risk today. “We process and bring together a network of market participants – we have 140 buy-side clients, 40 executing brokers, 20 clearing brokers. We have had this service in existence for about 10 years. In the past 14 months we extended the service to add an extra layer of data accuracy and increase operational efficiency.”

The firm’s solution includes the creation of a trade order ID that can persist across the workflow, tying together the data fields and processing in real-time. “We don’t need a 90-minute window. We can help people process in real-time. Well within the 30-30-30 standard, and bring forward finality of trade in futures markets. This is already in production today.”

Evolution vs Revolution in post-trade

To end the interview, Joanna Davies spoke about the different takes for a roadmap in the ETD space: evolution vs revolution.

“I’m not saying either one is right or wrong but our approach has seen very good traction from market participants”, she said about the adopted evolutionary change: “The most pragmatic way to effect change today and by doing so decrease operational risk and inefficiency is by leveraging existing infrastructure and connectivity. Participants can leverage the solution today without a heavy lift on their side.”

“We have extended our evolutionary approach to consider how we can tokenize ETD transactions and continue to look to the future whilst solving the immediate problems affecting ETD participants today”, Joanna Davies stated

As the market moves to substantiate any proposed standards around timeliness and data consistency, she expects end clients will move to demand brokers meet standards and that this will become the defining factor for executing and clearing relationships. The ETD market is in a period of transition and the defining factor for success is the continued collaboration of all involved to drive real change today.

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