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Additional Regulatory Documents

Report on Windsor Follow-Up Developments

The Futures Industry Association Global Task Force on Financial Integrity ("FIA Global Task Force") was organized in March 1995 in response to the collapse of Barings Plc. in February 1995 to address certain national and cross-border issues related to the structure and operation of international markets for exchange-traded and/or cleared futures and options. The FIA Global Task Force includes representatives of major international exchanges and clearinghouses, brokers/intermediaries (including futures commission merchants and other brokers) and customers from the following 17 jurisdictions: Australia, Belgium, Canada, France, Germany, Hong Kong, Italy, Japan, the Netherlands, New Zealand, Norway, Singapore, South Africa, Spain, Sweden, the United Kingdom and the United States.

The primary goal of the Task Force is to enhance the protection of the assets of market participants and, as a means of achieving this objective, to:

  • provide information and education about global futures and options markets;
  • provide market participants with a means of evaluating and comparing exchanges/clearinghouses and brokers/intermediaries;
  • improve cross-border coordination and communication among exchanges/clearinghouses and regulators in the same and different jurisdictions, as well as the level of information available regarding the activities of market participants; promote where necessary, changes in existing laws or regulations to facilitate the realization of these objectives;
  • improve internal risk management by brokers/intermediaries of exposure to customer positions;
  • improve internal risk management by brokers/intermediaries and
  • customers of their own trading activities, including the activities of affiliates (proprietary trading); and
  • enhance public confidence in the global exchange-traded futures and options markets.

The objectives of the Global Task Force are similar to those of the Windsor Declaration of May 1995.

On June 19, 1995, the FIA Global Task Force released 60 financial integrity recommendations for futures and options exchanges/clearinghouses, brokers/intermediaries and customers. The recommendations were intended to provide general guidance to market participants regarding issues and principles which

the Task Force believes should be taken into consideration by such participants in structuring their activities.

Subsequently, the Global Task Force continued to carry forward work to implement various aspects of the recommendations. The following highlights some of the major accomplishments and other developments:

  • The execution on March 15, 1996 of the "Memorandum of Understanding and Information Sharing Agreement" ("MOU"). One of the Global Task Force's recommendations called for each exchange/clearinghouse, subject to applicable law, to have in place procedures and systems for the sharing of information regarding market participants and their trading activities, either directly or through the applicable regulatory authorities, with other exchanges/clearinghouses (including both futures and securities exchanges) and regulators, in the same and other jurisdictions. Under the auspices of the FIA Global Task Force, futures exchanges and clearing organisations developed such a trigger-based agreement whereby the occurrence of certain agreed upon triggering events affecting an exchange member's financial resources or positions will prompt the sharing of information. On March 15, 1996, 49 futures exchanges and clearing organisations initially signed the MOU in Boca Raton, Florida contemporaneously with the signing of the companion regulatory Declaration by 14 futures regulators. Since the initial execution date of March 1 5th, 5 additional exchanges and one SRO have signed the MOU.

  • The development by the FIA Global Task Force of a crisis protocol which contains preparatory considerations on specific actions to be taken during a market emergency. This report is being disseminated separately to exchanges/clearinghouses for their internal use.

  • On June 11, 1996, the FIA Task Force released an Appendix to be used in conjunction with the original recommendations. Included in the Appendix is an illustrative format exchanges and clearinghouses can use to disclose financial safeguards and a guide for collecting information on default mechanisms.

    The format is designed to elicit information about an exchange/clearinghouse that will enable market intermediaries and customers to evaluate the market protection mechanisms in place to support the financial integrity of the clearing system and customer property, the financial resources available to cover a clearing member default and default procedures. To the extent practical, each exchange/clearinghouse is encouraged to prepare an Information

    Statement or revise their existing literature in accordance with the instructions and format presented to foster disclosure of relevant information in a consistent manner that will facilitate meaningful comparisons across exchanges/clearinghouses.

    The Task Force worked specifically on the need for dissemination of information regarding exchange/clearinghouse rules and procedures for the transfer or close-out of positions in the event of default. This guide is designed to help market users collect the appropriate information, if needed, on the default mechanisms of the exchanges and clearinghouses. It is also aimed at giving the exchanges and clearinghouses guidelines for disseminating information on these matters in the Information Statement or through information transmitted separately.

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