IDX 2022: why futures industry must act on standardisation

It’s time for the futures industry to heal its painful workflow problems, and the International Derivatives Expo 2022 is the perfect platform for sparking action.

The futures industry has evolved gradually over 40 years into a complex ecosystem. This involves many processes and actors trying to get the right trades into the right places at the right times.

Lack of standardisation in underlying data, protocols and processes has led to a sub-optimal workflow that periodically fails in times of extreme market activity. These failures significantly increase costs and risks to brokers and their clients.

This dull ache of sub-optimal process never hurt enough to prompt action, until recently.

The sharp pain of prolonged high volatility and high volume trading during the pandemic spurred the industry to start collaborating, with oversight and coordination from the Futures Industry Association (FIA).

The aim of this collaboration was initially to administer first aid to address the immediate and growing backlog of misallocated trades; then to diagnose and treat the underlying problems.

Delta Capita FIA partnership

Delta Capita is working with the industry to solve these challenges. We partnered with the FIA to conduct a broad industry outreach that analysed the root causes and suggested solutions.

This work focussed on issues in the give up, allocation and average pricing processes - all of which were highlighted in the FIA Annual Progress Report.

Delta Capita continues to work with FIA and participants from all parts of the industry to identify solutions and drive adoption of standards of best practice.

At this year’s IDX conference in London, I will also lead a roundtable of industry experts in discussing ‘A roadmap towards standardisation’. We will analyse observations from March 2022 market volatility showing the industry’s progress; and discuss standardisation issues with the audience.

At the event, I will also call on the futures industry to join the Derivatives Market Institute for Standards (DMIST) in its plans to create a strong foundation of standards. This will create a bedrock of best practice on which the industry can build more streamlined solutions.

By Mark Croxon, Global Head of Market Infrastructure