FIA Submits Comments on IOSCO’s report on Direct Electronic Access

          The Futures Industry Association submitted comments to the IOSCO Technical Committee on its consultation paper regarding Policies on Direct Electronic Access and noted that markets offering direct electronic access are in the best position to provide customers with guidance on using these systems and in determining a customer’s proficiency. The FIA emphasized the importance of access to pre- and post-trade information on a real-time basis and highlighted some of the findings in its September 2007 joint study with the Futures and Options Association on risk controls. In its May 26 comment letter to IOSCO, the FIA emphasized that FCMs are best situated to determine appropriate risk management for their business rather than regulators. “Accordingly, the FIA does not support any mandate of how an FCM implements its risk management in satisfaction of regulatory requirements,” the FIA wrote.

          The FIA noted that intermediary firms will not have access to all information from their DEA customers regarding participants in omnibus trading accounts. Accordingly, it warned that DEA customers, not the intermediary firm, should be responsible for setting standards for participants in those accounts. The FIA noted that it is not feasible for an FCM to monitor customers in omnibus accounts and it recommended that the FCM help facilitate direct communication between DEA customers and regulators.

          The FIA highlighted the importance of legal documentation in establishing DEA agreements, but it noted that specific terms of these contracts must not be mandated by regulators. Rules regarding such documentation, it said, must be principles based to accommodate the customized nature of trading relationships. In addition, the FIA warned that conditions and terms regarding delegated access should be set between just the intermediary and the DEA.

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