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Introduction
Project Overview
How eGAINS Works
Supporting FCMs for eGAINS
Banking Overview
How the System is Funded
Tentative Timeline
Schedule of Monthly Debits, Credits, Payments and Reports
FIA Tech Responsibilities
Markit Responsibilities
CCorp Responsibilities
Participant Firm Responsibilities
eGAINS User Testing Guide v3

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Introduction

The Futures Industry Association has spent the last three years helping the listed derivatives industry address inefficiencies in the give-up process. In February 2007, we launched EGUS, an electronic system to execute giveup agreements. We also have been working with the former FIA European Chapter and the Futures and Options Association to put a system in place to manage give-up payments between executing and clearing brokers.

The Chicago Mercantile Exchange and the Board of Trade Clearing Corporation devised an automated billing system almost 10 years ago to help firms keep track of payables and receivables. Each organization maintains its own version of the system, commonly know as GAINS, which automatically debits and credits the firms’ accounts. The FIA European Chapter worked for over a decade to get a similar system in place for the European markets. The “automated brokerage system” was developed by LCH.Clearnet for their exchanges. This was not a complete solution, however, since other European exchanges did not want their data viewed by a competing clearinghouse. To alleviate this concern, FIA agreed to license GAINS from The Clearing Corporation and have the data managed by an independent third-party service provider.

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Project Overview

FIA Technology Services, Inc., a wholly owned subsidiary of FIA, has licensed the GAINS application system from CCorp. FIA Tech has outsourced the operation of eGAINS to Markit Group, a respected provider of automated solutions to the financial services industry. Markit built EGUS for FIA and currently operates and supports the system. This solution is designed to assure the confidentiality of the data.

FIA Tech will enter into agreements with participating exchanges to provide their data to the system. Eurex, ICE Futures and Liffe are the first exchanges we have approached to provide data. We plan to make the system available to additional exchanges in the North and South America, Europe, and Asia in the future.

FIA Tech will also put in place agreements with executing and clearing brokers to use the system. FIA Tech has commitments in principle from 16 major clearing firms to participate in the system. We are in the process of contacting executing brokers to invite them to participate.

FIA Tech will be governed by a board appointed by the FIA board. The FIA Tech board will be advised by a committee of participating firms.

How eGAINS Works

1. The executing broker (XB) enters the customer give-up agreement, account, and rate information via eGAINS or downloads the information from EGUS.
2. The “bill to” participant or clearing/carrying broker (CB) reviews the give-up agreement, account, rate, and trade information. The CB can reject account, rate, and trade information.
3. Participating exchanges send cleared give-up trade data to the eGAINS System at the end of each business day.
4. eGAINS calculates fees based on a match of executing account, carrying firm, and account information.
5. eGAINS automatically generates pays and collects (currently in Euros,GBP andUSD) between the counterparties.
6. eGAINS pulls the necessary funds fromtheCB account and pays XB according to the payment schedule (see page 3).

Supporting FCMs for eGAINS

Banking Overview

FIA Tech’s commercial bank is providing a Swift-based platform for making currency payments and collections to support multiple country/currency destinations in one file. The full value of the funds is made available on the settlement date. Settlement via single direct debit/drawdown and/or credit can be made via client’s bank account(s) wherever located. FIA Tech’s bank validates, edits, reformats and/or transmits instructions from eGains via Swift to client’s designated bank (s). (Note: FIA Tech’s currency bank accounts are located in London, other then USD, which is in NY). Premiums may need to be charged on some currencies in the future.

How the System is Funded

To underwrite the cost of launching the system, FIA Tech asked major participants in the system to become “supporting firms.” Supporting firms paid FIA Tech a non-refundable deposit of $100,000. The deposits are being used to cover the cost of licensing the eGAINS system from CCorp and purchasing the hardware and software needed to run the system. Once the system is self-funding, the supporting firm, if it meets its commitments, will be able to use the deposit to cover the cost of its execution brokerage obligations.

The ongoing operation of eGAINS will not be funded by a per contract fee or other type of fee. eGAINS will be funded by interest earned on funds held in the system or the Float Payment System. FIA Tech will debit funds from the CB’s account, hold the funds for the float period, and then release the funds to the XB. The length of time the funds are held will depend on the amount of money flowing through the system. In the opening days of eGAINS, funds will be held by FIA Tech for 60 business days. Business day is defined as a working day in all of the markets affected and the major processing centers (US, UK). The number of days will drop as more users are added to the system. We anticipate dropping the float period to 20 days once the amount of money flowing through the system reaches projected levels.

The success of the float payment system depends on the rapid adoption and use of the system by executing and clearing brokers. Firms that do not regularly deposit money into the system will forfeit a portion of their deposit. Sixty days after eGAINS launches, the $100,000 deposit balance will be reduced by $15,000 for each quarter that the supporting firm does not use the system. For each quarter in which the supporting FCM does not use eGAINS, the quarterly reduction will continue until the deposit balance is reduced to zero.

Tentative Timeline

Schedule of Monthly Debits, Credits, Payments and Reports

Date	Activity	Report/Datafile Distribution
FIRST (1ST) BUSINESS DAY OF EACH CALENDAR MONTH (“Day 1”)	Month-end accounting completed for the prior calendar month.	Reports and data files available; distribution method to be determined.
SEVENTH (7TH) BUSINESS DAY OF EACH CALENDAR MONTH (“Day 2”)	8:00 p.m. (Eastern Time) deadline for executing firm to make corrections and adjustments to data within eGAINS.
FIFTEENTH (15TH) BUSINESS DAY OF EACH CALENDAR MONTH (“Day 5”)	8:00 p.m. (Eastern Time) deadline for carrying firm to Re-Accept or Reject information in eGAINS. Data not in a rejected status on the eGAINS System at this time is deemed accepted by the CB.
SIXTEENTH (16TH) BUSINESS DAY OF EACH CALENDAR MONTH (“Day 6”)	The FIA enters debit instructions into banking system. On the eGAINS System, Participants have access to end-of-cycle final reports/data files that reflect final payment amounts including any adjustments made during the payment review period. A Payment Summary Report summarizes a participant’s debits and credits for the current payment cycle.	Final reports and data files available; distribution method to be determined.
SEVENTEENTH (17TH) BUSINESS DAY OF EACH CALENDAR MONTH (“Debit Date”)	Carrying firms’ accounts are automatically debited. This represents the first day of the float period.
LAST BUSINESS DAY OF THE FLOAT PERIOD (“Credit Date”)	Executing firm’s accounts are credited.
LAST BUSINESS DAY OF EACH CALENDAR MONTH	Last day for participant to submit or change banking information	By written notice to the FIA.

Note:The initial float period will be 60 days. This period is expected to drop to 20 days as more participants and funds are added to the system. The process will be reviewed and may be adjusted by the eGains working group.

FIA Tech Responsibilities

Markit Responsibilities

CCorp Responsibilities

Participant Firm Responsibilities