FIA Tech’s Atlantis Ready for More Options Brokers

John Lothian

John Lothian

Executive Chairman and CEO

Give-up Settlement and Payment System Improves Efficiency, Speeds up Payments

FIA Tech is trying to solve a problem for options brokers with a solution that’s worked for futures brokers and exchange-traded derivatives. That problem is improving the efficiency of give-ups and take-ins reconciliation, settlement and payments.

In July, FIA Tech announced the expansion of its Atlantis service to help options brokers settle give-up trades faster and get paid sooner, while freeing up human resources thrown at this complex problem. One hundred million contracts a month are processed via Atlantis, which is expanding into options in a two-part process.

FIA Tech was launched in 2007 by the Futures Industry Association and recently took on a $44 million investment from 10 leading clearing firms to fund the strategic growth of the organization.

Give-ups are used when a trade is executed by a broker other than the one that holds the account. In the exchange-traded derivatives, or ETD side of the trading world, that could be a Goldman Sachs acting as a CME member firm futures clearing merchant (FCM) or a non-clearing FCM that you have never heard of.

In the ETD-land, Atlantis has been bringing greater efficiency to settlement and payment of give-ups since April of 2017. The July announcement that FIA Tech was working with the Options Clearing Corporation to bring the Atlantis service to the U.S. listed options space brings the same workflows and settlement processes to options as it does exchange traded derivatives.

The first month of the Atlantis options initiative saw a 93% settlement rate for give-ups for the two firms signed up for the service, said Mark Davis, head of strategy and industry engagement for FIA Tech who was interviewed by JLN this week. In September, the August give-ups had a 96.8% settlement rate. FIA Tech has more firms to add to the service, but is looking for more to expand the Atlantis community and bring greater efficiency to the listed options brokerage business, Davis said.

“Brokerage teams have been able to re-deploy personnel to more valuable activities” as a result of using Atlantis, Davis said. Davis, who joined FIA Tech in December of 2017, was on the sell side with Barclays before joining FIA Tech and was with Lehman before that as head of futures and OTC clearing technology. 

In the next phase of Atlantis, FIA Tech plans to build a central depository of rate schedules for options trading, just as it has with the DOCS product for exchange-traded derivatives, Davis said. This will not standardize the give-up prices, but rather their format, and it will provide a central location for this information. New rate data is updated every hour in DOCS.

Currently, the manual processes for invoicing give-ups involve an extensive list of trades on one invoice. If there are any trades that don’t match, it can hold up an entire trade-laden invoice from being paid for months or even years. With Atlantis, trades are settled on a trade-by-trade basis, not an invoice-by-invoice basis. That means firms get paid faster and it frees up hours of work for back-office staff to create the invoices or match up trades, rates and firms. It increases straight through processing and decreases the wait to get paid.

Even with the success of Atlantis in the ETD-world, it can take up to six to seven months to settle 90% of the give-ups. About 84% of the trades are settled in the first month, but it takes years for everything to settle, or be taken off the system for negotiation or arbitration. The goal is to get 100% settlement of these trades in three years or less, Davis said.

There are 77 exchanges around the world that FIA Tech supports with Atlantis, that work with 56 central counterparty (CCP) clearinghouses around the world directly and take trade feeds from clearing member brokerage firms for the balance. 

Option brokers do not need to be a member of the FIA to sign up for Atlantis, Davis said.

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