By adopting the Transfer Protocol, brokers transitioning exchange-traded derivatives execution or clearing business to EU27 affiliates can simplify and automate the creation of new client agreements with all counterparties. These brokerage execution agreements, commonly called Give-Up Agreements, typically involve three or four parties and are widely used by asset managers, hedge funds, commodity trading advisors and pension managers. The Transfer Protocol automates the agreement transition process, including any related reference and account data changes required by trading and clearing systems. Without the Transfer Protocol, these agreements would require redrafting and execution by all parties which would add significant cost and potentially take months to complete.
“With a great deal of uncertainty still facing the industry, firms want to be prepared and have asked us to help them be nimble,” said FIA Tech President and CEO Nick Solinger. “Our goal with the Transfer Protocol was to ease the burden of contingency planning as firms assess the changing Brexit landscape and evaluate business relocation requirements with their clients.”
As clearing firms prepare for the potential disruption of Brexit, a significant number of Give-Up Agreements may need to be transitioned to service clients via EU27-based affiliates or branches. The Transfer Protocol provides the legal and technical requirements for the bulk transfer of Give-Up Agreements from one entity to a qualified affiliate without the need to obtain individual consent of all counterparties. Give-Up Agreements housed on FIA Tech’s Docs platform cover the execution and clearing activity for more than 30,000 legal entities and over 700,000 individual investors and account holders. Most of these agreements cover trading activity around the globe and over 40 percent are in the England & Wales jurisdiction with one or more UK-based entities trading on EU venues.
Developed in consultation with FIA and FIA’s legal community, the Transfer Protocol was fast-tracked onto FIA Tech’s Docs platform, allowing firms to maximize the remaining time prior to the end of March 2019 Brexit deadline to fully engage with clients on Brexit plans and transitions. Larger clients often have hundreds of Give-Up Agreements, and large clearing firms have thousands of agreements and for all of these firms to transition these agreements individually before March in order to continue uninterrupted trading arrangements would require significant resources if required for business relocations.
“This Transfer Protocol is a flexible tool that will allow our members and their clients to better cope with the disruption of Brexit and other similar events,” said FIA President and CEO Walt Lukken. “I commend FIA’s Law and Compliance Division and the Legal Working Group in London for their work with FIA Tech on this industry-wide solution.”
By adopting the Transfer Protocol once, at no cost, parties to existing Give-Up Agreements agree to a specific legal process of cloning the terms of existing agreements and transferring obligations to a qualified broker affiliate or branch. While created with careful consideration of Brexit-driven transitions, the Protocol has been designed to support other types of corporate or regulatory-driven transitions as well.