Update

Exchange & Clearing House Issues

	Eurex

The FOA has established a Legal Working Group to address a number of issues with the Exchange – these include:

•  The facilitation of efficient execution of pre-negotiated business

•  Outsourcing of trading and clearing functions

•  Resolution of the problems associated with the lack of segregation

•  Development of rules that would allow more efficient oversight of firms' order routed business

The FOA will provide more information to its members as progress is made on these issues.

Following a number of instances where members have failed to exercise in-the-money options which had significant financial ramifications for the firms concerned, the FOA is addressing the various operational/functionality problems which firms believe exacerbate the risks involved in the exercise/assignment process.

If your firm wishes to provide feedback on this matter to the FOA, please contact Hugo Jenkins.

	ICE Futures

Announcement of 3am TRS opening

Following the circular from the Exchange which gave members a couple of days notice that TRS would be opening at 3am, the FOA received calls from members who were concerned about the risk management implications of the move. The FOA subsequently met with the Exchange to stress the need for proper consultation with members before announcing such changes.

On the 6 June, the Official Exchange Settlement Price for the July ICE Nat Gas contract was incorrect due to a “processing error”. The explanation from the Exchange as to what led to the error was deemed to have been wholly inadequate by FOA members and so the FOA will be urging the Exchange to provide further detail as to the circumstances surrounding the error and the steps the Exchange will be taking to ensure that this does not happen again.

	Euronext.liffe

Management of conflicts of interest when facilitating arbitrage in softs between Euronext.liffe and NYBOT.

The FOA has been working with the Exchange and FOA members to agree an appropriate way to address the potential conflicts of interests which can arise when executing London/NY arbitrage business in softs futures contracts. Discussions are still ongoing however the preferred approach is likely to involve firms sending their clients a disclosure statement – the FOA is working on the development of a standardised statement for firms to use if they wish.

	LME

Changes to Lending Guidance for Nickel

The FOA has been asked by its Metals Working Group to seek clarification on the circumstances that led to the decision to modify the Lending Guidance for nickel which became effective on 7 June.

LME Order Handling Guidelines

The FOA intend to commence the updating of this publication to reflect MiFID related regulatory change next month.