European Commodity Market Regulations Part 2

Research Report – 2013/002

December 5, 2013

European Commodity Market Regulations

Implementation, Impacts and Solutions Part 2 of 2

Sponsored by

European Energy Market Regulations – Survey Results

© Commodity Technology Advisory LLC and ETR Advisory Ltd, 2013, All Rights Reserved. December, 2013 2

Contents Background and Approach.............................................................................................................................. 4

Results ............................................................................................................................................................. 5

Demographics ............................................................................................................................................. 5

Regulation Awareness ................................................................................................................................ 5

Action Plans ................................................................................................................................................ 6

EMIR Threshold Calculation ........................................................................................................................ 6

Trade Confirmation Requirements ............................................................................................................. 6

Portfolio Reconciliation .............................................................................................................................. 6

Portfolio Compression ................................................................................................................................ 8

Mark-to-Market .......................................................................................................................................... 9

Data Reporting ............................................................................................................................................ 9

Derivatives ................................................................................................................................................10

Potential Position Reporting Under MiFiD2 .............................................................................................10

Trade Monitoring Under REMIT ...............................................................................................................10

Additional Staffing ....................................................................................................................................10

Impacts on Ability to Trade .......................................................................................................................11

Analysis and Discussion ................................................................................................................................12

Appendix - Questionnaire .............................................................................................................................14

About The Authors ........................................................................................................................................18

Aviv Handler ..............................................................................................................................................18

Dr. Gary M. Vasey .....................................................................................................................................18

About Commodity Technology Advisory ..................................................................................................19

About ETR Advisory ..................................................................................................................................19

About the Sponsor ........................................................................................................................................20

TriOptima .................................................................................................................................................20



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Background and Approach A component of the European Regulatory study conducted by ComTech advisory and ETR Advisory

was to survey the market regarding overall preparedness for the regulations. The following report

outlines the results of that survey providing analysis and discussion of those results. It should be

read in conjunction with Part 1 of our study, which is available for download at

http://www.ctrmcenter.com/publications/reports/european-commodity-market-regulations/

The survey was conducted from August 7 to November 25, 2013. We used email requests, direct

calling, articles, blog articles, and website pop ups and banners to drive responses as well as asking

vendors in the space to solicit responses from their clients. Despite this and the length of time that

the survey was open, we experienced a very poor rate of response and in the end; we managed to

collect some 42 responses in total but eliminated 11 incomplete or invalid responses to be left with

31 usable responses. Software vendors and/or consultants submitted the responses deemed to be

invalid, or the responses had missing or invalid email addresses that prevented validation of the

identity of the respondent.

In order to increase the number of survey responses, we also used telephone interviews entering

their responses ourselves and omitting to record their contact details. In this way, the anonymity of

the respondent was guaranteed; however, we knew the responses to be valid for the purposes of

the study.

It should also be noted that not all respondents answered all questions accounting for the variability

in total response numbers below.

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Results

Demographics The vast majority of the respondents were located within the European Union (71%) with 13%

located in non-EU European countries while the remaining respondents wouldn’t say were they

were located. The respondents were largely based in Utility/Generators (33%) or Traders/Merchants

(33%). The remaining third included Hedge Funds/Banks, Industrial Consumers and Oil & Gas

Producers. Twenty percent of the respondents declined to answer the question. Some 77% of the

respondents traded energy commodities (power, natural gas, oil etc.), 6% traded agricultural and/or

soft commodities and 3% traded metals. Three respondents declined to answer the question. As

might be expected, the respondents were then largely traditional energy traders based in the

European Union.

Regulation Awareness As shown in Figure 1, the majority of the

respondents (65%) indicated that they

were aware of the regulations (EMIR,

REMIT, MIFiD2 etc.). However, 65% is

lower than might be expected given that

some of the regulations are already in

effect and considering the far-reaching

nature and possible impacts of these

regulations.

Thirteen percent said that they did not

know about the regulations and although

this is a relatively small percentage, it is

still significantly larger than might be

expected. Even if this percentage represents those respondents that are not impacted by EMIR or,

are not within the European Union, it must still be viewed as surprisingly high.

Figure 2 shows which regulations the

respondents believe will affect them. The

majority cite both EMIR and REMIT but a

sizable portion also believe MiFiD2 will

affect them as well.

Figure 1: Are you aware of which of the new regulatory rules

(EMIR, REMiT, MiFiD2) that you will need to comply with in

the next few years?

65%13%

16%

6%

Yes No Don't Know No Answer

Figure 2: What regulations do believe will affect you?

0 0.2 0.4 0.6 0.8

EMIR

REMIT

MiFiD2

CRDIV

None



Figure 3: Are you able to calculate if you are you over or under the

EMIR threshold?

Action Plans In order to see if general awareness of the regulations translated into planned actions, we also asked

if the respondents’ companies already had a fully resourced and budgeted program plan to comply

with the rules and whether that plan included both business and IT. In fact, only 45% of the

responding companies said that they had such a plan and only 35% have a plan that spreads across

business units and their IT departments. Thirty-two percent of the respondents stated that no such

plan existed, while 13% did not know. The remainder did not respond to the question. The survey

suggests that less than half of the companies in the survey are already planning the actions that are

required to comply with regulations.

EMIR Threshold Calculation One key aspect of planning for EMIR is to know whether your company is under or over the ‘threshold’.

The survey suggests that just under

half of the responding companies are

able to calculate their EMIR threshold

already on a daily basis, some 23%

require further clarification in order to

perform the calculation and just 7%

can’t perform the calculation.

Of the 14 respondents that can and

do calculate their EMIR threshold, six

have that process automated

already while eight companies

perform the calculation manually.

Furthermore, just over half of those

calculating the threshold are carrying

out a capital simulation exercise to see

the potential effects of clearing if you go over the threshold

Trade Confirmation Requirements

Just under 40% of the responding companies believe that they are already in compliance with the

new T+7/5 trade confirmations requirement. Around 20% said that they were not in compliance and

a further 26% did not know. However, only four respondents felt that they complied with the new

stricter confirmation requirements coming in while eleven said they were not in a position to comply

and a further eleven did not know. The answers to these two questions again indicate a significant

level of unpreparedness among the responding companies.

Portfolio Reconciliation Another aspect of EMIR is the need to reconcile portfolios. We asked whether responding

companies intended to perform that trade reconciliation manually or by using a system. In fact,

around a quarter said they will perform portfolio reconciliation manually and 16% more will combine

46%

23%

17%

7%7%

Yes Maybe Don't Know No No answer



Figure 4: Portfolio Reconciliation

16%

16%

26%

26%

16%

Using a system Combination of system and manual

Manual only Don't Know

No Answer

manual and systems to perform portfolio reconciliation. A further 16% will use software only while

almost a quarter do not know how they will do it.

When asked how they intended to perform the portfolio reconciliation activity, only 10 respondents

replied. Of these, 60% said that they intended to exchange files with each relevant counterparty on

an agreed date and

then using their

system to perform

the reconciliation,

25% said that they

would use an

outsourced service

that takes the trades

and works out the

dates, as well as

performing the

reconciliation, while

one respondent had

not yet decided.

We also asked how

many extra man-days of effort per quarter would be added by the new reconciliation rules to their

workload. Only 11 respondents answered but they suggested a range of values from three man-

days/quarter to as high as 30 man-days/quarter and an average of 16.8man-days of additional effort

per quarter.



Figure 5: Portfolio Compression

4% 0%

60%

24%

12%

Yes - Multilateral Yes - Bilateral No but plan to

No but plan to Don't Know

Portfolio Compression In terms of undertaking portfolio compression, at this stage of the game, there seemed little interest

in it. Of those that answered the question, 56% stated that they had no plans to do it. Only one

respondent said that they would perform portfolio compression and that they would do this

multilaterally. Not a single respondent suggested that they would undertake bilateral compression.

However, almost a quarter of the respondents said that while they did not perform portfolio

compression now, they

planned to do so in the

future and another 11% did

not know what their plans

were.

The lack of interest in

performing portfolio

compression however

seems to be a matter of

preparedness as opposed

to a true lack of interest as

almost 55% of the

respondents were aware of

available services for

multilateral compression.

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Figure 6: Trade Reporting Preparedness

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Understand Hold Data Gap Analysis TR

Investigated

Yes/Plan to No

Mark-to-Market The survey suggests that meeting the mark-to-market calculation requirement of EMIR for those over the

threshold is a larger issue than might be expected. Only 44% of those who answered the question said

that they were able to calculate mark-to-market, 32% said that they could not calculate it and 24% said

that they did not know the answer.

Data Reporting

In terms of knowing what data is required to be reported both under EMIR and REMIT, a cursory glance

at the data seems to imply a reasonable level of understanding as 83% of the respondents that answered

the question said yes. However, one has to ask why the question wasn’t answered by 20% of the survey’s

respondents? Is it because the answer would be “No”?

That the majority seems somewhat prepared for data reporting is also suggested by the follow up

question which asked if they had checked that the data required by each set of rules is held

somewhere within the organization. Some 65% of the respondents said that they had undertaken

this work already. Furthermore, 52% said that they had performed a data gap analysis with 13% still

planning to do so. Around a third of the respondents answering the question had not performed a

gap analysis. Similar ratios are observed in those that have investigated the Trade Data Repositories

with 65% having already investigated TRs,

17% planning to do so and a quarter who

had not.

Around 70% of those who answered the

question had also investigated software

and service-based solutions to help with

the regulatory reporting under EMIR

and/or REMIT and 65% had already

begun to implement such a solution.

However, the majority in our survey plan

to deploy and utilize homegrown

solutions according to the survey

responses.

Finally, just under half of the respondents

(48%) said that they aware of the business

processes that will need to change because

of REMIT and EMIR.



Derivatives When it comes to having a mechanism in place to tell if a trade is considered a “derivative” and whether

it is traded via an MTF, as per the recent FCA ruling, there is less preparedness with only 39% saying yes,

39% saying no and the remainder indicating they do not know if they have such a mechanism in place.

Potential Position Reporting Under MiFiD2 While naturally much focus is on EMIR and REMIT regulations and preparedness, MiFiD2 may also have

an impact on the industry. When we asked about awareness of the potential position-reporting

requirement under MiFiD2, only 22% of those answering the question said that they were aware and 88%

were not.

Trade Monitoring Under REMIT Our respondents were also split on whether they were obligated to implement trade-monitoring

software or processes under REMIT. It would appear many are still trying to determine this, with 35% of

those who answered the question saying that they did not know. Around 22% felt that they were not

obligated with the remaining 43% believing that they were. Of those, 40% stated that they would

implement trade surveillance by business process and policy only and the other 60% would include a

software solution. Its notable, however, that 73% of the respondents that answered the question felt

that doing trade surveillance was a good idea irrespective of REMIT.

Additional Staffing All of the additional tasks and activities around the regulations add up to possibly the need for more staff

to handle that workload. On average, the respondents felt that about four new staff would be needed

however; plainly, this depends on the size and complexity of the organization and responses ranged from

none (5) to 10 or more new staff (2).

Figure 7: Additional Headcount to Comply

0

1

2

3

4

5

6

None One 2 to 4 5 to 10 10 or

more

Don't

Know



Impacts on Ability to Trade The impacts of the regulations are seen by the respondents to the survey to be largely in increased costs

related to technology and support, with 70% of the respondents citing this as a concern. Reduction in

OTC transactions and increased costs due to margin requirements were both cited by a third of the

respondents. Around 15% of the respondents felt there would be no impact (these were predominantly

European no-EU entities) and one respondent believes that they will need to divest part of their business

to keep compliance costs down.

Figure 8: Impacts on Ability to Trade

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

Increase our costs related to technology and

support

Reduce the number of OTC transactions that we

do

Increase cost of trading due to higher margin

requirements

No impact

Will force us to divest a portion of our business

to reduce the regulatory burden



Analysis and Discussion Despite almost 6-months of pushing to gain responses to the survey, response rates remained low.

Discussions with others across the industry suggeste that this is a common phenomena around

surveys related to regulatory preparedness and perhaps indicates an unwillingness to provide details

on the issue of preparedness. It may be the level of unpreparedness that has kept response rates

down.

Frankly, the level of preparedness is low considering that these regulations have been in planning

(and have been frontpage news) for several years and EMIR is already in force. However, it is true

that implementation dates have slipped and details regarding implementation have been slow to

emerge and in some instances still remain unclear. Perhaps some beleive that as a result, the

regulations will never be properly implemented? Certainly, there appears to be a general lack of

urgency around the issue.

According to our sample, only 65% are aware of the regulations. Again, given the amount of

coverage of the regulations in the media and the industry, this seems surprising. Furthermore, less

than half the respondents have an action plan to deal with the regulations and just over a third of

respondents have a plan that crosses IT and business boundaries.

EMIR is already in force but only around half of the respondents can calculate where they sit with

respect to the threshold and almost 1 in 10 cannot perform the calculation. Around 40% are in

compliance with the new trade confirmation requirements but only 4 respondents felt they could

comply with the new stricter requirements coming in.

We observe similar results when it comes to other aspects of EMIR such as portfolio compression

and portfolio optimization and risk management. Data reporting appears to be the only area of EMIR

(and possibly REMIT) where respondents have made a start. Here, more than 80% of those that

answered the relevant questions have made some progress. In other areas such as REMIT

requirements and the potential requirements around MiFiD2 there is a great deal of uncertainty and

not much preparedness.

The overwhelming conclusion of the survey must be that the industry has yet to properly prepare in

many quarters for these regulations. In fact, an additional observation is that while vendors and

service providers seem to have invested in developing new solutions (reporting, threshold

calculations, trade surveillance tools and so on), they too have yet to see the interest levels that they

originally may have expected.

Overall, the data gathered via this survey and others that we are familiar with seems to suggest that

around a third of the industry consider themselves prepared and ready for the regulations, a third

are in progress with preparations and a third haven’t yet started. Another private ComTech Advisory

survey for example, asked a question about readiness for EMIR and REMIT and found similar results

(Figure 9).



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Figure 9: Results of a Previous ComTech Survey on Readiness for EMIR and REMIT

Finally, the respondents in this current survey do indicate that compliance with these regulations

comes at potentially significant costs; ranging from additional staff required to ensure compliance

burdens are met, through potential divestment of parts of the business. The issue, however, is that

the level of preparedness and consideration given to the impact of these regulations indicated by

the survey doesn’t give us much confidence in their assessment of the impact. It may well be that

the final impact is even greater indicated in the survey.

24%

34%

19%

19%

4%

Aware and fully compliant Aware and preparing for compliance

Aware and not started Not heard of the regulations

Not Applicable



Appendix - Questionnaire The following are the question used by the survey.

What type of company best describes you?

Hedge fund/bank/investment bank/financial institution

Utility/Generator

Oil & Gas Producer/Marketer

Pipeline/Refiner/Processor

Merchant/Trader

Agricultural Producer/Mining

Industrial Commodity Consumer

Chemical/Petrochemical

Retailer

Coal Producer/Marketer

Oil Trader

Other, please specify

In which commodity segment does your company primarily trade?

Energy

Ags/Softs

Metals


Are you aware of which of the new regulatory rules (EMIR, REMIT, MiFiD2 etc.) that you will need to

comply with over the next years?

No

Yes

Don’t Know

Which regulations do you actually fall under?

CRD IV

MiFiD2

EMIR

REMIT

None

Do you have a resourced and budgeted program to comply with the different aspects of the rules?

Yes

No

Don’t Know

If yes, is this spread across IT and the business?

Yes

No

Don’t Know

Are you able to calculate if you are over or under the EMIR threshold?

Don’t Know

Yes

Maybe – we need clarification on what is included in the calculation

No

Do you have an automated process in place to calculate the EMIR threshold?



Yes

No – manual

Don’t know

Are you carrying out a capital simulation exercise to see the potential effects of clearing if you go over

the threshold?

Yes

No

Don’t Know

Are you already in compliance with the trade confirmations requirement T+7/5?

Yes

No

Don’t Know

Are you in compliance with the stricter requirements coming in?

Yes

No

Don’t Know

Will you perform portfolio reconciliation using a system or manually?

System

Manually

Combination

Don’t Know

Please indicate which systems you plan to use?

Will you be performing the reconciliation by?

Exchanging files with each relevant counterparty on an agreed date and using your system to

perform reconciliation?

Using an outsourced service that takes your trades and works out dates for you, as well as

performing the reconciliation?

If manually, how many man-days per quarter do you think will be added by the new reconciliation

rules?

Do you perform portfolio compression?

Yes – bilaterally

Yes – multilaterally

No

No but we intend to

Don’t Know

Are you aware of available services for multilateral compression?

Yes

No

Are you able to calculate daily mark to market/model if required?

Yes

No

Don’t Know

Are you aware of the data that must be reported under both EMIR and REMIT?

Yes



No

Have you checked that the data required by each set of rules is held somewhere within the

organization?

Yes

No

Don’t Know

Have you performed a data gap analysis?

Yes

No

Don’t Know

Have you investigated the various EMIR trade repositories/REMIT RRMs?

Yes

No

We plan to

Don’t know

Have you reviewed software and services to help send the data to the reporting locations?

Yes

No

Don’t Know

Have you begun to implement a solution?

Yes

No

Don’t Know

Which solutions are you implementing or planning to implement?

Are you aware of the business processes that will need to change because of REMIT and EMIR?

Yes

No

Don’t Know

Do you have a mechanism to tell if a trade is considered a ‘derivative’ and whether it is traded via an

MTF?

Yes

No

Don’t Know

Are you aware of the potential position reporting requirements of MiFiD2?

Yes

No

In your view, are you obligated to implement a trade monitoring processes and/or software in order

to comply with REMIT?

No

Yes – we will implement by process and policies

Yes – we will implement via process, policy, and a software solution

Don’t Know

What Software solution are you using?

If not, do you think it is a good idea to perform trade monitoring anyway?



Yes

No

Don’t Know

How many additional people will your firm need to manage through all of these new regulations?

None

One

2-4

5-10

10+

Don’t Know

Do you believe these regulations will impact your ability to trade? (Please check all that apply)

There will be no impact

We will reduce the number of OTC transactions that we do

Will increase the cost of trading due to higher margin requirements

Will increase our costs related to technology and support

Will force us to divest a portion of our business to reduce regulatory burden




About The Authors This report has been compiled and issued by ComTech Advisory in association with ETR Advisory and

sponsored by TriOptima.

Aviv Handler Mr. Handler is the Managing Director of ETR Advisory, a specialist consulting company focused

entirely on Energy Trading regulation. He specializes in energy regulation and the IT systems and

platforms required for compliance. He gained this after spending several years in the field, setting up

the European Compliance Centre of Excellence at SunGard prior to founding ETR. He has also been

involved in banking regulation.

He has 20 years of experience in energy trading, credit, risk and financial technology. He has

delivered a series of trading, credit and risk solutions to a wide variety of oil majors, power and gas

companies and investment banks.

The last 12-years have been focused on the commodity trading markets, the majority of which was

spent running Coherence Consulting, which specialized in credit risk within the energy markets as

well as CTRM systems and implementations and compliance. Coherence’s team delivered a number

of solutions to a variety of global and local clients under his leadership, spanning oil majors, gas and

power trading companies and CTRM software houses. Coherence was ultimately absorbed by Sirius

Solutions, where he ran the European region.

Prior to forming his business, Mr. Handler led product strategy for KWI, an ETRM vendor whose

system, KW 3000, was widely used in Europe and North America.

Mr. Handler also spent several years in capital markets technology, specializing in compliance, risk

and financial messaging. He was one of the original members of the FpML initiative, a standard that

is now in scope for Energy regulation alongside others such as CpML.

Mr. Handler speaks regularly at conferences, and has written a large number of articles on

regulation, credit and commodity trading, as well as financial messaging. His blog at

http://www.energytradingregulation.com is being increasingly used as a primary resource for

information about the state of the regulation space.

Mr. Handler holds a degree in computer science from Imperial College, University of London.

Dr. Gary M. Vasey Dr. Vasey is an industry expert noted for his analysis, consulting, marketing, and branding skills. With

over 29-years’ experience in the energy and commodities trading industry, Gary has experienced the

industry’s volatility as an executive of a trading firm, geologist, consultant, software developer,

analyst, and marketing practitioner, providing him with unique insights, not just into the entire value

chain, but also into how to position, brand, and deliver products and services to the industry.

He is a noted expert on the commodity trading, transaction and risk management software industry

and an accomplished industry analyst and thought leader.

Gary has published more than 200 articles on energy and commodities industry trends in a variety of

publications, is a regular speaker at industry conferences, and is the co-author of the books Trends in

Energy Trading, Transaction and Risk Management Software – A Primer and Selecting and

Implementing ETRM Software – A Primer (with Patrick Reames). He also contributed two chapters to

The Professional Risk Managers‘ Guide to Energy and Environmental Markets published by PRMIA

and two chapters, co-written with Peter C. Fusaro, to Weather, Energy and Environmental Hedging –

An Introduction (ICFAI University Press, 2007) edited by Amando F C Da Silva.



Gary is also the co-author of Energy & Environmental Hedge Funds – The New Investment Paradigm

(Wiley, 2006) with Peter C. Fusaro, and of many trade press articles on hedge funds in the energy,

commodities and environmental industry.

Gary holds a B.Sc. (Hons.) degree in Geological Sciences from the University of Aston in Birmingham,

England and a Ph.D. in Geology from the University of Strathclyde, Scotland.

About Commodity Technology Advisory Commodity Technology Advisory (ComTech Advisory) is the leading analyst organization covering the

ETRM and CTRM markets. We provide the invaluable insights into the issues and trends affecting the

users and providers of the technologies that are crucial for success in the constantly evolving global

commodities markets.

Patrick Reames and Gary Vasey head our team, who’s combined 60-plus years in the energy and

commodities markets provides depth of understanding of the market and its issues that is

unmatched and unrivaled by any analyst group. For more information, please visit

http://www.comtechadvisory.com.

ComTech Advisory also hosts the CTRMCenter, your online portal with news and views about

commodity markets and technology as well as a comprehensive online directory of software and

services. Please visit the CTRMCenter at http://www.ctrmcenter.com.

About ETR Advisory ETR (Energy Trading Regulation) Advisory Ltd is a specialized, expert resource, which explains, and

helps apply the complex labyrinth of European Energy and Commodity Market regulations, including

EMIR, REMIT and MiFID II. Our detailed knowledge of the rules and the technology platforms and

solutions around them permits us to help our clients navigate and implement the best solutions

while being ready for future rules.

Since being founded in May 2013, ETR has already advised several Market Participants, ETRM

companies and trading platforms. ETR has also provided training to several companies.

ETR also runs the blog at www.energytradingregulation.com, which provides news and thoughts

about developments in the regulatory field in one place.



About the Sponsor

TriOptima TriOptima is the award-winning provider of post trade risk management services and infrastructure

for OTC derivatives. Focused on reducing costs, eliminating operational and credit risk, improving

counterparty exposure management, and reducing systemic risk, TriOptima offers a range of

services: triReduce to reduce swap inventory and counterparty risk; triResolve to reconcile OTC

derivative portfolios and manage disputes; triBalance to manage cleared and bilateral counterparty

risk; and triQuantify to measure and analyze counterparty risk. Currently triBalance and triQuantify

are in the piloting phase and are targeted for launch by early 2014.

triReduce, TriOptima’s portfolio compression service, eliminates credit risk and reduces operational

and capital costs. Eliminating derivatives exposures and shrinking the balance sheet is critically

important in anticipation of Basel III gross leverage ratio guidelines. Derivatives are measured on a

gross, not net basis, inflating balance sheets significantly. Moreover, compression eliminates gross

notional value, and with the EUR 3 billion clearing threshold in EMIR, it has become extremely

important for commodity trading companies to proactively manage their gross notional exposure.

Serving over 150 institutions worldwide including major energy houses and dealer banks, triReduce

offers compression cycles in a range of commodity derivatives, interest rate swaps and credit default

swaps. triReduce has terminated $354 trillion in notional principal outstanding across product

classes since its introduction in 2003 through August 2013.

TriOptima has gone from a pilot phase in 2011 to running 6 live cycles in the commodity space in the

past year, including natural gas, power, oil, coal and precious metals. Over 24 commodities houses

and dealer banks have participated with several more completing documentation in preparation of

the upcoming cycles. More than $14 Billion in notional principal has been eliminated for

commodities transactions.

triResolve, TriOptima’s portfolio reconciliation and counterparty exposure management service, is

used by over 450 institutions to reconcile their OTC derivative portfolios, the majority on a daily

basis. With over 8 million transactions on triResolve (90% of collateralized OTC derivative

transactions plus uncollateralized OTC derivatives, cleared trades and other types of trades), most

reconciliations are done daily in order to comply with the new portfolio reconciliation standards that

will be effective under the CFTC (August 23) and ESMA (September 15) rules in 2013.

New institutions are joining triResolve daily around the world, over the past 12 months over 250

new firms have started to use triResolve, an increase of more than 100% over the previous 12

months. The number of reconciliations grew to 116,000 a month in July 2013. Energy firms, Asian

financial institutions and mid-tier European firms are among the growing number using triResolve.

Enhancements to the basic triResolve platform incorporated and standardized data categories

critical to commodity participants. Currently over 450,000 commodity trades are being reconciled on

triResolve. Adoption of the triResolve service accelerated dramatically in the past year in order to

meet the regulatory deadlines for portfolio reconciliation in the US (August 23) and Europe

(September 15). During the past year, triResolve has been adopted by the commodity trading

community as the industry-wide solution for portfolio reconciliation. As of end of August 2013, over

70 leading energy houses and financial institutions use the triResolve service for reconciliation of

commodity trades.

triResolve is a network service that does not involve any software installation or updates. In fact,

triResolve revolutionized reconciliation practice from a reactive, spreadsheet-based internal



operation to a proactive, secure web service. Clients upload their data against their counterparties

onto the triResolve website, and the results of the reconciliation are available on the website.

All types of OTC derivative transactions (IRS, equity, CDS, FX, Commodities, etc.) and all product

structures (plain vanilla to bespoke) are accommodated in triResolve. There are no data format

requirements; triResolve normalizes the data that each institution submits. Matching information is

available to users at the portfolio level or at the individual transaction level. Users can communicate

on the triResolve platform both internally with other departments in their institution or externally

with their counterparties to investigate differences. triResolve’s advanced analytics and reporting

functionality allow users to drill down to any level of the data in multiple dimensions and produce

reports targeted to the needs of any audience from the most senior credit officer to the head of

collateral management.

During the last year, triResolve users have expanded the application of triResolve’s reconciliation

functionality to trades beyond the collateralized OTC derivative transactions initially

included. Uncollateralized OTC trades, cleared transactions, exchange-traded transactions,

securities lending trades and repo trades are also reconciled on triResolve in response to the need

for greater precision in counterparty credit risk management. Emphasizing the versatility and

adaptability of the service, triResolve clients also reconcile their collateral positions.

Most recently (June 2013), TriOptima and DTCC announced the DTCC trade repository will make

client data available to TriOptima to support data verification and portfolio reconciliation of trade

repository data. TriOptima will be the first service provider to directly receive DTCC repository data

for this purpose underscoring TriOptima’s commitment to interoperability and innovation in a

changing marketplace. Interested in establishing connectivity to additional repositories, TriOptima

also announced that it will connect to REGIS-TR when it goes live in January 2014 under EMIR rules

for transaction reporting.

TriOptima, an ICAP Group company, maintains offices in London, New York, Singapore, Stockholm,

and Tokyo.