ISITC Publishes Updated Listed Derivative Market Practice

ISITC’s Derivatives Working Group outlines guidelines for processing negative trading prices on commodity futures

Bridgewater, NJ, June 1, 2020 -- ISITC, the industry trade group focused on developing standards and best practices in financial services operations, announced the release of its latest version of the market practice document, “Listed Derivative Market Practice Guide.” ISITC’s Derivatives Working Group developed the document to help users of the SWIFT network process negative trading prices on commodity futures. The effort was spurred by recent market event disruption caused by the COVID-19 pandemic, headlined by the West Texas Intermediate (WTI) oil benchmark, which traded and settled in negative territory for the first time ever.

Commodity futures are traditionally transmitted from buy side to custodians via MT54x messages according to SWIFT settlement instructions. Field 90B within the message indicates the traded price but SWIFT standards do not allow for communication of a negative value in this field. Due to the global nature of SWIFT communications, the change management process can be lengthy and tightly controlled. The market practice document outlines an interim solution that firms can use when special processing is needed to avoid posting a negative traded price trade as a positive.

“After the events of April 20, the Settlements and Derivatives working groups quickly organized around a market practice update as an interim solution,” said Brian Manning, Co-Chair of ISITC Derivatives Working Group. “Our membership’s diverse set of skills and subject matter expertise gave us a broader lens to help address this issue. As efforts continue for a long-term solution, ISITC continues to champion the SWIFT messaging standards.”

After the Derivatives Working Group held frequent calls to discuss the initiative ISITC’s Listed Derivative U.S. Market Practice Guide v3.2 was released in April 2020. The full guide can be viewed here.

 

About ISITC
ISITC brings together investment managers, broker dealers, custodians, utilities and technology vendors to develop and promote standards and best practices that increase operational efficiencies across the securities industry, enabling member companies to provide essential and enhanced products and services. Founded in 1991, ISITC’s membership totals more than 2,000 financial services professionals representing more than 60 firms and trillions of dollars in AUM/AUA. Through its member committees and working groups, ISITC plays a direct role in shaping the future of securities operations by creating and updating market practices and educating the membership around emerging trends in technology and regulations. www.isitc.org

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