The Federal Reserve Bank of New York welcomes the commitments made today in a letter from 17 major market participants to improve the infrastructure that supports the global equity derivatives market. The commitments reflect the need for the industry to increase standardization of equity derivative documentation and to move to greater adoption of electronic processing platforms.
Currently, equity derivatives are processed predominantly via paper confirmations due to the limited adoption of standard trade documentation and Master Confirmation Agreements (MCAs). Therefore, as a first priority, the industry participants have developed a prioritization plan for creating and publishing additional MCAs.
Importantly, the market participants stated their intent to create an environment where frequently traded products are supported by streamlined documentation, the majority of confirmable events are processed electronically, and confirmations are executed on a timely basis.
The New York Fed will be working closely with other U.S. and international industry supervisors to monitor progress in all of these areas against the specific milestones cited in today’s letter. In particular, we consider the creation and publication of additional MCAs and other industry-agreed standard trade documentation to be the industry’s most significant immediate priority.
These commitments follow substantial progress achieved over the past 14 months in improving the infrastructure that supports the global credit derivatives market. The specific goals announced today, which address equity derivatives for the first time, follow the September 27, 2006, meeting between industry participants and domestic and international regulators convened at the Federal Reserve Bank of New York.