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FUTURES INDUSTRY BUSINESS CONTINUITY AND DISASTER RECOVERY 2007 INDUSTRY TEST RESULTS “ DR IV ” November 5, 2007 Compiled and Developed by Tellefsen and Company, L.L.C. TABLE OF CONTENTS Background3 Executive Summary8 Overall Test Results12 Problems Encountered27

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FUTURES INDUSTRY BUSINESS CONTINUITY AND DISASTER RECOVERY2007 INDUSTRY TEST RESULTS“DR IV”November 5, 2007Compiled and Developed byTellefsen and Company, L.L.C.


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TABLE OF CONTENTS

  • Background3

  • Executive Summary8

  • Overall Test Results12

  • Problems Encountered27

  • Lessons Learned29

  • Suggested Next Steps33

Page Number:


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I.BACKGROUND

  • The FIA Information Technology Division conducted the first annual Disaster Recovery (DR) Test in October 2004.

  • Starting in Q2, 2007, the FIA Business Continuity Committee began detailed preparations for this year’s third annual industry-wide test.

  • A Working Group was convened to discuss and agree on a date, goals, objectives, etc.


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BACKGROUND (Cont’d) …

  • Two futures Industry BC/DR symposiums were held in September in New York and Chicago. Panelists included representatives from the major exchanges and clearinghouses:

    • CBOE Futures Exchange

    • Chicago Board of Trade

    • Chicago Mercantile Exchange/CME Clearing

    • The Clearing Corp.

    • Eurex AG

    • ICE Futures EU

    • ICE Futures US/ICE Clear US

    • Liffe

    • Kansas City Board of Trade/KCBT Clearing Corp.

    • MEFF

    • New York Mercantile Exchange/NYMEX Clearing

    • Philadelphia Board of Trade

    • Winnipeg Commodity Exchange


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BACKGROUND (CONT’D) …

  • The scope of this year’s initiative was designed to test disaster recovery back-up connectivity and functionality between exchanges, clearinghouses and member firms:

    • Test firm back-up to exchange back-up sites (DR-DR).

    • Verify connectivity.

    • Test round-trip communications capabilities.

  • The symposium sessions were well attended by numerous operations managers and BC/DR representatives from various clearing and non-clearing firms.

  • Regular Committee conference calls were held between May and October (bi-weekly and weekly).


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BACKGROUND (Cont’d) …

  • The Committee including representatives from:

    • Clearinghouses

    • Exchanges

    • FCMs

    • Clearing firms

    • Non-clearing firms

    • Key service providers

    • Independent software vendors


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BACKGROUND (Cont’d) …

  • To encourage participation, the FIA agreed that all firm names would be anonymous and test results would be without attribution to any firm.

  • Post-test interviews with firms and survey forms were used to fine tune the results.


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II.EXECUTIVE SUMMARY

  • The fourth annual industry-wide disaster recovery test in the U.S. financial services sector was highly successful, largely in part to the good working relationship between exchanges and the firms.

  • Major U.S. and international futures exchanges, clearinghouses, FCMs and clearing firms participated in this year’s test:

    • 103 FCMs, clearing firms and non-clearing firms participated - an increase over last year

    • 98% of firms tested successfully

  • Participant firms represent a significant critical mass of futures order flow and liquidity:

    • ~88% of overall futures exchanges’ volume.


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    EXECUTIVE SUMMARY (CONT’D) …

    • This year’s test initiative was expanded to include several domestic and international exchanges:

      • ICE Futures EU

      • MEFF

      • Philadelphia Board of Trade

    • Exchanges and clearinghouses demonstrated that their systems, processes and procedures simultaneously worked very well.


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    EXECUTIVE SUMMARY (CONT’D) …

    • Feedback from the firms, exchanges and clearing houses indicated that this was a valuable and worthwhile exercise and that the industry should continue to do more common testing in the future.

    • Firms indicated that the test helped them:

      • Exercise their Business Continuity/Disaster Recovery plans

      • Identify internal single points of failure

      • Tighten up and document their business continuity procedures

      • Better understand the need for cross-training

      • Test connectivity with exchanges’ DR sites


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    TEST PARTICIPANTS REPRESENT A SIGNFICANT % OF EXCHANGES’ VOLUME

    Source: Exchanges and Clearing Houses


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    III.OVERALL TEST RESULTS

    • The major domestic and international futures exchanges and clearinghouses and 103 firms* participated in the test:

      • CBOE Futures6

      • CME Group54

      • Clearing Corp.23

      • Eurex 66

      • ICE87

      • ICE Futures US/ICE Clear US29

      • Kansas City Board of Trade17

      • Liffe19

      • MEFF2

      • NYMEX/COMEX40

      • Winnipeg Commodity Exchange14

        * Some firms are common members of multiple exchanges and clearing houses. PBOT testing did not involve members.


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    OVERALL TEST RESULTS (CONT’D)…

    • Test participants included both clearing firms and non-clearing firms.

    • Approximately 85%of all futures clearing firms participated.

    • 98% of firms tested successfully.

    • 92% tested from their Disaster Recovery sites and/or via back up communications facilities.

      • The remainder tested from their primary sites.


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    CBOE FUTURES EXCHANGE

    • Tested via member firms’ back up connectivity to production CBOEdirect trading platform.

    • Scripted trade entry for VIX futures contracts.

    • Transmitted trades to the Clearing Corp’s. back- up systems.


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    CHICAGO BOARD OF TRADE

    • Members tested connectivity to eCBOT trading system.

    • Participated in post-trade testing and generated a subset of October 26th trades to member firms from CME Clearing.

    • Injected trades in trade handling system via back up site.

    • Transmitted trade confirmations from CME Clearing.

    • Accepted EFP, change records, PCS and large trader records.


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    CHICAGO MERCANTILE EXCHANGE

    • Tested member firms back-up connectivity to production GLOBEX trading platform via CME remote back-up site.

    • Entered a script of orders for various products.

    • Received ex-pit, block trade information via CME remote site portal URL.

    • Generated trade reporting and SPAN files from 10/26 trade date.

    • Received PCS and large trader information from member firms.

    • Transmitted trade registry data and SPAN files via FTP.


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    THE CLEARING CORP.

    • Tested member firms’ back-up connectivity to back-up clearing system.

    • Confirmed system connectivity via successful system login message – no scripted trade entry.

    • Transmitted previous business day clearing reports to member firms:

      • Match off files

      • Report files

      • SPAN files

    • PCS, ex-pit and large trader information was not accepted.


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    EUREX AG

    • Tested member firms’ back up connectivity to production XCEED electronic trading platform.

    • Connectivity was confirmed via successful system log in message – no scripted order entry.


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    ICE FUTURES US / ICE CLEAR US

    • Tested member firms’ back-up connectivity to the ICE Trader electronic trading system.

    • Scripted order entry for Cotton and Sugar futures contracts.

    • Trade entry via TIPS system for test trades, ex-pit, large trader and PCS information.

    • ICE Clear produced end-of-day files:

      • Match off files, report files and SPAN files.


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    ICE FUTURES EU

    • Tested member firms’ back-up connectivity to the ICE Exchange electronic trading system DR site.

    • Scripted order entry for Cotton and Sugar futures contracts.

    • Tested ICE Block and other non trading functionality from DR site.

    • ICE Web reporting via Internet portal for deal reporting, position reports, etc.

    • Futures trades submitted to the ICE Clear DR site.


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    KANSAS CITY BOARD OF TRADE

    • Members tested connectivity to eCBOT trading system.

    • Participated in post-trade testing.

    • Generated a subset of October 26th trades to member firms.

    • Transmitted trade confirmations from KCBT Clearing Corp.

    • Accepted EFP, change records, PCS and large trader records.


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    LIFFE

    • Tested member firms’ back up connectivity to production CONNECT trading platform.

    • Connectivity was confirmed via successful system log in message to central gateways– no scripted order entry.


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    MEFF

    • Tested via the MEFF production ETS environment.

    • Simulated a failure of their London POP and successfully failed over to the backup system during the test.

    • Members entered trades and received reports.

    • Transfer files were delivered from clearing, but member firms’ back office systems did not receive any test data.


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    NEW YORK MERCANTILE EXCHANGE

    • Tested member firms’ back-up connectivity to GLOBEX trading platform, ClearPort TMS and ClearPort Clearing systems.

    • Order entry via scripted trade entry in crude oil, natural gas, heating oil, gasoline, silver and gold futures contracts.

    • Reported trade fill information to member firms.

    • Transmitted end-of-day clearing reports via NYMEX Clearing:

      • Ex-pit, PCS, large trader information

      • 591 Member Trade Register report


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    PHILADELPHIA BOARD OF TRADE

    • PBOT conducted an ‘internal’ test

    • Used the PBOT/XL trading system

    • Trade Orders received at PBOT/XL Help Desk.

    • Fill reports were generated.

    • PBOT trade file processed for clearing and settlement.


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    WINNIPEG COMMODITY EXCHANGE

    • Members tested connectivity to eCBOT trading system.

    • Participated in post-trade testing.

    • Generated a subset of October 26th trades to member firms from Clearing and transmitted trade confirmations.

    • Accepted EFP, change records, PCS and large trader records.


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    THE MAJORITY OF PARTICIPANTS WERE CLEARING FIRMS

    Number of Firms

    Source: Exchanges and Clearing Houses


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    IV.PROBLEMS ENCOUNTERED

    • A number of problems were encountered, including:

      • Incorrect FIX tags impacted routing logic

      • Configuration parameter not set properly on back up servers

      • Configuration file issues with ISV systems

      • MQ connectivity/could not generate MQ messages

      • Incorrect IP addresses/incorrect network configuration

      • Firewall configuration parameters

      • Member firm hotline was not working initially

      • Exchange trading system not accepting logins

      • Exchange web portal connectivity problems

      • Remote login to clearing system did not work

    • Most were resolved quickly, although some caused an unexpected delay to test progress.


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    PROBLEMS ENCOUNTERED (CONT’D)…

    • Some firms experienced procedural problems with invalid or expired passwords, looking at the wrong system screens, etc.

    • One exchange had problems with firm’s access to their backup systems, issues with SFTP encryption certification.

    • Some firms did not verify that their back up servers and equipment was properly functioning prior to the test.


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    V.LESSONS LEARNED

    • The futures industry proved that it is capable of successfully orchestrating an industry-wide disaster recovery test.

    • Most problems that were encountered were rectified quickly, although some caused an unexpected delay to the restoration of full processing capabilities:

      • Under real life situations, most problems could probably be resolved within hours or by the next business day.

  • The exchanges and clearinghouses’ internal support processes and procedures worked well.


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    LESSONS LEARNED (CONT’D)…

    • Firms indicated that the test helped them:

      • Identify some internal single points of failure

      • Tighten up and document their business continuity and system fail over procedures

      • Better understand the need for cross-training

      • Test connectivity with exchanges’ DR sites

    • Pre-test connectivity testing was valuable and should be a pre-requisite for future tests.


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    LESSONS LEARNED (CONT’D)…

    • Firms must be aware of any environmental impact on their network fire walls caused by test requirements:

      • Have proper network staffing support actively engaged during the test.

      • Be aware of any firewall impact and make changes accordingly to accommodate testing.

    • There is a need to better coordinate testing activities:

      • More time should be allocated for this during future tests.

      • Need to identify and corroborate all test contacts prior to the tests.

      • Try to standardize scripts across exchanges.


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    LESSONS LEARNED (CONT’D)…

    • Need clear support desk procedures and sufficient staffing at exchanges to properly support the test.

    • A number of firms apparently did not pre-register and “showed up” for the test at several exchanges:

      • They were set up and most tested successfully, however, this placed an additional demand on exchange and clearing house support staffs.

      • Additionally, several firms that registered at 1-2 exchanges were “no shows”


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    VI.SUGGESTED NEXT STEPS

    • Survey firms and exchanges for input to future testing.

    • Announce the details of the 2008 DR test:

      • Define the scope of next year’s scenario test exercise

      • Establish the goals and objectives of test initiatives

      • Announce dates early in advance

    • Broadly “market” future test initiatives to firms’ IT, operations, trading and senior management, to ensure a wider dissemination of test information within all firms.


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