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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 Background 3 Executive Summary 8 Overall Test Results 12 Problems Encountered 27

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slide1

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

table of contents
TABLE OF CONTENTS
  • Background 3
  • Executive Summary 8
  • Overall Test Results 12
  • Problems Encountered 27
  • Lessons Learned 29
  • Suggested Next Steps 33

Page Number:

i background
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.
background cont d
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
background cont d5
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).
background cont d6
BACKGROUND (Cont’d) …
  • The Committee including representatives from:
    • Clearinghouses
    • Exchanges
    • FCMs
    • Clearing firms
    • Non-clearing firms
    • Key service providers
    • Independent software vendors
background cont d7
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.
ii executive summary
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.
executive summary cont d
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.
executive summary cont d10
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
slide11

TEST PARTICIPANTS REPRESENT A SIGNFICANT % OF EXCHANGES’ VOLUME

Source: Exchanges and Clearing Houses

iii overall test results
III. OVERALL TEST RESULTS
  • The major domestic and international futures exchanges and clearinghouses and 103 firms* participated in the test:
      • CBOE Futures 6
      • CME Group 54
      • Clearing Corp. 23
      • Eurex 66
      • ICE 87
      • ICE Futures US/ICE Clear US 29
      • Kansas City Board of Trade 17
      • Liffe 19
      • MEFF 2
      • NYMEX/COMEX 40
      • Winnipeg Commodity Exchange 14

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

overall test results cont d
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.
cboe futures exchange
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.
chicago board of trade
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.
chicago mercantile exchange
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.
the clearing corp
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.
eurex ag
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.
ice futures us ice clear us
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.
ice futures eu
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.
kansas city board of trade
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.
liffe
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.
slide23
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.
new york mercantile exchange
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
philadelphia board of trade
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.
winnipeg commodity exchange
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.
slide27

THE MAJORITY OF PARTICIPANTS WERE CLEARING FIRMS

Number of Firms

Source: Exchanges and Clearing Houses

iv problems encountered
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.
problems encountered cont d
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.
v lessons learned
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.
lessons learned cont d
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.
lessons learned cont d32
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.
lessons learned cont d33
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”
vi suggested next steps
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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