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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5
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 wouldnt 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
6
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%
cant 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
7
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.

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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 wasnt answered by 20% of the surveys
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.

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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
11
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
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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 havent 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 doesnt 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
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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
Dont 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
Dont Know

If yes, is this spread across IT and the business?
Yes
No
Dont Know

Are you able to calculate if you are over or under the EMIR threshold?
Dont 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?
15
Yes
No manual
Dont know

Are you carrying out a capital simulation exercise to see the potential effects of clearing if you go over
the threshold?
Yes
No
Dont Know

Are you already in compliance with the trade confirmations requirement T+7/5?
Yes
No
Dont Know

Are you in compliance with the stricter requirements coming in?
Yes
No
Dont Know

Will you perform portfolio reconciliation using a system or manually?
System
Manually
Combination
Dont 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
Dont 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
Dont Know

Are you aware of the data that must be reported under both EMIR and REMIT?
Yes
16
No

Have you checked that the data required by each set of rules is held somewhere within the
organization?
Yes
No
Dont Know
Have you performed a data gap analysis?
Yes
No
Dont Know

Have you investigated the various EMIR trade repositories/REMIT RRMs?
Yes
No
We plan to
Dont know

Have you reviewed software and services to help send the data to the reporting locations?
Yes
No
Dont Know

Have you begun to implement a solution?
Yes
No
Dont 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
Dont 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
Dont 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
Dont Know

What Software solution are you using?

If not, do you think it is a good idea to perform trade monitoring anyway?
17
Yes
No
Dont Know

How many additional people will your firm need to manage through all of these new regulations?
None
One
2-4
5-10
10+
Dont 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

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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. Coherences 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
industrys 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.
19
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, whos 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.

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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, TriOptimas 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, TriOptimas 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
21
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. triResolves 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 triResolves 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 TriOptimas 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.

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