ISLA Model for Agent Lender Disclosure in Europe

Transcription

1 Agent Lender Disclsure in Eurpe David Rule Sylvia Mas 14/07/2008

2 Table f Cntents 1. Intrductin 3 2. Overall Shape f the Mdel 5 3. Data Transmissin Hub 9 4. Timing fr File Transfer Rep Trades Reverse Rep Trades Reprting f Triparty Cllateral Reprting f DBV Cllateral Industry Classificatin Cdes Daily Lan Data File Daily Nn Cash Cllateral File Implementatin Appendices 25 Page 2 f 25

3 1. Intrductin 1.1 This dcument utlines ISLA s recmmended mdel fr daily disclsure by agent lenders f the details f Eurpean brrwers expsures t underlying principal lenders. The mdel has been designed t prvide brrwers with the infrmatin they need t manage cunterparty credit risk and calculate regulatry capital requirements under Basel 2. It will apply t all agent lenders perating n a pled basis n behalf f clients in the Eurpean securities lending market. It need nt apply t agent lenders that segregate principals and cllateral, r that segregate principals and use legally-rbust cllateral allcatin letters agreed with brrwers. Fr UK-regulated firms, the Financial Services Authrity has stated that brrwers shuld be receiving full infrmatin daily abut their expsures at underlying principal level by 1 January 2010 at the latest. The recmmendatins have been prduced by the ISLA EU ALD (Agency Lending Disclsure) Wrking Grup, cmprising representatives f ISLA member firms, including brrwers and agent lenders, and supprted by Capc. The members f the Wrking Grup are listed in Appendix 1. The main recmmendatin is t replicate in Eurpe the existing U.S. ALD mdel, which wrks well and is already used by many agent lenders and brrwers perating in Eurpe fr their U.S. activities. Sme amendments t the U.S. mdel are recmmended in rder t meet the needs f Eurpean agent lenders and brrwers. 1.2 The mdel was discussed at length within the Wrking Grup and it published prpsals fr public cnsultatin in May The final recmmended mdel takes accunt f the respnses received t that cnsultatin and further discussins within the Wrking Grup. It has been apprved by the ISLA Bard. 1.3 This dcument cntains the fllwing chapters Overall Shape f the Mdel Data Transmissin Hub Timing fr File Transfer Rep Trades Reverse Rep Trades Reprting f Tri-Party Cllateral Reprting f DBV Cllateral Industry Classificatin Cdes The Daily Lan Data File The Daily Nn Cash Cllateral File Page 3 f 25

4 Implementatin Each chapter includes an explanatin f the slutin, the required changes, the actin(s) needed t be taken, and the wner(s) f the actin. Appendices include the actual texts f the recmmended file frmats. There will be n changes t the fllwing prcesses frm the U.S. slutin as described in Chapter 2 (Overall Shape f the Mdel): Incremental Add/Delete File Brrwer s Respnse File Master Credit File Credit Apprval Prcess 1.4 A recmmended implementatin timeline, including deliverables and milestnes, has been included as Chapter Respnsibility fr implementing this mdel lies with individual brrwers and agent lenders. ISLA cannt mandate that agent lenders disclse infrmatin using this mdel. Hwever, fllwing a cmmn apprach shuld be mre efficient fr all. ISLA will cntinue t facilitate cmmunicatin (fr example, thrugh frtnightly pen cnference calls) and, if necessary, prvide crdinatin at industry level. Hwever, it will nt drive nr mnitr implementatin by individual firms, which is their respnsibility, wrking with their cunterparties. Any cmments r questins shuld be addressed t David Rule, Chief Executive, Internatinal Securities Lending Assciatin, 1 Gerge Yard, Lndn EC3V 9DH ( david.rule@isla.c.uk). Page 4 f 25

5 2. Overall Shape f the Mdel Backgrund Since 2006 in the United States, agent lenders have prvided data that permits SECregistered brrwers credit and regulatry capital grups t mnitr credit expsure and calculate regulatry capital requirements based n transactins with the underlying principal lenders fr securities lans executed under securities lending agreements. Brrwers are required t perfrm regulatry capital calculatins, as prescribed by SEC rule 15c3-1, Net Capital Requirements fr Brkers and Dealers, at the principal level rather than the agent lender level. There are three main elements t the U.S. ALD mdel 1) the exchange f files between firms, 2) credit pre-qualificatin and 3) regulatry capital calculatin. Data is transmitted frm agent lenders t brrwers daily using standard text-frmatted files. The Depsitry Trust and Clearing Crpratin (DTCC) serves as a transmissin hub fr passing infrmatin between agent lenders and brrwers. Many use vendrs t manage the prcess, althugh it is pssible t submit/receive files directly t/frm DTCC. The current vendrs used in the U.S. are EquiLend and SunGard. Underlying principal lenders are identified using unique cdes that agent lenders btain frm DTCC using a web-based applicatin. Fr U.S. entities, these cdes are U.S. tax IDs. Fr Nn-U.S. entities, pseud-tax IDs issued by DTCC are used. Figure 1 File Transmissin Prcess Page 5 f 25

6 Files are als sent t / frm the agent lender t the brrwer t add r remve a principal lender t/frm a brrwer s prgramme. Brrwers must act t send an apprval back t the agent lender fr a principal befre beginning t brrw frm them. Figure 2 Re/Pre Qualificatin f Principal Lender Prcess The brrwer uses the infrmatin cntained in the files prvided by the agent lender t calculate their capital requirements in rder t cmply with ALD regulatins n a daily basis. Figure 3 U.S. Regulatry Capital Calculatin Prcess Page 6 f 25

7 The five file types used t transmit data are summarised in the table belw. Credit Apprval Files Incremental Add/Delete File Purpse: t cmmunicate principal lender infrmatin t brrwers and request brrwer s apprval f each principal lender Sent by: agent lender t brrwer Frequency: As needed Brrwer s Respnse File Master File Purpse: t send an apprval r rejectin f a principal lender back t the agent lender Sent by: brrwer t agent lender in respnse t an Incremental Add/Delete request Frequency: As needed Purpse: t recncile the list f apprved/rejected principals and their statuses n a peridic basis. Sent by: agent lender t brrwer Frequency: At least annually Daily Capital and Credit Recnciliatin Files Daily Lan Data File Purpse: t cmmunicate all pen street-side cntracts with principal lender level detail Sent by: agent lender t brrwer Frequency: Daily Daily Nn-Cash Cllateral File Purpse: t cmmunicate all nn-cash and cash pl cllateral psitins assigned by the agent t each principal lender. Sent by: agent lender t brrwer Frequency: Daily Brrwers use the infrmatin in the 2 daily files t recncile with their wn files. Recmmendatin ISLA recmmends that the key elements f the U.S. ALD mdel shuld be replicated in Eurpe. In particular: Identical file types and frmats. Firms shuld be able t use the same files and file frmats fr reprting f bth U.S. and Eurpean data. The changes recmmended in the fllwing chapters affect the cntents f fields and reprting instructins: fr example, enabling the files t accmmdate rep and reverse rep data. Agent lenders will send separate files cntaining Eurpean and U.S. data respectively t the Eurpean and U.S. ffices f brrwers respectively. Use the same data-exchange hub prvided by the DTCC fr Eurpean reprting as currently used fr U.S. reprting. Use f DTCC unique identifiers fr underlying principal lenders and cunterparties. Adpt the U.S. credit apprval prcess. Befre starting t exchange daily Eurpean data files, agent lenders will need t btain credit apprval fr their current Eurpean principal lenders frm brrwers using the incremental add/delete file. In mst cases, brrwers will already have apprved thse lenders fr credit purpses utside the ALD mdel. Hwever, the ALD credit apprval prcess will nnetheless have t be cmpleted. Agent lenders and brrwers may want t have an initial exchange f master files t recncile their lists f principals at the utset. Fr mre infrmatin and file templates please refer t The A Z Guide t ALD: A Cmprehensive Set f Guidelines fr Brrwers and Agent Lenders Participating in Securities Lending n an Agency Basis which can be fund n the Securities Industry and Page 7 f 25

8 Financial Markets Assciatin s (SIFMA) website at ZGuideFinal.dc Actin Needed 1) Agent lenders and brrwers must cmmit t adpt the necessary measures t allw fr the daily transmissin f required data as shwn n the Implementatin Timeline (See Appendix 7). 2) Agent lenders need t subscribe t the DTCC fr the issuing f identifiers fr all underlying principals and cunterparties in their prtfli. Agent lenders are t infrm brrwers f assigned identifiers s that all parties will use them in rder t establish an industry-wide standard f firm identificatin. Actin Owner 1) Agent lenders, brrwers and vendrs 2) Agent lenders Page 8 f 25

9 3. Data Transmissin Hub Recmmendatin ISLA recmmends using the U.S.-based DTCC hub fr the issuance f unique identifiers and transmissin f files. The DTCC will make the SMART/Track fr Agency Lending Disclsure hub available t ISLA members thrugh a DTCC subsidiary fr the transmissin f daily and peridic lan files by the end f The DTCC s prpsal, including terms and cnditins, is set ut in Appendix 8. As a cnditin f using the DTCC hub, users withut a U.S. presence (parent/branch/subsidiary) will be required t btain and utilise the unique identifiers generated by SMART/Track t ppulate the principal lender field in their lan files. In this way, DTCC will be able t meet the regulatry requirements f the Office f Freign Asset Cntrl (OFAC) by screening the database f unique identifiers against OFAC s Specially Designated Natinals and Blcked Persns list SDN list rather than screening lan files. ISLA recmmends that use f these unique identifiers shuld be mandatry fr all firms. On this basis, existing members/participants f DTCC will be able t start using the SMART/Track system fr Eurpean files immediately. ISLA members that are nt members/participants f DTCC will be able t use the system frm the end f 2008, subject t testing, and will be required t sign a nn-member agreement with DTCC. Firms must decide whether t cnnect t the DTCC hub via a vendr r directly. If they chse t cnnect directly, they will need t have a cmmunicatin line t DTCC, which may require a lead-time f up t 12 weeks fr Western Eurpe and 26 weeks elsewhere in Eurpe and will invlve a cnnectin fee. DTCC has indicated that firms will pay a mnthly fee f US$200 fr transmitting files and accessing the website t btain unique identifiers. DTCC des nt expect t charge ISLA r ISLA members fr any upfrnt develpment csts. Actin Needed 1) DTCC t make SMART/TRACK available t ISLA members 2) Acquire DTTC-issued unique IDs fr all principal lenders, agent lenders and brrwers and infrm users f their unique identifier. 3) Determine methd f cnnectin t DTCC hub either direct r via vendr. 4) ISLA members that are nt current DTCC members/participants t cmplete DTCC nn-member agreement frm 5) Establish cnnectin t DTCC hub Actin Owner 1) DTCC 2) Agent lenders and brrwers Page 9 f 25

10 3) Agent lenders and brrwers 4) Agent lenders and brrwers 5) Agent lenders and brrwers Page 10 f 25

11 4. Timing fr File Transfer Recmmendatin ISLA recmmends that 9 AM CET Settlement +1 Day shuld be the guideline fr brrwers t receive the Daily Lan Data and Daily Nn-Cash Cllateral Data Files in Eurpe. As this is the same time requirement as fr the U.S., it will enable agent lenders t send all files at the same time. As in the United States, the guideline als applies t any pre-delivered cllateral i.e. agent lenders shuld reprt data in relatin t that cllateral by 9 AM CET Settlement +1 Day. Actin Needed 1) Agent lenders will transmit data in the Daily Lan Data and Daily Nn-Cash Cllateral Data Files s that brrwers will receive the files by 9AM CET Settlement +1 Day fr Eurpe. Actin Owner 1) Agent lenders Page 11 f 25

12 5. Rep Trades Recmmendatin ISLA recmmends the reprting f Eurpean agency Rep transactins dne n behalf f underlying principals under the Glbal Master Repurchase Agreement (GMRA). Reprting will be included within the Daily Lan Data File and, if relevant, the Daily Nn-Cash Cllateral File under a separate recrd type. The recmmended changes t the Recrd Types in the Daily Lan Data File in rder t facilitate rep reprting are as fllws: Maintain the same frmat and clumn headings as the Daily Lan File frmat Create an additinal Street Side Recrd Type 3 and its descriptin, which will be used t identify the street side infrmatin fr Rep Transactins. Create an additinal Principal Lender Allcatin Recrd Type 4 and its descriptin, which will be used t identify the principal lender allcatin infrmatin fr Rep Transactins. Create an additinal Nn-Cash Cllateral Recrd Type RPCL, which will be used t identify the allcatin f any nn-cash cllateral delivered by the brrwer t the agent lender under Rep transactins: fr example, if the brrwer delivers margin t the lender in the frm f nn-cash cllateral fllwing an increase in the value f the reped securities. The data fr the Rep transactins can be included in the Daily Lan Data File using the same prcess as a lan transactin. Nte: The Daily Lan Data File currently cntains tw recrd types: Recrd Type 1 is the Street Side Recrd that cntains the lan infrmatin. Recrd Type 2 is the Principal Lender Allcatin Recrd that cntains the underlying principal infrmatin. The Daily Nn-Cash Cllateral File cntains ne recrd type Recrd Type NCOL that cntains infrmatin n the allcatin f cllateral. Actin Needed 1) Create a new Street Side Recrd Type 3 fr Rep that cntains the transactin infrmatin and a new Principal Allcatin Recrd Type 4 fr Rep that cntains the principal allcatin infrmatin. 2) Agent lenders, brrwers and vendrs must be able t prcess the amended file cntent. Agent lenders t include rep data in their reprting n this basis frm the agreed g-live date fr use f the new file cntent. 3) Create an additinal Nn-Cash Cllateral Recrd Type RPCL, which will be used t identify the allcatin f any nn-cash cllateral delivered t the agent lender by the brrwer in relatin t Rep transactins. Page 12 f 25

13 Actin Owner 1) ISLA and Capc 2) Agent lenders, brrwers and vendrs 3) ISLA and Capc Page 13 f 25

14 6. Reverse Rep Trades Recmmendatin ISLA recmmends that reverse rep reprting shuld be facilitated n an ptinal basis by bilateral agreement between agent lenders and brrwers. The files frmats have been adapted in rder t enable reprting t take place using the ALD mdel but agent lenders can als reprt the infrmatin in anther way e.g. bilateral cntact between dealers. The recmmended changes t the Recrd Types in the Daily Lan Data File and Daily Nn- Cash Cllateral File in rder t facilitate reverse rep reprting n an ptinal basis are as fllws: Maintain the same frmat and clumn headings as the Daily Lan File frmat Create an additinal Street Side Recrd Type 5 and its descriptin, which will be used t identify the street side infrmatin fr Reverse Rep Transactins. Create an additinal Principal Lender Allcatin Recrd Type 6 and its descriptin, which will be used t identify the principal lender allcatin infrmatin fr Reverse Rep transactins. Create an additinal Nn-Cash Cllateral Recrd Type RVCL, which will be used t identify the nn-cash cllateral allcatin infrmatin fr Reverse Rep transactins. Nte: The Daily Lan Data File currently cntains tw recrd types: Recrd Type 1 is the Street Side Recrd that cntains the lan infrmatin. Recrd Type 2 is the Principal Lender Allcatin Recrd that cntains the underlying principal infrmatin. The Daily Nn-Cash Cllateral File cntains ne recrd type Recrd Type NCOL that cntains infrmatin n the allcatin f cllateral. Actin Needed 1) Create a new Street Side Recrd Type 5 fr Reverse Rep that cntains the transactin infrmatin and a new Principal Allcatin Recrd Type 6 fr Reverse Rep that cntains the principal allcatin infrmatin. 2) Agent lenders, brrwers and vendrs pting t reprt reverse rep transactins must be able t prcess the amended file cntent by the agreed g-live date fr use f the new file cntent. 3) Create an additinal Nn-Cash Cllateral Recrd Type RVCL, which will be used t identify the nn-cash cllateral allcatin infrmatin fr Reverse Rep transactins. Actin Owner 1) ISLA and Capc 2) Agent lenders, brrwers and vendrs 3) ISLA and Capc Page 14 f 25

15 7. Reprting f Triparty Cllateral Recmmendatin ISLA recmmends tw ptins fr the reprting f triparty cllateral: Optin 1 and Optin 2 belw. Agent lenders and brrwers shuld agree bilaterally which ptin they use. Reprting n the Daily Nn-Cash Cllateral Data File shuld be as fllws: Optin 1 Agent lenders prvide the cllateral breakdwn by ISIN per underlying principal based n infrmatin frm the triparty agents. List securities used as cllateral under Security ID Type, Security ID and Security Quantity type in the Securities Cllateral sectin f the file Omit Triparty Principal % and Triparty Amunt f Triparty Cllateral sectin Cmplete Triparty Bank ID and Triparty Accunt Number f Triparty Cllateral sectin Nte: As 5 f the 6 fields in the Tri-Party Cllateral sectin f the Nn-Cash Cllateral File are mandatry, develpment wrk wuld need t be undertaken t allw If Cllateral Type T selected and all fields in the Securities Cllateral sectin cmpleted then nly cmplete Triparty Bank ID and Accunt Number f Triparty Cllateral sectin. Optin 2 Agent lenders prvide the percentage r value f triparty cllateral, triparty bank ID and accunt number per underlying principal; and the brrwer btains the cllateral breakdwn by ISIN frm the triparty agent. Cmplete Triparty % r Amunt, Triparty Bank ID and Triparty Accunt number f Triparty Cllateral sectin. Actin Needed 1) Amend the Daily Nn-Cash Cllateral File. 2) Agent lenders, brrwers and vendrs must be able t prcess the amended file by the agreed g-live date fr use f the new file cntent. 3) Agent lenders and brrwers decide bilaterally whether t use ptin 1 r ptin 2 4) Triparty agents need t extract and send the data t Agent lenders and/r brrwers (as required). Page 15 f 25

16 Actin Owner 1) ISLA and Capc 2) Agent lenders, brrwers and vendrs 3) Agent lenders and brrwers 4) Triparty agents Page 16 f 25

17 8. Reprting f DBV Cllateral Recmmendatin ISLA recmmends tw ptins fr the reprting f Delivery-By-Value (DBV) cllateral in Eurclear UK and Ireland: Optin 1 and Optin 2 belw. Agent lenders and brrwers shuld agree bilaterally which ptin they use. Reprting n the Daily Nn-Cash Cllateral Data File frmat shuld be as fllws: Optin 1 Agent lenders prvide the cllateral breakdwn by ISIN based n data btained frm Eurclear UK and Ireland using its interface r by file transfer. Optin 2 The agent lender reprts the value f DBV cllateral allcated t each f its clients by DBV class. The brrwer can then btain the cllateral breakdwn by ISIN frm Eurclear UK and Ireland using its user interface r by file transfer. Changes t the Street Side Recrd File frmat t include: Asset Identifier Cde- Additin f New Cde fr DBV cllateral (recmmended t use E fr Eurclear and descriptin) Asset ID- Additin f CREST 3 Character reference fr the DBV class being used and descriptin Nte: Current field capacity ranges frm 4 characters t 12 characters. Characters wuld therefre have t be added fllwing the CREST DBV 3 Character references t increase their length t 4, 6, 7, 8, 9 r 12 characters. It is recmmended that 6 blank spaces shuld be added befre the 3-character cde t pad ut the field t 9 characters (See Appendix 5 Recmmended DBV Classes and 6 Recmmended Daily Files with Sample Data). Changes t the Daily Nn-Cash Cllateral Data File frmat t include: Cllateral Type- Additin f type D fr DBV and descriptin Security ID Type- Additin f type E fr Eurclear and descriptin Security ID- Additin f CREST 3 character reference and descriptin Security Quantity- Use this field fr DBV Value (brrwers may need t multiply by 1 if their systems are set up t expect a nminal amunt when prcessing) Nte: Current field capacity ranges frm 4 characters fr Quick Cdes t 12 characters fr ISIN cdes. Characters wuld therefre have t be added fllwing the CREST DBV 3 Character references t increase their length t 4, 6, 7, 8, 9 r 12 characters. It is recmmended that 6 blank spaces shuld be added befre the 3- character cde t pad ut the field t 9 characters (See Appendix 6 Recmmended Daily Files with Sample Data). In the Daily Nn-Cash Cllateral File, the agent lender shws cllateral type as D and reprts each DBV class in the same way as a security. If cllateral type D is selected then all fields in the Securities Cllateral Pledged sectin must als be filled in. Page 17 f 25

18 Actin Needed 1) Amend the Street Side Recrd and Daily Nn-Cash Cllateral Data Files. 2) Agent lenders, brrwers and vendrs must be able t prcess the amended file by the agreed g-live date fr use f the new file cntent. 3) Agent lenders and brrwers decided bilaterally whether t use ptin 1 r ptin 2 Actin Owner 1) ISLA and Capc 2) Agent lenders, brrwers and vendrs 3) Agent lenders and brrwers Page 18 f 25

19 9. Industry Classificatin Cdes Recmmendatin ISLA recmmends that the fllwing cdes shuld be added t Appendix B f the Incremental Add/Delete File: Crprate Pensin Fund (nn-u.s.) Gvernment Pensin Fund (nn-u.s.) Svereign Wealth Fund Investment Trust Supranatinal Entities Nte: Descriptins f existing types have als been amended. Actin Needed 1) Amend Appendix B f the Incremental/ Add Delete File. 2) Agent lenders, brrwers and vendrs must be able t prcess the amended file by the agreed g-live date fr use f the new file cntent. 3) T infrm U.S. based cunterparties, f changes t the appendix 4) Amend table fr new industry cdes and descriptins Actin Owner 1) ISLA and Capc 2) Agent lenders, brrwers and vendrs 3) ISLA 4) ISLA t versee; U.S. based firms t implement Page 19 f 25

20 10. Daily Lan Data File Recmmendatins Nte: This chapter summarises the recmmended changes t the file explained in the previus chapters. Changes t the Street Side Recrd file frmat t include: Recrd Type- Trade ID- descriptin Additin f type 3 Rep and its descriptin Additin f type 5 Reverse Rep and its descriptin Asset Identifier Cde- Additin f New Cde (e.g. E fr Eurclear and descriptin Asset ID- Additin f CREST 3 Character reference and descriptin Changes t the Principal Lender Allcatin Recrd file frmat t include: Additin f type 4 Rep and its descriptin Additin f type 6 Reverse Rep and its descriptin Lan Trade ID- descriptin Quantity- descriptin Cash Cllateral Amunt- descriptin Filler- This field can be used n ptinal basis fr the Legal Agreement Type (GMSLA, GMRA, MFSLA, OSLA etc.) Actin Needed 1) Amend Daily Lan Data File. 2) Agent lenders, brrwers and vendrs must be able t prcess the amended file Actin Owner 1) ISLA and Capc 2) Agent lenders, brrwers and vendrs Page 20 f 25

21 11. Daily Nn Cash Cllateral File Recmmendatin Nte: This chapter summarises the recmmended changes t the file explained in the previus chapters. Changes t the Daily Nn-Cash Cllateral Data File frmat t include: Cllateral Type- Additin f type D fr DBV and descriptin Security ID Type- Additin f type E fr Eurclear and descriptin Security ID- Additin f CREST 3 character reference and descriptin Security Quantity- Use this field fr DBV Value (brrwers may need t multiply by 1 if their systems are set up t expect a nminal amunt when prcessing) Additinal Recrd Type RPCL fr any nn-cash cllateral delivered t lenders in relatin t Rep transactins Additinal Recrd Type RVCL fr nn-cash cllateral in relatin t Reverse Rep transactins Actin Needed 1) Amend Daily Nn-Cash Cllateral Data File 2) Agent lenders, brrwers and vendrs must be able t prcess the amended file Actin Owner 1) ISLA and Capc 2) Agent lenders, brrwers and vendrs Page 21 f 25

22 12. Implementatin Recmmendatin The UK Financial Services Authrity has stated that the industry shuld mve t full, daily disclsure fr all firms brrwing securities, at pint f trade where pssible and n later than ne business day fllwing settlement date, within tw years frm January All Eurpean agent lenders perating pled prgrammes and brrwers shuld therefre have begun daily autmated reprting ahead f January Implementatin f the mdel will include the fllwing stages: Requirements The cnfirmed requirements f the mdel will be published t agent lenders, brrwers and vendrs t enable them t prepare fr implementatin. DTCC Hub The DTCC prpses t make the SMART/Track hub fr transmissin f daily and peridic lan files available t firms that are nt current DTCC members/participants at the end f The DTCC will als incrprate the changes necessary fr Eurpean ALD. Vendr Readiness The main vendrs have stated that they wuld require between 6-9 mnths t prepare their systems ahead f user testing. Credit Pre-qualificatin Current users f U.S. ALD will need t add any new underlying principals t the current list f acceptable principals. New users f ALD will have t add all underlying principals by using the Incremental Add/Delete File. During Q3 2009, agent lenders, vendrs and brrwers will begin using the new file cntent (e.g. rep, reverse rep, triparty, DBV, industry classificatin). Eurpean firms that are nt current users f US ALD will need t: Chse a methd f cnnecting t the DTCC Hub Cmplete DTCC nn-member agreement frm (if relevant) Uplad underlying principals and brrwers t the DTCC database t prcure unique identifiers Infrm cunterparties f unique identifiers Establish cnnectivity t the DTCC hub Develp the ability t send r receive the ALD files Page 22 f 25

23 New users f ALD will have t add all underlying principals by using the Incremental Add/Delete File. U.S. ALD Users Firms that are already users f US ALD can begin using the DTCC hub fr reprting Eurpean business using the existing U.S. file frmats and cntent as sn as they are ready. Sme firms are already ding s. ISLA recmmends that all firms shuld be ready t test the new file cntent during Q in rder t be ready ahead f the FSA s January 2010 deadline. ISLA will cnsult with market participants nearer that time t establish whether any crdinatin f testing is needed at industry level. Page 23 f 25

24 Implementatin Timeline Page 24 f 25

25 13. Appendices The fllwing appendices illustrate the recmmended changes: Appendix 1- Members f the ISLA Wrking Grup Appendix 2 Recmmended Daily Lan Data File Appendix 3- Recmmended Daily Nn-Cash Cllateral File Appendix 4- Recmmended Daily Files with Sample Data Appendix 5- Recmmended Industry Classificatin Cdes Appendix 6- Recmmended DBV Classes Appendix 7- DTCC Prpsal Page 25 f 25