DMIST Publishes Final Standard for Position Transfers

The Derivatives Market Institute for Standards (DMIST) has published a final standard designed to improve the processing of position transfers in exchange-traded derivatives markets – a release that one of its directors claims “will drive meaningful change”.

The Position Transfer Standard is the third published by DMIST, which was established by FIA in mid-2022 to promote greater efficiency across trading and clearing workflows, and covers the movement of open positions between accounts—whether within a single clearing member firm or across different firms.

DMIST says position transfers play a critical role in managing risk, optimising margin, correcting allocations, balancing portfolios, changing clearing relationships and handling ownership changes due to mergers or acquisitions. 
Currently, the transfer process is largely manual. By introducing a standardised approach, DMIST says it aims to strengthen operational efficiency and resiliency, lower regulatory and operational risk by reducing manual intervention, and improve communication between clearing members and clients. It also notes that the new standard lays the groundwork for greater automation of the process going forward.

“Position transfers are crucial for clients to manage risk and optimise margins efficiently,” explains Samina Anwar, senior director of global derivatives operations at Cargill and chair of the DMIST sponsor board. “A standardised approach ensures a more streamlined, consistent process for clients and fewer errors. Clearing members, clients, clearinghouses, and service providers collaborated to create this standard, which demonstrates the value of bringing together a diverse range of industry participants to discuss and shape solutions that benefit everyone.”

This was reinforced by Tim Hoopes, executive director, Morgan Stanley and leader of the DMIST position transfer working group, who says, “This standard introduces a new level of consistency and structure to the position transfer process. It harmonises and streamlines two critical steps in the process: communication from the client to the clearing member, and from the clearing member to the central counterparty (CCP)—while also drawing a distinction between simple and complex transfers.”
The standard provides a template clients can use to submit a position transfer request to its clearing members and a standard template for clearing members to more easily upload position transfer data to CCPs. It also offers a corresponding standard template for CCPs to adopt for receiving data from clearing members.

It also defines the timing for simple and complex position transfers, recommending that simple position transfers requested five hours ahead of the market clearing close be completed the same day after receiving the completed client request form, and that complex transfers be completed within 48 hours or sooner of receiving the completed client request form. It also recommends that complex transfers that require exchange approval be completed within 72 hours or sooner of receiving the completed client request form.

Alongside this, the client is encouraged to send the client request form simultaneously to both the originating and receiving clearing members.     

“This is a real success story for both the industry and DMIST,” says Don Byron, executive director, DMIST. “The Position Transfer Standard will drive meaningful change. The clearing members, clients, CCPs and service providers who collaborated during the standard development process can be proud of what they have achieved.”