During a Lunch and Learn held with one of our esteemed Partners, ZE PowerGroup, our panel of experts discussed the challenges corporations find with Dodd-Frank and presented the software that WG Consulting and ZE PowerGroup built as an answer to those challenges.

1. WG Consulting &
ZE PowerGroup
Dodd-Frank Reporting Solution
www.wgconsulting.com

2. Table of Contents
Introduction
Landscape of Dodd-Frank Legislation
Our Dodd-Frank Solution
Panel Session
ZEMA Demo
Page 2

3. Panelist Bios
Craig Enochs, Partner
Jackson Walker, L.L.P.
As an expert in deregulated energy
transactions, including asset-based
structured transactions, transactions
for the purchase and sale of energyrelated commodities, transmission
arrangements and transportation for
these commodities, and commoditybased financial derivative
transactions, Craig will share his
insights into Dodd-Frank’s impacts.
Erin Hunzeker, Vice President
DTCC
Erin is responsible for industry
outreach and relationship
management for the commodity
business unit. He is a subject matter
expert in energy trading having
served as an energy trader in the
power, natural gas, and oil space for
Mirant for almost 10 years. He
managed operations and hedging for
a 2,500 megawatt portfolio. He has
hedge fund trading experience and
previously worked in both the back
and front offices of Salomon Brothers
Michael Prokop, Director
Committee of Chief Risk Officers
James Yu, Partner
WG Consulting
Michael began his career in New York,
where he became a partner in the
Merrill Lynch Energy Group. He then
became a Managing Director of
Energy Products at CME Group. Mr.
Prokop continues to play a leading
role in the development of industry
initatives.
James is currently working with
financial and energy clients to assist
them in understanding the practical
implications of the Dodd-Frank
regulations and its impacts on their
systems and business processes.
James will share his insights into the
Dodd-Frank technical impact and
applicable solutions for your business.
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4. Introduction
WG Consulting and ZE Power Group have formed an exclusive partnership to build a DoddFrank solution to provide client answers to their current challenges.
WG Consulting
WG Consulting (WG) utilizes world-class
methodologies to deliver value-creating
solutions based on each client’s unique
operating needs. Our team’s thorough
understanding of operational and regulatory
risk is the key to competitive results that
mitigate such risks for our valued clients.
ZE PowerGroup
ZE PowerGroup Inc. (ZE) is a software
development company with extensive energy
experience. ZE is the developer of the award
winning ZEMA Suite an end to end data
management system that focuses on data
aggregation, data presentation and analysis,
distribution and systems integration. ZE was
founded in 1995 and has been providing
services to market participants for 17 years.
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5. CFTC Enforcement
Recent examples of the CFTC levying fines on organizations that have violated terms of
compliance:
•
June 7, 2012 - CFTC Orders Futures Commission Merchant Open E Cry, LLC to Pay
$250,000 to Settle Failure to Supervise Charges
• June 5, 2012 - CFTC Orders Morgan Stanley & Co. LLC to Pay $5 Million Civil Monetary
Penalty for Unlawful Noncompetitive Trades
• April 19, 2012 - Federal Court Orders $14 Million in Fines and Disgorgement Stemming
from CFTC Charges against Optiver and Others for Manipulation of NYMEX Crude Oil,
Heating Oil, and Gasoline Futures Contracts and Making False Statements
• April 4, 2012 - CFTC Orders JPMorgan Chase Bank, N.A. to Pay a $20 Million Civil
Monetary Penalty to Settle CFTC Charges of Unlawfully Handling Customer Segregated
Funds
As of August 2012
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6. Industry Viewpoints
“Has anybody done a comprehensive analysis of
the impact on – on credit? I can’t pretend that
anybody really has,” Bernanke said. “You know,
it’s – it’s just too complicated. We don’t really
have the quantitative tools to do that.”
-
Ben Bernanke,
Chairman of the Federal Reserve
“While Dodd-Frank harms our economy, it
unfortunately fails to even address the biggest
cause of the financial crisis: the governmentsponsored enterprises, Fannie Mae and Freddie
Mac that fueled the riot of imprudent lending
that knocked our economy down to its knees.”
-
Rep. Spencer Bachus (R-Ala),
Chairman of the House Financial Services
Committee
As of August 2012
“Most of the bad actors are gone,” “off-balancesheet businesses are virtually obliterated,” “money
market funds are far more transparent” and “most
very exotic derivative are gone,” he said.
-
Jamie Dimon,
President and CEO of JPMorgan Chase
“There is still a great deal of work to do to repair
the damage caused by the crisis, and to implement
the full framework of reforms. Ultimately, success
will depend on making sure that we can write
sensible rules that promote the health of the
broader economy instead of the interests of
individual firms—and that those charged with
enforcing these rules have the resources and the
talented people they need to do their job.”
- Timothy Geithner,
U.S. Secretary of Treasury
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7. Estimated Annual Costs of Dodd-Frank
Below are estimated annual costs for SD/MSP’s and Non-SD/MSP’s that will clear all of their
trades on a DCO*. These costs are in addition to upfront costs that could reach as high as
$2.5M. Costs will vary greatly from company to company depending on the volume and
complexity of an organization’s swap business.
Clearing &
Membership
Reporting
Recordkeeping
ICE TV Fee Per
Asset Class
Total Cost
SD/MSP
$500,000$1,000,000+
$250,000$400,00
$250,000$500,000
$10,000$500,000
$750,000$2,500,000+
NonSD/MSP
$125,000$500,000
$150,000$250,000
$80,000$100,000
$10,000$500,000
$350,000$1,500,000+
*Cost estimates are based on numbers provided by the CFTC and ICE. The clearing and membership
costs are specific only to ICE, as they are the only confirmed DCO that will also act as a SDR. CME has
also applied to act as a SDR.
As of August 2012
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8. SD/MSP vs Non-SD/MSP
Requirements Matrix
SD/MSP
Non-SD / non-MSP
Capital
Must maintain new equity of $20 million
plus amount for market and credit risk
N/A
Reporting
Must submit PET of trade to a SDR within
30 minutes after execution in the first
year and within 15 minutes after
execution thereafter
If trade is not cleared and both parties are
Non-SD/MSP the parties must together
determine the party responsible for reporting.
Responsible reporting party must then report
PET of trade within 4 hours after execution in
the first year, within 2 hours of execution in the
second year, and within 1 hour of execution
thereafter
Recordkeeping
Records must be retained for the life of
the swap plus 5 years. SD/MSP’s must
also be able to retrieve records for the life
of the swap plus 2 years within 3 business
days if requested by the CFTC.
Records must be retained for the life of the
swap plus 5 years. SD/MSP’s must also be able
to retrieve records within 5 business days if
requested by the CFTC.
Clearing
SD/MSP’s are required to clear
Non-SD/MSP can invoke end-user exception
from clearing
As of August 2012
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9. SD/MSP vs Non-SD/MSP
Requirements Matrix
SD/MSP
Non-SD / non-MSP
Position Limits
Position Limits must be reported for 28 core
referenced future contracts and any swap
that is deemed “economically equivalent” to
a CRFC. Position Limit monitoring goes into
effect 60 days after the CFTC’s final
definition of “Swap”.
Position Limits must be reported for 28 core
referenced future contracts and any swap
that is deemed “economically equivalent” to
a CRFC. Position Limit monitoring goes into
effect 60 days after the CFTC’s final
definition of “Swap”.
Compliance
Office
Responsible for informing counterparty of
risk of entering into trade. SD/MSP’s must
also designate a CCO, file an annual
compliance report with the CFTC, and
establish a compliance program that incudes
new processes and procedures directly
related to the Dodd-Frank Act.
Provisions for anti-fraud
Registration &
Membership
Must register with NFA and subject to
application fees and annual membership
fees.
N/A
As of August 2012
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10. CFTC Timeline – Decision Points (Non-SD)
Potential finalized projected compliance dates for non-Swap Dealers
April 2012
June 2012
August 2012
November 2012
February 2013
Swap entity definitions
finalized
Swap product definition
anticipated to be
finalized
Spot month position
limits
Real Time reporting and
record-keeping/reporting
for interest rate and
credit swaps
Real time reporting and
record-keeping/reporting
for equitites and other
commodities
(effective: July 23, 2012)
Assessment
Q2 2012
1
Q3 2012
Selection
8/16
2
10/15
3
1/14
Q4 2012
4
Q1 2013
Implementation
1 – Possible Swap Definition
published to Federal Registry
2 – Initial Compliance Date
Implement
Selection
Assess
3 – SD/MSP Compliance
4 – Non-SD / Non-MSP
Compliance
4/18/12
Swap entity definitions finalized by CFTC/SEC (rule effective July 23, 2012)
6/30/12
Swap product definitions anticipated to be finalized, per Commioner O’Malia’s proposed schedule as
published on CFTC website
8/29/12
Spot month position limits in effect (60 days after publication of product definitions)
11/27/12
2/25/13
As of August 2012
Real time reporting and recordkeeping/reporting for non-Swap Dealers – Interest Rates and Credit (150
days after publication of product definitions)
Real time reporting and recordkeeping/reporting for non-Swap Dealers – Equities, FX and other
commodities (240 days after publication of product definitions)
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4/15

11. CFTC Timeline – Decision Points
(Swap Dealers)
Potential finalized projected compliance dates for Swap Dealers
April 2012
June 2012
August 2012
Swap entity definitions
finalized
Swap product definition
anticipated to be
finalized
•
Spot month position limits
•
Real time reporting for
Interest Rates and Credit
•
Internal Business Conduct
(effective: July 23, 2012)
Assessment
Q2 2012
Q3 2012
1
8/16
2
November 2012
February 2013
•
Real Time reporting and
record-keeping/reporting for
equities, FX and other comm.
•
Real Time reporting and
record-keeping/reporting for
equities, FX and other comm.
•
Large Trader reporting for
cleared swaps
•
Large Trader reporting for
cleared swaps
10/15
Q4 2012
Selection
3
1/14
Q1 2013
4
Implementation
Selection
August 2012
October 2012
1 – Possible Swap Definition
published to Federal Registry
Large Trader Reporting
Assess
July 2012
Provisional registration for SDs
External Business Conduct
2 – Initial Compliance Date
3 – SD/MSP Compliance
4 – Non-SD / Non-MSP
Compliance
4/18/12
Swap entity definitions finalized by CFTC/SEC (rule effective July 23, 2012)
6/30/12
Swap product definitions anticipated to be finalized, per Commioner O’Malia’s proposed schedule as published on CFTC website
8/29/12
11/27/12
As of August 2012
- Spot month position limits in effect (60 days after publication of product definitions)
- Real time reporting and recordkeeping/reporting for Swap Dealers – Interest Rates and Credit (60 days after publication of
product definitions)
- Internal Business Conduct (except for Business Continuity & Disaster Recovery Plan)
Real time reporting and recordkeeping/reporting for non-Swap Dealers – Interest Rates and Credit (150 days after publication of
product definitions)
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4/15

12. Dodd-Frank Issues
The Dodd-Frank regulations create a unique system and business issue for organizations that
will require a system with capabilities around:
Collection & Centralization
•
•
Multiple sources: Ability to
pull from multiple ETRM
systems and spreadsheets
Customization: Ever
changing regulations
require new fields and
reports to be created
Reporting & Mapping
•
•
Normalization of data:
Transformation of each
data source to go into
single datawarehouse
Publication
•
Communication with the
following entities:
•
•
ICE Trade Vault
•
Create report Formats:
CSV, FpML, XML, FIXML
CFTC
DTCC
Error Handling: Ability to
perform action based on
data translation issues
•
Scheduling: Action set to
occur based on specific
time
•
•
•
Internal Reports:
Viewable screen to show
history of reports
submitted
•
Error Handling: Ability to
perform action based on
communication issues
Datawarehouse: Stored
data in a standard database
As of August 2012
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13. Our Dodd-Frank Solution
WG Services
• Dodd-Frank Impact Assessment
• Updates on latest regulatory changes
and impacts to your business
• Recommend and build reports
• Identify fields and setup reports
• Position Limits
• Systems Assessment
• Trade reporting data verification
• Custom Dodd-Frank Development
ZEMA System
• Extract, Transform, Load and Publish
(ETLP) Platform
• Customizable Solution for New and
Changing Regulations
• Scalable for Growing Business and
Multiple Source Systems
• Flexible templates based solution
offering low turnaround time
• Data mapping interfaces between
source and sink systems
As of August 2012
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14. Checklist Comparison
The Dodd-Frank solution will require a combination of SME consultants and a proven
systems solution that WGC and ZE can provide.
Standard Solution Features
ZEMA
Regulatory Reporting (LTR, Real-Time, Recordkeeping)
Data warehouse (Schemas for Counterparty, Static and Transactional Data)
Connectivity to all Swap Data Repositories
Connectivity to CFTC
Connectivity to Swap Execution Facilities
Form Reporting (102S, 404A/S)
Internal Reporting (Audit, compliance and IT)
Validation (Rules and Notification capabilities)
Monitoring
Ongoing Support
As of August 2012
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15. Benefits Overview
The WG and ZE Dodd-Frank solution provide the following key benefits that we believe set
us apart.
Benefits
• The Dodd-Frank rules and regulations are constantly evolving. WG and ZE
are committed to updating the tool as updates are published
• Low delivery risk. Our solution is built on award-winning ZEMA platform
• The ZEMA Dodd-Frank Solution can be implemented in a relatively short timeframe,
ensuring your organization meets the compliance deadlines of the CFTC
• Cost certainty with fixed software costs allowing for better budgeting
• Left with a scalable and expandable software system that can be used for other
Interface (ETL) projects, Market Pricing and Publishing Curve Prices
As of August 2012
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16. Collection and Centralization
Collection and Centralization
•
Source Data
•
•
1a. Allegro (MS SQL)
1b. Endur (Oracle)
Ability to pull information from
multiple ETRM systems (ex. Endur,
Allegro, etc)
•
Screen shot
Ability to pull data from spreadsheets
or other electronic sources
Data Warehouse
•
Dodd-Frank data warehouse solution
covers the following table structures:
Reports, Party, Static, and ETL
connections
•
2. Data Warehouse
Data warehouse here is flexible and
scalable for new regulations and will
fulfill future compliance needs and
organizational needs
As of August 2012
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17. Centralization – Cont.
Centralization
•
Validation
•
•
Screen shot
1. Easily transform data values
Ability to validate and transform data
before inserting into the data
warehouse
Buy = ‘BUY’
Pay = ‘PAY’
Simple ability to create standard
validation rules (ex. count, correctness,
etc.)
•
Viewable screen to track submitted
records and their validation status
•
Simple screen to manually enter
changes
•
Setup Email notifications on validation
errors
2. Create new Validation conditions
As of August 2012
3. Validation Report
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18. Mapping - Classification
Mapping
•
Classification of data
•
Customer data mapping is
automatically generated when pulling
data from source system (ex. LEI Code,
102S ID, Market Designation)
1. Static data mapping
Static data mapping is automatically
generated when pulling data from
source system (ex. Underlying
Commodity Code (UCC), Commodity
Reference Price (CRP))
•
Screen shot
•
2. Customer data mapping
Easy to setup mappings for Dodd-Frank
rules
As of August 2012
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19. Reporting - Scalability
Screen shot
Reporting
•
View and visualization data
•
Ability to setup new data sources to
allow business growth and expansion
•
Ability to add new fields to reports
based on new or changes to the
requirements
•
Ability to add new observations
around pulling data from sources
•
Reporting on data
Dedicated team of software
developers and Dodd-Frank
consultants, which will update
software based on new and changing
regulations
As of August 2012
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20. Publication - Monitoring
Monitoring
•
Monitoring (Internal)
•
Listeners can be configured to operate
at various time intervals
•
•
1. Screen to Monitor Status of listeners
Ability to setup listeners that will
monitor changes to a source system
and automatically move data to the
data warehouse
•
Screen shot
2. Ability to schedule and create Email Notifications
when monitor fails
For Real-time reports, the listeners can
be configured to gather, transform and
submit data to the proper entities near
real-time
Monitoring (External)
•
Ability to monitor responses from
external entities
As of August 2012
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21. Publication
Messaging
•
Messaging
•
Tasks are easily configured to create
FpML messages and store data into a
appropriate directories
•
Viewable screen to show when
messages were sent, status and history
•
1. Easy setup of credentials between databases and
external entities
Workflows can be scheduled to work in
during various times
•
Screen shot
Simple Screens that will allow user to
setup communication credentials
between entities (ex. sFTP, ICE Trade
Vault, and MQ Gateway)
2. Files sent to CFTC via sFTP
FpML test file
loaded up to CFTC
As of August 2012
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22. ZEMA – High Level End to End Workflow
Data is automatically
imported from Allegro and
Endur.
DF
Database
Data is centrally stored into the
ZEMA DF database.
Centralization
Data stored in the database can
be reported on, visualized and
manipulated.
Transformed data
issued back to the
system.
Receipt confirmations are sent
back to the system.
As of August 2012
Collection
Data is mapped to target
destinations.
Reporting
Mapping
Fixed format files are issues to
CFTC secured locations.
Publication
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23. Demo Workflow
Manually executing an event driven process
Import Openlink
table from one
database to
another
As of August 2012
Transform
Openlink table to
FPML
Post to secure FTP
Write values back
to database and to
file store
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24. Let’s Stay In Touch
David Stephan
Managing Director,
Risk, Systems & Compliance
DStephan@wgconsulting.com
O: 832.581.4971
C: 832.863.6659
Dan Masch
Director,
Regulatory Compliance
DMasch@wgconsulting.com
C: 832.863.6659
James Yu
Managing Director,
Trading & Risk Management
JYu@wgconsulting.com
C: 832.603.1572
Waleed El-Ramly
Waleed@ze.com
O: 604-306-4393
Baljeet Dhaliwal
Baljeet.dhaliwal@ze.com
O: 604-244-1469 ext 297
Bruce Colquhoun
Bruce.c@ze.com
O: 604-244-1469 ext 210
For more information, email letstalk@wgconsulting.com
www.wgconsulting.com
WG Consulting, LLC
@thewgcpromise
WG Consulting
WG Consulting 1415 Louisiana, Suite 3450 Houston, TX 77002
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