Financial Information Forum

Mr. Jonathan Katz
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549

June 5, 2002

File No. S7-14-02
Assessments on Security Futures Transactions and Fees on Sales of Securities Resulting from Physical Settlement of Securities Futures Pursuant to Section 31 of the Exchange Act

Dear Mr. Katz:

The Financial Information Forum welcomes the opportunity to comment on the proposed rules regarding Section 31 assessments on Securities Futures Transactions. The Financial Information Forum (FIF) was founded in 1996 to address the issues that impact financial information systems management in light of rapid changes occurring in technology, federal regulation and the competitive environment among financial service organizations. The constituency of FIF includes buy and sell side financial firms, market data vendors, service bureaus, U.S. exchanges, ECNs and data consolidators. Further information on the Financial Information Forum is available on

The FIF Single Stock Futures Committee was formed over a year ago to examine and seek solutions for some of the operational and technical challenges presented by the unique attributes of single security futures. As an example, in June of 2001 FIF published a recommendation for the security identification of single stocks futures to alleviate confusion and overlap on industry information systems in the area of order entry, market data and clearing.

Committee members have voiced a particular concern with regard to the proposed guidance on the calculation of fees based on original transaction price for those sales that result from the physical settlement of security futures. This would cause operational and technical challenges that would require months of development work to implement for multiple industry participants including firms, service bureaus, exchanges and clearing organizations. Certain data elements are readily available to the firm, the service bureau, the exchange and the clearing organization, among them trade price and settlement price. Original transaction price is not typically kept by systems that calculate SEC fees. In addition, the difference in the basis of the fee would require mechanisms to keep track of which futures transactions result in physical delivery as differentiated from those that do not.

The clearing organization commonly collects the SEC fees, however should the proposal be adopted the clearing organization would not have information available on the original transaction price on which to base the fee. This missing information would have to be supplied to the clearing organization by the firm or service bureau providing processing services to the firm or else an entirely new reporting scheme would need to be implemented. In addition to the complexities of tracking the original transaction price, the verification of the accuracy of the information would be impossible without extensive investigation and manual intervention involving multiple organizations.

Firms and service bureaus are struggling to prepare systems and operational procedures for the launch of single stock futures. Due to the hybrid attributes of the security and in the absence of final rules, much of the work and testing has yet to be completed. The challenges facing those responsible for the design and implementation of the systems required to process this new security type should not be under-estimated given the lack of detail available and the expectation of a short interval between final rule publication and product launch. The situation would only be made worse by the introduction of new and complex rules on the calculation of fees.


W. Leo McBlain

W. Leo McBlain
Financial Information Forum