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On the Market.

On the Market

With the implementation of the Trade Input Processing System (TIPS), the Coffee, Sugar & Cocoa Exchange, Inc. (CSCE) has installed one of the most interactive futures and options trade processing systems in existence today. TIPS reduces errors, cuts costs and trims time from trade data entry, matching and clearing member acceptance.

Under the direction of a TIPS Steering Committee comprised of 37 members, CSCE Management Information Systems staff designed a system that employs sophisticated computer technology to provide: on-line, automated trade input; an ongoing matching process throughout the day; continuous trade status updates and intra-day resolution of "breaks". TIPS supplies more immediate notice of erroneous trades; on-line clearing member trade review; enhancements to the Exchange's audit trail capabilities; and on-line Exchange compliance and clearing corporation trade review.

"TIPS is tangible evidence of the value of this Exchange's membership committee work," said CSCE chairman Charles Falk. "The concerted and conscientious efforts of the TIPS Steering Committee has made TIPS possible. Throughout the TIPS development process, the committee provided the guidance crucial to implementation of a superb system."

"The system is also a testament to the leadership of [former CSCE chairman] Charles Nastro," Falk continued. "He was instrumental in seeing the project through."

TIPS has been implemented in stages since January 11. Now, the coffee, sugar and cocoa futures markets are processed through the system. The coffee, sugar and cocoa options markets are scheduled to be on line by May 31.

Since implementation, the percentage of trades which are not matched has fallen from a daily average of 4% prior to TIPS to less than 0.1%.

"TIPS is on the leading edge of trade processing technology," said CSCE president Bennett Corn. "TIPS eliminates much of the paperwork and man-hours once required to process trades. And, it does so in a user-friendly environment to which everyone has readily adapted."

System Operation

Essentially, the system guides clerks through the data entry process. Trade data is entered into narrowly-defined data entry fields, allowing TIPS to immediately identify faulty information. When errors are discovered, clerks are notified instantaneously by one of the system's 90 error messages. As correct data is entered, TIPS seeks the opposite side of the transaction and then matches buys and sells. Matched trades with clearing member identification are then reviewed by the clearing member. The clearing member can challenge the trade, and send it back to the originator for correction. Matched, clearing member-approved trades are stored for the clearing process that begins in the early evening.

Trades the system cannot match are immediately brought to the input clerk's attention. Clerks work to resolve out-trades throughout the day. The clerks perform TIPS functions from a newly constructed "write-up room" equipped with 155 computer terminals. Communication among users is facilitated by an electronic mail function within the system. Prior to system implementation, every clerk was required to receive nine hours of comprehensive training and pass a certification examination.

Before TIPS, trade data was verbally confirmed off hand-written sheets among clerks and trade data entry and matching did not occur until the evening. As a result, errors were only identified on the next day and resolution validated the second day. Moreover, the old system did not afford the CSCE with the proper processing environment necessary to accommodate the tremendous growth in trading volume over the latter part of the 1980's.

Future Enhancements

While TIPS is complete from the standpoint of its original design specifications, members and staff are constantly identifying potential enhancements. One future TIPS enhancement will directly link the system with clearing member back-office systems. The link will remove steps in back-office data entry, reducing errors and facilitating ongoing in-house risk management for clearing members.

Moreover, TIPS has been designed to be easily linked with new technologies. It is the only trade input system in the industry immediately adaptable to wireless hand-held trading terminals that could be used on the CSCE floor if the technology becomes practical.

"The advent of TIPS marks a number of important achievements," Corn said. "We have reduced or eliminated market risk due to errors and slow processing. We have increased our volume capacity. We have improved the audit trail. And, we have streamlined costs."
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Title Annotation:effectiveness of the Trade Input Processing System
Publication:Tea & Coffee Trade Journal
Date:Jun 1, 1991
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