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New challenges for securities and derivatives clearing and settlement
Edward LeachHead of Africa South, EMEA region, SWIFT8th April 2009
World_Bank_Redefining_the_Landscape_of_Payment_Systems_April_2009 2
Discussion points
• Trends and developments in securities settlement systems
• Development in Standards
• Main industry initiatives
World_Bank_Redefining_the_Landscape_of_Payment_Systems_April_2009 3
Trends and developments in securities settlement systems
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SWIFTNet FIN traffic by market
World_Bank_Redefining_the_Landscape_of_Payment_Systems_April_2009
CONFIDENTIALWorld_Bank_Redefining_the_Landscape_of_Payment_Systems_April_2009 5
Average daily number of FIN messages (mio)
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Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec2007 Actuals 2008 Actuals 2009 Actuals
March 09SWIFT - average daily traffic
Market infrastructures during the credit crunch• MIs coped extremely well with the volume spikes • Reliability top of the priority list• Standards an important enabler to ensure high levels of STP
and reduction in operation risk• Focus in 2009 on mitigating risks, reducing and managing costs
• Further automation envisaged
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World_Bank_Redefining_the_Landscape_of_Payment_Systems_April_2009 7
Development in standards – ISO 20022
World_Bank_Redefining_the_Landscape_of_Payment_Systems_April_2009
What is driving the move to ISO 20022?
• New initiatives– Global harmonisation– Market infrastructures– Automation in the ‘funds’ market
• New players– Corporates, fund managers
• New technology– XML, SOA, web services
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Slide 9World_Bank_Redefining_the_Landscape_of_Payment_Systems
General Assembly
TC
Council
Technical Management Board (TMB)
TC TCTC 68
Financial Services
Central Secretariat
SC 7Banking
SC 4Securities
SC 2Security
National Standards Bodies (BSI, ANSI, AFNOR, DIN, SFS, etc)
WGWG WG WGWG WG WGWG WG
201 Technical Committees
2,287 Working Groups
542 SubCommittees
157 Countries
17,000 International Standards
50,000 ‘voluntary’experts
620 international or regional Liaison Organisations
ISO20022RMG
SEG SEG SEG SEG
RATSG SEG
WG4ISO 20022
What is ISO?International Organisation for Standardisation
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SWIFT standards
• SWIFT sets standards because a common language for financial transactions:– Improves automation
– Ensures human understanding of the data
– Reduces errors and risks
– Helps cost savings
• All new standards development currently undertaken by SWIFT uses the ISO 20022 methodology
• SWIFT works with the financial community to coordinate standards convergence worldwide to avoid unnecessary duplication
World_Bank_Redefining_the_Landscape_of_Payment_Systems_April_2009
World_Bank_Redefining_the_Landscape_of_Payment_Systems_April_2009
Current ISO 20022 development pipelineSecurities• Securities
– Pre-trade/Trade (FIX/SWIFT) – 29 messages– Funds Processing Passport (SWIFT) – 2 messages– Settlement and Reconciliation (SWIFT) – 29 messages– Corporate Actions (SWIFT) – 13 messages– Post-trade (Omgeo/SWIFT) – 12 messages– Market Claims/Transformations (Euroclear) – 14 messages– Securities Registration and Holder ID (Euroclear) – 14 messages– Securities Issuance (Euroclear) – 27 messages– Total Portfolio Valuation Statement (ISITC) – 6 messages– Alternative Funds (SWIFT) – 8 messages– Settlement Instruction Modification & Allegement rejection (SWIFT) – 5 messages– Securities Static Reference Data (SWIFT) – 15 messages– T2S (4CB) – number of messages not yet known
• FX and Derivatives– No current or pending development
> 150 messages
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World_Bank_Redefining_the_Landscape_of_Payment_Systems_April_2009 12
Investment Roadmap FIX, ISO, FpML syntax (HIGH LEVEL)
FIX ISO(1) FpML(1) Represents ISO 20022, ISO 15022 and SWIFT FIN messages(2) See OTC Derivatives breakout for details:
- Commercial Loans, Privately Negotiated FX, and OTC Equity, Bond, Interest Rate, Credit, and Commodity Derivatives- Combination of FIX + FpML is supported for post-trade allocations for OTC Derivatives
Cash Equities &Fixed Income
Forex(2) Listed Derivatives
OTC Derivatives(2)
Funds
Pre-Trade
Trade
Post-Trade
Clearing / Pre-Settlement
Asset Servicing N/A
Settlement
Pricing / Risk / Reporting
Asset Class
Transaction cycleEquities, FI Forex Money Markets Listed derivatives OTC derivatives Commodities Repos Syndicated Loans Cash
Pre-trade / trade Trading (FIXand FIN)
Trade Capture –New!
Trading (FIXand FIN)
Post-trade / pre-settlement
Trade confirms Trade notification
Trade confirms Trade notification,
Affirmation
Trade confirms Trade notification,
Affirmation
Trade confirms Trade notification
Trade confirmsTrade notification
(FIN+FpML), Affirmation
Trade confirms Trade confirms
Pre-settlement matching
Allocation processing as well as confirmation matching, SSI – New!
Clearing & Settlement Settlement& Reconciliation
Settlement& ReconciliationCLS 3rd Party
service
Settlement& Reconciliation
Settlement& Reconciliation
(FIN+FpML)
Settlement& Reconciliation
Settlement& Reconciliation
Agent notices, Credit agreement, Rollover (FpML)
Cash management
Payments
Cash reportingCash settlementCash reporting
Cash settlementCash reporting Cash reporting Cash reporting Cash reporting Cash reporting
Exception Management
Asset servicing & Administration
Data distribution Data distribution Agent notices (FpML - EOC CUG,
DTCC)Corp. Action Corp. Action (Corp. Action)
Proxy voting
Portfolio Administration Total Portfolio Valuation (TPV) – New!
Collateral management
Collateral Management
Collateral Management – New!
Portfolio Reconciliation – New!
Securities Financing Securities Financing – New!
Securities Financing – New!
Regulatory Reporting Transaction Reporting
Transaction Reporting
Transaction Reporting
Transaction Reporting
Planned solutions Available Solution
World_Bank_Redefining_the_Landscape_of_Payment_Systems_April_2009
Coexistence framework and approach
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World_Bank_Redefining_the_Landscape_of_Payment_Systems_April_2009
Overall coexistence framework
1. Prepare MX 2 . Introduce MX 3. Implement MX
MTMX
MT/MX MXMT
Decisions by Standards Committee (STC) and business committees (BPC and SSC)
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World_Bank_Redefining_the_Landscape_of_Payment_Systems_April_2009
Overall coexistence framework
1. Prepare MX 2 . Introduce MX 3. Implement MX
MTMX
MT/MX
Decision to build/use MX
MX live on SWIFT
MT removal
MXMT
Milestones, dates and length of phase to be determined by each MT or MT group, governed by users
Decisions by Standards Committee (STC) and business committees (BPC and SSC)
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World_Bank_Redefining_the_Landscape_of_Payment_Systems_April_2009
Coexistence – current status
• The MTs are not going away anytime soon• SWIFT will support customers through the
coexistence period with additional products and services designed to make coexistence ‘easier’
• A coexistence implementation plan was started in 2007, but community feedback indicated it was too early for consensus on milestones and dates for many MTs
• SWIFT remains fully committed to ISO 20022 for all standards development
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Business areas considering dates for MX convergence • Investment Funds
– Targeted date for removal of MT message - end 2012– Subject to reaching identified milestones
• Exceptions and Investigations (E&I)– Targeted date for removal of MT message - end 2012– Subject to reaching identified milestones
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World_Bank_Redefining_the_Landscape_of_Payment_Systems_April_2009 19
Main industry initiatives
Example of main industry initiatives
• T2S• CCI • Link Up Markets• CCP
– Trade 2 Clear• Regional initiatives, e.g.
– CoSSE– EAC
• Domestic market infrastructure
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Sibos_2009_ update_20090320 - Confidentiality: Public 21
Sibos is coming to Hong Kong:14 to 18 September 2009
World_Bank_Redefining_the_Landscape_of_Payment_Systems_April_2009 22
Thank you