SWIFT LARC 2016- Securities- Work Session

The Tides of Global Investment:

Destination Americas? Preserving and Channeling Regional Growth

Thomas Trépanier

Director de Estrategia de Infraestructura de Mercado de Valores en Estados

Unidos, America Latina y el Caribe, SWIFT

Horario: 10:00 - 11:00am

Siguiente Sesión

SWIFT Latin American Regional Conference 2016 1


SWIFT in figures

6.11+billion FIN messages per year (2014)

10,800+ SWIFT users

200+ Countries and territories

27.5 million FIN messages peak day (2014)

8.4% Increase in FIN traffic (2013)


While firms are trying to recover and grow, they face pressure from

regulation, costs and need to improve STP

Voice of the Customer

Regulation

Growth Costs

Regulatory Overload

Competitive Differentiation


SWIFT FIN Traffic – Global Distribution by Market

48% 46%

5%

1%

Payments

Securities

Treasury

Trade

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

2010 2011 2012 2013 2014 2015

North America

Axis

Tit

le

Chart Title

Payments

Securities

Trade Finance

Treasury

-10.0%

0.0%

10.0%

20.0%

30.0%

2010 2011 2012 2013 2014 2015

Asia-Pacific

Payments

Securities

Trade Finance

Treasury

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

2010 2011 2012 2013 2014 2015

Central & Latin America

Payments

Securities

Trade Finance

Treasury

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

2010 2011 2012 2013 2014 2015

Europe M-E

Payments

Securities

Trade Finance

Treasury

SWIFT FIN Traffic - by Region


Strong growth from Securities versus Payments Traffic

0

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

5,000,000,000

6,000,000,000

7,000,000,000

Afr

ica

AP

AC

Ce

ntr

al Lata

m

EM

E

No

rth

Am

Tota

l

Afr

ica

AP

AC

Ce

ntr

al Lata

m

EM

E

No

rth

Am

Tota

l

Payments Securities

2012

2,013

2014

2015

Securities Traffic Growth

• Impacted by clearance &

settlement, statements, trade

status and asset servicing


Regulatory impact for financial institutions

Risk, transparency and operations

Operations • Collateral account segregation

• Stringent risk controls

• Efficiency middle/back office

• Ensure business continuity

• Automation (STP)-limited human intervention

• Scalability to cope with volume growth

• Interoperability framework (inter-MI)

• Data archival for dispute resolution

Challenges Needs Collateral and

Liquidity • High quality collateral demand and

fragmentation

• Avoid concentration

• Very conservative haircuts

• Timely process of payments

• Optimise collateral monitoring & mobility

• Cross-product margining

• Settlement netting for all products

Transparency • Account segregation

• Reporting arrangements unclear

• Trading in different jurisdictions

• Level of detail and relevance

• Change account structure and granularity(cost)

• Clear procedures for TR

• Clear TR guidelines

• Reduce the number of TRs


Changes happening in correspondent banking

More risk averse banking

The number of net new RMA relationships is going down worldwide – banks are closing down relationships in order to drive

risks down and comply with regulatory requirements


Declining trust between Eurozone & PIIGS countries?

Average value of an export trade finance transaction is going down

European banks seem to take less risk over the past year in financing export to the ‘more

risky’ EU countries

40000

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60000

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03

Growth 2015 vs 2014: -29%


Key Takeaways

Transparency

Gravitation Towards

Safe Havens De-risking

• Transparency is becoming

a key area of focus driven

by regulatory requirements

• Current trend is showing

volumes gravitating towards

securities traffic

• Greater emphasis in

standardizing and

automating securities

transactions

• Emphasis on de-risking as

banks re-shuffle portfolios

to accommodate lower risk

appetites

• Consolidation of business

with trusted correspondent

parties across all markets

The Tides of Global Investment:

Destination Americas? Update on Argentina

Alejandro Berney

Director Ejecutivo & CEO, Caja de Valores

Horario: 10:00 – 11:00am

Siguiente Sesión: 11:30am


Year Quantity Var.

2013 3.039.438

2014 3.892.584 28%

2015 3.283.961 -16%

Period Quantity Var.

01 to 04 2013 825.305

01 to 04 2014 1.136.263 38%

01 to 04 2015 976.091 -14%

01 to 04 2016 1.326.189 36%

-

100.000

200.000

300.000

400.000

500.000

Nu

mb

er

of i

nst

ruct

ion

s

Publics Bonds T-Bills Equity Others

Ballotage

Region sets the tone but local flavour has influence

Macri elected

president

Hold outs

agreement

SWIFT Latin American Regional Conference 2016

Year Average Var.

2013 285.483.493.780

2014 400.571.846.850 40%

2015 531.828.987.716 33%

Period Average Var.

01 to 04 2013 273.454.491.791

01 to 04 2014 354.504.134.858 30%

01 to 04 2015 503.462.851.048 42%

-

100.000

200.000

300.000

400.000

500.000

600.000

700.000

800.000

AR

S $

Mil

lio

ns

Publics bonds T-Bills Equity Corporate Bonds Trust Securities Others

Change in instrument type is related to change in macroeconomic and monetary policies

Deficit financing

– electoral year

Recognition of debts

& beginning of anti-

inflationary policy


Year Average Var.

2013 182.794.865.332

2014 283.421.828.162 55%

2015 413.822.370.066 46%

Period Average Var.

01 to 04 2013 175.010.874.746

01 to 04 2014 243.812.775.464 39%

01 to 04 2015 382.658.023.616 57%

Year Average Var.

2013 102.688.628.448

2014 117.150.018.687 14%

2015 118.006.617.649 1%

Period Average Var.

01 to 04 2013 98.443.617.045

01 to 04 2014 110.691.359.394 12%

01 to 04 2015 120.804.827.431 9%

Local Investors and Intermediaries

Foreign Investors and Intermediaries



-

100.000

200.000

300.000

400.000

500.000

600.000

700.000

800.000

AR

S $

Mil

lon

s



Local Investors lead increase in investments, with foreigners following


• Implementation of Capital

Markets Law

• Integration between

markets / DMA

• New B&MA

• New regulators reducing red

tape and inconsistencies

• New economic & monetary

policies

• Tax amnesty bill

• Frontier to Emerging Market

• Old and inefficient

infrastructure was enough for

a small market.

67

%

31% 14

%

53%

10

9%

34

%

BR

Z

MEX

AR

G

CO

L

CH

L

PERSo

urc

e: W

orl

d B

ank

Private Debt-to-GDP (2014)

35%

37%

11%

39%

90%

38%

BR

Z

MEX

AR

G

CO

L

CH

L

PER

Sou

rce:

Wo

rld

Ban

k

Market Cap-to-GDP (2014)

Pro-growth environment

Regulatory Improvements

Strong need for automation


Regulation

Growth Costs

Current environment signals strong growth of the Argentine Capital Markets


Summary

Argentine market is strongly influenced by regional outlook and flows, but

has its own dynamics based on macro changes and expectations

Argentina’s relative importance is too low to make a difference in overall

regional trends

Strong underlying currents in Argentina – changes to macroeconomic

policies, reestablishment of investments and repatriation of savings –

forecast strong growth in capital markets

There is a strong need of automation to bring the infrastructure up to this

task

Steven Kelly

Sales Manager, Bloomberg STP Solutions

Horario: 10:00 – 11:00 am

Siguiente Sesión: 11:30 am


Standardizing and Automating

Securities Transactions Changing the Game in Post-Trade STP


Industry Challenges in Post-Trade Processing

Industry

Transformation

Driving Change

Challenges of a

T+2 World

The Need for an

Automated Work Flow

• The effective processing of a trade from execution to settlement is impacted by trade volume

being supported by a shrinking trade support staff

• Contributing to an inefficient trade lifecycle process is the lack of full STP adoption

(manual processing of trade events range from 20% to 35% of a global institutional broker’s trade

activity)

• The move from the current three-day settlement cycle (“T+3”) to a two-day cycle “T+2”) will reduce

operational and systemic risk by limiting exposure and creating greater efficiencies in trade

processing. European markets migrated on Oct 6, 2015 and the U.S. market is targeting Q2

2017.

• However the transition to shorter settlement times introduces many challenges including

increased development costs, higher volumes of immediate post-trade processing and an

increase in trade exceptions

• Regulatory mandates have altered or introduced new processing requirements such as central

clearing, trade reporting and supporting collateral obligations. Implementation of Capital

Markets Law, integration between markets/DMA and new B&MA

• Services such as collateral management that were once supported by an operation ‘cost center’

are now moving into the front-office due to the P&L impact related to funding & collateral needs

Penetrating New

Markets

• Capital Markets are expanding into new asset classes and markets

• Strong need for automation to replace old and inefficient infrastructures in markets

• Strong underlying currents in Argentina forecast strong growth in capital markets


Industry Challenges in Post-Trade Processing Managing trade fails continues to be a critical step in the post-trade workflow

Large Volumes of Trades Fail Every Day… (U.S. Treasury Securities Daily Trade Fails; $ in billions)

…Industry Trends Are Increasing the Importance of Effective

Trade Fail Management

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

Aug-12 Dec-12 Apr-13 Aug-13 = 5 day moving average

Proposed Shortened Settlement Cycle

• European Union moving to T+2 settlement by 2015

• U.S. moving to T+2 settlement by 2016 and T+1 by 2020

Fines for Trade Fails in Treasuries

• Treasury Market Practices Group (TMPG) and SIFMA have

instituted a “fails charge” for fails on certain asset classes

TMPG Margin Recommendation for MBS

• TMPG is recommending the posting of margin for unsettled

MBS trades and failed MBS trades

DTC Proposal to Settlement Process

• DTC is proposing new industry standard to require pre-

matching certain transaction types prior to processing


• Bloomberg provides products and services

that support the trade lifecycle beyond the

front office.

• As a provider of electronic services, data,

news and information to customers

throughout the world, Bloomberg offers a full

trade life cycle solution.

• Expanding the offering of matching services

helps meet the demands of the securities

industry while promoting competition among

service providers.

• More effective straight-through-processing

offerings are needed by the market

participants to advance and strengthen

market efficiencies.

• Shorter settlement cycles driving the need for

more efficient trade processing. Bloomberg

STP provides the industry with an alternative

option to increase market efficiencies.

• Bloomberg STP offers a post-trade

confirmation matching service supporting

both central and local matching.

• Global post-execution service supporting all

global markets.

The Value of Bloomberg STP Solutions


The Value of Bloomberg STP Solutions Post-Trade Services Bloomberg STP is a real-time multi-asset class platform that streamlines post-trade workflows. Bloomberg

STP reduces operational risk while providing post-trade process automation to buy-side, sell-side and

custodians.

LIFECYCLE DATA CONNECTIVITY COMMUNITY

• VCON

• Allocation

Notification

• Confirmation

Matching

• Option Expiry Mgr

• FailStation /

FXStation

• Metrics / Scorecard

• Collateral Monitor

• SSI Database

• Reconciliation

Service (in-flight)

• STPStation

• Integration Services

(FIX, SWIFT, FpML)

• Multi-Asset Class

Blotter

• STP Portal

• Bloomberg IB

Bloomberg Terminal / STP Portal / Messaging

21

SWIFT is a member-owned

cooperative through which the

financial world conducts its business

operations with speed, certainty and

confidence. More than 10,800

financial institutions and

corporations in over 200 countries

trust us every day to exchange

millions of standardised financial

messages. This activity involves the

secure exchange of proprietary data

while ensuring its confidentiality and

integrity.

The Value of Bloomberg STP Solutions Post-Trade Services Workflow

Investment

Manager

/ Service

Provider

Broker

Dealer /

Clearing

Broker

Depositories

Block (ET & Voice)

Allocation Allocation

Confirmation

Block Match

Matched Confirm

Trade Authorization

Block Match

Custodian

Block &

Allocation

Block (ET & Voice)

Bloomberg

SSI Enrichment

Trade Authorization

Exceptions/Fails

Exceptions/Fails

Matched Confirm

Matched Confirm

Confirmation

Matching

Settlement

Exceptions

Matched Confirm

Settlement

Status

Prime

Broker

Exceptions/Fails

www.swift.com


Economy & Finance

SWIFT LARC 2016- Securities- Work Session