Transcript A Single Protocol for Clearing and Settlement?

2nd AECSD Conference, Moscow - 5th October 2005
A Single Protocol for
Clearing and Settlement
John Falk
Securities Market Infrastructures
SWIFT
AECSD_20051005
Slide 1
Recommendations, Barriers or Regulations
What is meant
by a
Single Protocol for
Clearing and Settlement?
AECSD_20051005
Slide 2
Recommendations, Barriers or Regulations
2001 CPSS-IOSCO
Recommendation 16: “Securities Settlement Systems should
use or accommodate relevant international communication
procedures & standards…”
2003 G30, Recommendation 2
“Harmonise message standards & communication protocols”
2003 Giovannini, Barrier 1
“Define EU wide protocol to eliminate national differences in
IT & interfaces used by Clearing & Settlement providers”
2004 ESCB-CESR, Standard 16 (draft)
“Entities providing securities clearing and settlement services,
and participants in their systems should use or accommodate
relevant international communication procedures and
messaging and reference data standards………”
AECSD_20051005
Slide 3
G30 Global Clearing and Settlement:
A Plan of Action - Recommendation 2
Harmonise messaging standards & communication protocols
 “All
market participants should adopt ISO15022
as the global standard for straight-through
securities messaging across the entire
securities life cycle”
 “XML
should become the language to describe
standardised messages”
 “Market
participants should support and use
communication networks that adopt open,
standardised, IP-based protocols for securities
transactions”
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Slide 4
SWIFT meeting the challenge
Present and future
 Communication
network
– SWIFTNet (IP based service)
 Market
Practice Standards worldwide
– Securities Market Practice Group (SMPG)
 Data
Standards
– ISO15022
– SWIFT ISO XML Standards
– UNIFI (ISO20022 - Standards convergence)
AECSD_20051005
Slide 5
UNIFI (ISO 20022)
Overview of existing initiatives
Treasury
Payments
EPC/ECBS
EACT
CHIPS
TCH
RosettaNet/PMP
IFSA
NACHA
OAGi
ISTH
X12
Fedwire
TWIST
FPML
W3C
OMG
ISDA
IFX
ISO/TC68
UNIFI - ISO 20022
FIX
BMA
SMPG
FISD/MDDL
SIA
G30
ISITC-IOA
UN/CEFACT
Bolero
OASIS
e-bMoU
IIBLP
EAN/UCC
ISSA
ICC
Giovannini
UNCITRAL
Securities
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IFSA
Trade Finance
Slide 6
A Single Protocol for Clearing and Settlement
What
is being
proposed?
AECSD_20051005
Slide 7
Protocol framework
Proposed recommendation

The original 9 element framework should be
simplified into 6 elements over 2 layers
Participant A A
Participant
Data
Data
Messaging
Transfer
Network
AECSD_20051005
Participant
Participant BB
S
TS 1
1ATA
NN
D 4
DA
AR
4RDS 7
D
S
S
ES 2
E
2 CC
UU
5
RR
I
IT
Y
T
5 8
Y
S
ES 3
3RER
VV
I 6
IC
CE
S
E
6 9
S
Data
Data
Messaging
Transfer
Network
Slide 8
ShortTerm
Term
- Long
Protocol scope - Proposed
Trade Date
IMI
Trade Date + X
Space 3
Clearing &
Settlement
Space 2
Post Trade /
Pre-Settlement
Space 1
Pre-trade
/ Trade
Institutional (buy) Side
Order
Street (sell) Side
B/D
Trade
B/D
Exchange
1
VMU /
ETCP
CCP
2
GC
SC
SA
SA
IMI: Investment Manager
B/D: Broker Dealer
VMU: Virtual Matching
Utility
GC: Global Custodian
SC: Sub-Custodian
SA: Settlement Agent
(Clearer)
CCP: Central
Counterparty
ICSD: (Int‘l) Central
Securities Depository
(I)CSD
Non Trade Related Activity
3
Space 4 - Asset Servicing
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Slide 9
Focus on the Data Layer:
How far from common data standards are we?
European CSD’s
Available Standard
Infrastructure use –
Cross border
Infrastructure use –
Domestic
BIC
42%
17%
ISIN
92%
83%
ISO Currency Code
83%
83%
ISO Country Code
92%
92%
ISO 15022 Data Dictionary
75%
17%
ISO 15022 Message syntax
67%
25%
ISO 15022 Message Set
33%
8%
SMPG (local) Message Set
IP Network
58%
92%
33%
92%
AECSD_20051005
Slide 10
Common Data Standards - AECSD
IP Network
SMPG (local) Message Set
ISO 15022 Message Set
ISO 15022 Message syntax
ISO 15022 Data Dictionary
ISO Country Code
ISIN
BIC
ISO Currency Code
Available Standards
Azerbaijan - National Depository
Georgia - Central Securities Depository
Kazakhstan - Central Securities Depository
Kyrgyzstan - Central Depository
Moldova - National Securities Depository
Republic of Belarus - Republican Central Securities Depository
Russian Federation - DCC
Russian Federation - NDC
Ukraine - Interregional Stock Union
Ukraine - National Depository
Uzbekistan Republic - State CSD
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Slide 11
Securities Market Infrastructures on SWIFT
Euroclear
Clearstream
Euroclear NL
London SE
Euroclear France
FMC
NDC & DCC, Russia
DTCC CREST
Omgeo
ECSDA
Tokyo SE
Iberclear
SIS
LCH.Clearnet DIFX Hong Kong FE
Monte Titoli
Singapore SE
CBLC
Strate Sydney Futures Exchange
CAJVAL JSE Securities Exchange
…and others!
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Slide 12
Communicating with
Securities Market Infrastructures using SWIFT
street side
Order/Trade
institutional (buy) side
Benefits for system owners
Post-Trade/
Pre-Settlement

Mission critical levels of
>>> reliability, security and support

Time to market is
Settlement
>>> short

Low entrance barriers for
>>> remote members

Access to all types of domestic and international players
>>> increased internationalisation of client activities

Global standards ISO 15022, XML, FIX for:
>>> trading >>> clearing >>> settlement >>> DVP >>> custody
AECSD_20051005
Slide 13
uestions
&A
nswers
AECSD_20051005
Slide 14
2nd AECSD Conference, Moscow - 5th October 2005
A Single Protocol for
Clearing and Settlement?
John Falk
Securities Market Infrastructures
SWIFT
AECSD_20051005
Slide 15
Securities Market Infrastructures - FIN
Argentina
Australia
Austria
Belgium
Caja de Valores
SFE
OEKB
CIK
Euroclear Bank
MTS
Brazil
CBLC
Canada
CDS
Croatia
Sredisnja Depositarrna Agencija
Denmark
VP
Finland
HEX
France
Euroclear France
Euronext Paris – MATIF
MTS
Germany
Eurex Clearing
Deutsche Boerse
MTS
Greece
Central Securities Depository
Hong Kong
HK Futures Exchange
SEHK Options Clearing House
Hungary
Keler
Italy
Monte Titoli
Borsa Italiana
CCG
Japan
JSCC
Kazakhstan
Kazakhstan Stock Exchange
Korea
Securities Depository
Latvia
Central Depository
AECSD_20051005
Lebanon
Luxembourg
Mexico
Netherlands
Norway
Poland
Portugal
Russian
Federation
Singapore
Slovenia
South Africa
Spain
Sri Lanka
Sweden
Switzerland
Taiwan
UK (& Ireland)
USA
Midclear
Clearstream
S.D. Indeval
Euroclear Netherlands
MTS
VPS
National Depository for Securities
MTS
Depository Clearing Company
The National Depository Center
Central Depository
Singapore Exchange
Central Securities Clearing Corp
STRATE
JSE Securities Exchange
Iberclear
MEFF
MTS
Securities Settlement System
VPC AB
SIS
SIS x-clear
Securities Central Depository
CREST
LCH.Clearnet
ISCC
DTCC
Omgeo
Slide 16
Market Infrastructures
Infrastructure Update
Euclid
CREST
HOME
Communicating with
Securities Market Infrastructures using SWIFT
street side
1
Trading: connecting
Exchanges
2
Clearing: connecting
Clearing Institutions and
Central Counter-parties
3
Electronic Trade
Confirmation: connecting
to VMU providers
4
Settlement & Custody:
connecting Central
Securities Depositories
and International Central
Securities Depositories
Exchange
Order
IM
Post-Trade/
Pre-Settlement
Order/Trade
institutional (buy) side
B/D
VMU
B/D
CCP
Settlement
GC
SC
SA
(I)CSD
IM: Investment Manager
B/D: Broker Dealer
GC: Global Custodian
SC: Sub-Custodian
SA: Settlement Agent
AECSD_20051005
SA
Slide 17
Securities Industry
SWIFTNet Solutions
Giovannini
Market Infrastructures
HOME
Proposed protocol:
Still to do…

Present draft recommendation:
– 17 October 2005 – SMPG
– 18 October 2005 – SWIFT Board
– 24 October 2005 – CESAME monitoring group

Pre-publication of protocol for industry consultation
– October 2005

Close of consultation
– January 2006

Expected final publication
– March 2006
AECSD_20051005
Slide 18
What Can and Does SWIFT bring
to the Securities Markets?
 Standards
 Security,
Reliability and Risk Resilience
 Co-Operation
 Services
 Provides
 SWIFT
AECSD_20051005
VALUE to the whole market
has done it before
Slide 19
Other G30 Recommendations

Creating a strengthened, interoperable global
network
1 Eliminate paper and automate communication, data capture
and enrichment
3 Develop and implement reference data standards
8 Automate and standardize asset servicing processes

Mitigating risk
12 Ensure effective business continuity and disaster recovery
planning

Improving governance
18 Promote fair access to securities clearing and settlement
networks
AECSD_20051005
Slide 20
SWIFTStandards
Securities
Other markets
UNIFI (ISO 20022) (syntax = XML, such as Investment
Funds, Cash Reporting, Bulk Credit Transfers, …)
ISO 15022 (syntax = enhanced
Traditional FIN
FIN, such as MT 502, MT 54x, …)
(e.g. MT 103)
ISO 7775 (syntax = traditional
Traditional FIN
FIN, such as MT 521, MT 500, …)
(e.g. MT 100, MT 202, …)
AECSD_20051005
Slide 21
Market Infrastructures
Infrastructure Update
Euclid
CREST
HOME
Communicating with
Securities Market Infrastructures using SWIFT
street side
Order/Trade
institutional (buy) side
Benefits for system members
Post-Trade/
Pre-Settlement

Technical standardisation: Single
window access to domestic and
international systems through one
interface
Settlement
>>> cost efficiency

Mission critical levels of
>>> reliability, security and support

Business standardisation: ISO 15022, XML, FIX:
>>> Market Practice standardisation>>> Straight Through Processing
>>> Real-time DVP >>> shorter settlement cycles>>> risk reduction
AECSD_20051005
Slide 22