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SWIFT Standards and the Securities Markets

Moscow, 22 nd March 2006. SWIFT Standards and the Securities Markets. John Falk SWIFT. SWIFT in figures – February 2006. 204 countries 7,863 live users 2.5 billion messages/year Over 12 million messages on last peak day Availability: - FIN messaging systems: 99,999 %.

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SWIFT Standards and the Securities Markets

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  1. Moscow, 22nd March 2006 SWIFT Standards and theSecurities Markets John Falk SWIFT 20060322_Moscow

  2. SWIFT in figures – February 2006 204 countries 7,863 live users 2.5 billion messages/year Over 12 million messages on last peak day Availability: - FIN messaging systems:99,999% 20060322_Moscow

  3. The SWIFT community banks found SWIFT - broker/dealers - central depositories & clearing institutions - exchanges securities market data providers 1973 1987 2004 travellers cheque issuers fund administrators 1988 2002 money brokers 1989 MA-CUGs 2001 - registrars & transfer agents - custody providers - trust or fiduciary services companies 1990 1999 1992 - treasury counterparties - treasury ETC service providers investment managers 1998 1995 1996 • securities MIs • payments MIs • proxy voting agencies • non-shareholding financial institutions trading institutions treasury securities ETC service providers Creating STP momentum for the industry 20060322_Moscow

  4. STP & automation SWIFT contribution to industry value Connectivity and messaging Standards and market practices Business Solutions 20060322_Moscow

  5. UNIFI (ISO 20022)Relation with SWIFTStandards SWIFTStandards Securities Other markets UNIFI (ISO 20022) (syntax = XML, such as Investment Funds, Cash Reporting, Bulk Credit Transfers, …) ISO 15022 (syntax = enhanced FIN, such as MT 502, MT 54x, ..) Traditional FIN (e.g. MT 103) ISO 7775 (syntax = traditional FIN, such as MT 521, MT 500, …) Traditional FIN (e.g. MT 100, MT 202, …) 20060322_Moscow

  6. UNIFI (ISO 20022)The main objectives Despite increasing business complexity: • Improve quality (make it better) • Reduce costs (make it cheaper) • Better time to market (make it faster) 20060322_Moscow

  7. Pre-trade / Trade Post-trade Buyer Seller Corporate actions Pre- settlement Proxy voting Pre- settlement Corporate actions Reconciliation Reconciliation Settlement Settlement Reconciliation Reconciliation I/CSD MT-based MX-based Securities market: equities and fixed income Custodian Clearing agent 20060322_Moscow

  8. Prospectus data Price report Subscription + redemption + switch orders Order confirmation + Order status Statements holdings + statement transactions Transfer in + Transfer Out instructions Transfer status + Transfer Confirmation Account management Portfolio Transfer Request for Statement Commission report Fund cash forecast report Request of Pending Transactions Live on SWIFTNet Available for piloting 2007 Funds messages - summary Fund accountant Fund management company Institutional investor Transfer agent Piloting Investment manager 20060322_Moscow

  9. EFAMA Luxembourg SWIFT user group + ALFI /TA Forum SMPG SWIFT Standards WG Standards, market practice & business practice harmonization around ISO 20022 Canada FundServ US DTCC ICI Germany SWIFT user group UK Standards WG Switzerland NMPG WG France SWIFT user group swimEC Australia Industry groups Singapore, Hong-Kong Taiwan 20060322_Moscow

  10. SWIFTNet Fund Distributor Investment Management Institution Fund Administrator / Transfer Agent Hub Fund Company’s Banking Institution SWIFT SolutionSWIFTNet Funds • Many-to-many • Messages • ISO 20022 (XML) • Store & forward • Non-repudiation • Validation • PKI • STATUS • 9 firms live • 24 implemented • 76 ready to implement 20060322_Moscow

  11. Recommendations, Barriers or Regulations G30 Recommendation 2 “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” 2001 CPSS-IOSCO,Recommendation 16 “Securities Settlement Systems should use or accommodate relevant international communication procedures & standards…” 2003 Giovannini, Barrier 1 “Define EU wide protocol to eliminate national differences in IT & interfaces used by Clearing & Settlement providers” 2003 G30, Recommendation 2 “Harmonise message standards & communication protocols” 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………” 20060322_Moscow

  12. Giovannini Protocol Content : ExampleElement 1 : Data Standards • EU Cash & Securities: Securities Clearing & Settlement Systems, C&S Infrastructures and CCP’s should implement relevant ISO data standards in support of ISO15022/20022 • Such as but not limited to: • ISO 3166 - Country Codes • ISO 4217 - Currency codes • ISO 6166 - ISIN • ISO 8601 - Date/time format • ISO 9362 - BIC • ISO 10383 - MIC • ISO 10962 - CFI • ISO 13616 - IBAN • ISO 16732 - IBEI (Provisionally) 20060322_Moscow

  13. Industry Body Recommendations “ISO 20022 is recognized as the single European standard for funds messaging going forward and should be the basis for all electronic communications in this area” - EFAMA/FEFSI “Communications between players within the asset and fund management sphere should utilise ISO Standard Messaging” - IMA 20060322_Moscow

  14. Conclusion - The Industry Experience • Profitability • “Our cost of processing orders has reduced by 66% • since implementing SWIFT” • Gary Janaway,Schroders • Scalability • SWIFT allows us to position ourselves for an increase • in dealing volumes, without having to increase headcount • Kathy Shackle, Fidelity • Customer Service • “ Straight-through processing lets us improve customer • service; we can extend cut-off times at our branches, • giving our sales people a longer selling window." • Maureen Low, Citibank Asia 20060322_Moscow

  15. What Can and Does SWIFT bringto the Securities Markets? • Standards • Security, Reliability and Risk Resilience • Co-Operation • Services • Provides VALUE to the market • SWIFT has done it before 20060322_Moscow

  16. Conclusion Cost Reduction and Improved Performance Revenues/ Portfolio Multiple Links Lack of Systems Integration Legacy Systems Multiple Standards Complex Products Manual Processes Net Profits/ Portfolio Performance 20060322_Moscow

  17. uestions & Answers 20060322_Moscow

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