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SWIFTStandards Strategy cornerstones

SWIFTStandards Strategy cornerstones. Paul Miserez. San Jose, Costa Rica, 15 March 2005. SWIFTStandards_SanJose_v3.ppt. SWIFTStandards Agenda. Introduction. The main objective. Strategy co rnerstones. Introduction What is SWIFT?. Heritage. Neutrality.

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SWIFTStandards Strategy cornerstones

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  1. SWIFTStandardsStrategy cornerstones Paul Miserez San Jose, Costa Rica, 15 March 2005 SWIFTStandards_SanJose_v3.ppt

  2. SWIFTStandardsAgenda Introduction The main objective Strategy cornerstones

  3. IntroductionWhat is SWIFT? Heritage Neutrality • Est. 1973 by 239 banks in 15 countries • Developed shared messaging platform for financial transactions • Emphasis on security, reliability and availability • Industry-owned community • Overseen by regulatory authorities • Impartial to the data transacted across the messaging platform Technology Understanding • Store and forward, file transfer, interactive query & response • Open standards • Multi-vendor IP VPN • 7,650 FIs in > 200 countries • Payments, Securities, Treasury and Trade • Reducing costs, improving automation, managing risk

  4. IntroductionWhat is SWIFT? Mission excerpts • “… to provide low-cost, competitive financial processing and communications services of the highest security and reliability” • ”… greater automation of the end-to-end financial transaction process, based on its leading expertise in message processing and financial standards setting” • “… enabling interoperability between its members, their market infrastructures and their end-user communities”

  5. IntroductionWhat is SWIFT? 7,656 live users (Jan 05) 202 live countries (Jan 05) 2.3 billion messages/year (2004) Latest peak day: 10,370,828 messages (1 Dec 04) Message growth: 12.3% (2004)

  6. IntroductionWhat is SWIFT? Traffic by market: % breakdown (Jan 2005 YTD) Trade 2% Treasury 7% Payments 58% Securities 33%

  7. IntroductionWhat is SWIFT? Traffic by region: % breakdown (Jan 2005 YTD) Africa 2% Middle East 1% Asia-Pacific 12% Europe 66% Americas 19%

  8. SWIFTStandardsAgenda Introduction The main objective Strategy cornerstones

  9. Improve quality Reduce costs Better time to market Better Cheaper Faster SWIFTStandardsThe main objective Despite increasing business complexity: Some examples of increased business complexity: • Multiplication of financial instruments • Communication reaches into corporate world • Industry drive to shorter settlement cycles • Increased competition lowers profit margins

  10. SWIFTStandardsComponents to make it better • Maximise industry involvement • Focus on business requirements: solve the right problem • Focus on end-to-end business transaction: avoid silos • Use formal approach • Reduce ambiguity: formal, machine readable descriptions • Ensure completeness: systematic and thorough analysis • Take into account detailed market needs: increase STP • Improve industry validation: full involvement & transparency • Maximise reuse of standardised building blocks • Define and agree once – re-use often: more stability • Industry-wide and cross-industry: better interoperability

  11. SWIFTStandardsComponents to make it cheaper • Decouple business standard & physical representation • Base applications on business standard: less maintenance • Reduce dependency on specific technology: more stability • Provide formal specifications • Reduce development time: less manual activities • Reduce development risks: less interpretation • Component-based approach: reusability & consistency • Use up-to-date technologies • Use of “off-the-shelf” tools: cheaper and more advanced • Better reuse of resources: infrastructure, tools and HRs • Convergence • Standards collaboration in fin. industry: avoid duplication

  12. SWIFTStandardsComponents to make it faster • Business case driven development • Develop right thing at right time: no wasted time or efforts • Prepare time line with industry: no surprises; ensure buy-in • More flexible release cycles • Launch new solutions when ready: up to 4 times per year • Group maintenance in yearly release: allow for budget cycle • Formal descriptions and up-to-date technologies • More automation in standards development: “generation” • More automation in standards implementation: “injection” • Convergence • More coordination in financial industry: increased efficiency

  13. SWIFTStandardsAgenda Introduction The main objective Strategy cornerstones

  14. SWIFTStandardsStrategy cornerstones Standardsconvergence ONGOING SWIFT Standards IN PROGRESS BAU Standards implementation Standards development

  15. SWIFTStandardsStrategy cornerstones SWIFT Standards BAU Standards development

  16. Available 2005 Beyond Standards deliverablesXML-based standards • Customer-to-bank payment initiation • Bulk payments • Cash management • Investment funds • Trade services utility prototype • Bank-to-customer cash management • Investment funds (rel. 2, 3) • FIX (pre-trade / trade) • Exceptions & investigations • Direct debits • Derivatives • Trade services utility • Investment funds (rel. 4) • Proxy voting

  17. Business Case Businessmodelling Automated publication Standards, Workstation, methodology & guidelines Internal Repository Business input Validation Standards documentation Feedback Modeling Group (per project) Scope & requirements Validation Group (per project) Standards developmentProcess

  18. All institutions have their own sets of data objects They have some in common SWIFT standardises common data objects When building messages, data objects are grouped... Transporting messages … and then messages are represented in syntax XML FIN Standards developmentBusiness Modeling

  19. Business analysis and requirements analysis:Understand the business and the problem Logical analysis and logical design:Define and refine the solution Technical design and implementation:Automated physical implementation Standards developmentMethodology Three-layered approach Other features • End-to-end view • Formal notation (UML) • Representation-neutral • Implementation-neutral • Foster reuse (dictionary) • Involve industry experts

  20. SWIFTStandardsStrategy cornerstones Standardsconvergence ONGOING SWIFT Standards

  21. Standards convergenceMultitude of organizations doing standards CEN ISO Financial Industry Bodies OMG UN/CEFACT W3C IOSCO ebXML FIX ISO/TC68 ANNA OASIS ITU Bolero CEFACT/TBG5 FpML e-MoU/MG CEFACT/TBG17 ECBS FISD/MDDL International Standards Setters ISSA ISDA ISITC-IOA Domestic Standards SMPG EPC ISMA IFSA

  22. Standards convergenceThe current situation IFX EDIFACT ? ? Proprietary ? ? ? ? ? FpML ISO 15022 FIX

  23. Standards convergenceThe ultimate objective Central Depository Corporate Corporate Financial Institution Financial Institution Stock Exchange Financial Institution Stock Exchange Fund Manager Fund Manager

  24. Standards convergenceStrategy Objective • To enable communication interoperability between financial institutions, their market infrastructures & end-user communities Major obstacle • The numerous uncoordinated standardisation initiatives (risk of divergence and duplication of efforts) Proposed solution • UNIFI (ISO 20022) – A common ISO/UN-CEFACTstandardization approach (methodology, process, repository) SWIFT’s role • Act as UNIFI (ISO 20022) Registration Authority (RA)

  25. Standards convergenceUNIFI (ISO 20022) – key components Modeling-based standards development • Syntax-independent business standard • Standards Evaluation Groups Syntax-specific design rules for XML • Predictable and automatable • Protect standard from technology evolution Reverse Engineering approach • Protect industry investment and provide interoperability • Prepare future migration ISO 20022 Repository • Business Process Catalogue & Data Dictionary

  26. UNIFI RA Standards convergenceThe ultimate objective SWIFT FIX BMA UN/CEFACT Cross-industy Repository Omgeo FpML Euroclear UNIFI (ISO 20022) Financial Repository DTCC Clearstream ISO 15022 Account CIDX Date FED Amount Target Tax OAGi TWIST Price ISTH IFX MDDL EBA RosettaNet

  27. Standards convergenceUNIFI (ISO 20022) and SWIFTStandards SWIFTStandards Securities Other markets ISO 7775 (syntax = traditional FIN, such as MT 521, MT 500, …) Traditional FIN (e.g. MT 100, MT 202, …) ISO 15022 (syntax = enhanced FIN, such as MT 502, MT 54x, …) Traditional FIN (e.g. MT 103) UNIFI (ISO 20022) (syntax = XML, eg, Investment Funds, Cash Reporting, Bulk Credit Transfers) … migration to a standardized use of XML, guaranteeing interoperability across industries, particularly in but not restricted to the financial industry

  28. ISO ISO ISO ISO Standards convergenceUNIFI (ISO 20022) registration bodies CentralRepository SWIFT Payments Bolero Data Dictionary Business request SWIFT FpML Securities Business Process Catalogue XML message Registration Authority TBG5 Others ISTH Group Standards Evaluation Groups Communities of users & developers Registration Management Group

  29. Standards convergenceStepping stones toward convergence UNIFI Techno- logy Process Compati- bility Agree- ments Interope- rability Liaisons Coex- istence Commu- nity Today

  30. Standards convergenceOverview of existing initiatives and liaisons Treasury Payments EPC/ECBS EACT CHIPS TCH RosettaNet/PMP ISDA TWIST NACHA OAGi FPML ISTH W3C Fedwire X12 OMG ISDA TC68/SC6&7 CEFACT/ TBG5 TC68/SC4&7 IFSA X9 IFX ISO/TC68 UNIFI (ISO 20022) UN/CEFACT FIX TC68/SC4 WG8 & WG11 CEFACT/ TBG15 bolero.net BMA OASIS SMPG e-bMoU IFSA FISD/MDDL ICC SIA G30 ISSA Acord ISITC-IOA IIBLP Insurance Giovannini Securities Trade Finance

  31. SWIFTStandardsStrategy cornerstones SWIFT Standards IN PROGRESS Standards implementation

  32. Standards implementationCo-existence – the key challenge The possibility to use FIN- and/or XML-based standards in an end-to-end business transaction without needing to know (or being impacted by) what your counterparts are using. XML FIN

  33. Corporate Inter-bank Corporate 2 Ordering Bank 3 Beneficiary Corporate 1 1 1 Intermediary Bank (2) Intermediary Bank (1) 2 2 Ordering Corporate Receiving Bank Ordering Bank Receiving Bank corporate cash reporting corporate payment initiation inter-bank payment execution Standards implementationCo-existence – problem description How to ensure interoperability and STP despite the use of different syntaxes in an E2E- transaction?

  34. Standards implementationWhy do we need a “co-existence solution”? “Co-existence must bridge the gap that is created because institutions have internal business drivers at different moments in time.” • Communication must remain possible between customers • “Mixed” transactions must work end-to-end • Some FIs want to move immediately to XML • Some FIs want to remain in FIN for a long time • Internal applications and DBs should not be duplicated/changed to deal with multiple syntaxes

  35. FIN Account Date Date XML OO- application XML-aware application Legacy application Business application Business application Business application Business application Business application Business application Business application Business application Business application Data Objects Standards implementationCo-existence – proposed way forward Interface Middleware EAI Standardised data objects SWIFT mapping rules

  36. Standards implementationCo-existence – proposed way forward • Step 1 • Ensure semantic • completeness • of business • process model • Step 2 • Define syntax • to use • (MT and/or MX) • Step 3 • Provide support • and tools for • interoperability To be used per end-to-end transaction

  37. Step 1 • Step 2 • Step 3 Standards implementationStep 1 – Check for semantic completeness Is all required data available and supported throughout the end-to-end transaction? IF NOT • complement through standards development or • specify acceptable workaround

  38. Step 1 • Step 2 • Step 3 Standards implementationStep 2 – Syntax to use Do we need additional standards development? • MX standards development (by default) or • MT standards development (board approval) Do we have a mix of MTs and MXs? • Migration scenario (results in MX-only) or • Translation scenario (provides interoperability)

  39. Step 1 • Step 2 • Step 3 Standards implementationStep 3 – Tools for interoperability What level of support should SWIFT provide? Business value for community/ business risk for SWIFT Business risk for SWIFT Delivered by others (competitive space) Delivered by SWIFT (collaborative space) Absolute minimum Value added steps Formal translation rules Central-ised translation Partner accred- itation Plug-in (all brands) Alliance (SWIFT only) Test cases Syntax mapping Web service Publish rules Qualification Solution at interface Solution as service

  40. SWIFTStandardsSummary • All new standards are XML-based • FIN-XML co-existence is a must • Convergence – UNIFI (ISO 20022) with the purpose to … unify!

  41. uestions & Answers

  42. Supporting slides

  43. Co-existence approach

  44. Date Account Order Order Date Grouping data objects Date Transporting messages XML FIN Representing data objects in message syntax Coexistence: underlying concepts1. Standardisation through modelling All institutions have their set of data objects SWIFT standardises common data objects

  45. Compare Repository Date Account Coexistence Information Order Support coexistence Order FIN Date Complete & Update Date XML Coexistence: underlying concepts 2. Reverse Engineering FIN FIN messages

  46. MT 942 ReturnTransaction MT 942 - FIN acctId: AccountIdentification :20: … :25: … :61:sub1 :61:sub2 :61:sub3 :61:sub4 :61:sub5 ... StatementEntry valueDate: DateTime entryDate: DateTime cdMark: CreditDebitMarkCode fundsCode: string amount: decimal ... AccountCashEntryDetails acctId: AccountIdentification acctCcy: CurrencyCode acctTp: CashAccountType1Code ntryRef: string ntryAmt: CurrencyAndAmount ntryDt: DateAndTimeChoice ntrySts: EntryStatus1Code 1 If ntryAmt > 99999999999999 then Error(AmountTooBig) 1 Coexistence: underlying concepts 3. Formalised mapping rules

  47. Middleware or EAI translates (based on SWIFT defined rules) 1 Interface translates (based on SWIFT defined rules) 3 2 SWIFT mapping rules Mandatory SWIFT translation module (similar to SNL) 4 Central translation in network application Coexistence: underlying concepts 4. SWIFT makes mapping rules available Middleware EAI Business application Business application Business application Business application  Middleware EAI Business application Business application  Business application Business application

  48. FIN Standardised data objects Enterprise “database” Interface Middleware EAI 25:113-584 61:0310171017 Account Date Date XML <AcctId>113-584 <TrfValDt>2003-10-17 <NtryDt>2003-10-17 SWIFT mapping rules Business application Business application Business application Business application Coexistence: underlying concepts 5. Implementing data objects data objects: “single window on standards”

  49. Co-existence examples

  50. How to forward info from C2B into MT 103 and into MT 202? How to forward info from MT 103 and MT 910 into CashRep? What is the correct field tag? How to convert the value?  FIN :20:abcde XML <InstRef>abcde</InstRef> Standards implementationCo-existence – example 1 mapping mapping MT 205 (FIN) MT 202 (FIN) MT 910 (FIN) translation & mapping translation & mapping MT 103 (FIN) Payment Initiation (XML) Cash Reporting (XML)

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