Slide 1 ACSDA_20051028

John FalkSecurities Market InfrastructuresSWIFT

A Single Protocol for A Single Protocol for Clearing and SettlementClearing and Settlement

ACSDA International Seminar, Punta del Este - Uruguay : 28th October 2005

Slide 2 ACSDA_20051028

Recommendations, Barriers or Regulations

What is meantWhat is meant

by aby a

Single Protocol forSingle Protocol for

Clearing and Settlement?Clearing and Settlement?

Slide 3 ACSDA_20051028

Recommendations, Barriers or Regulations

20012001 CPSS-IOSCOCPSS-IOSCO,, Recommendation 16Recommendation 16 “Securities Settlement Systems should use or accommodate relevant international communication procedures & standards…”

20032003 GiovanniniGiovannini, Barrier 1, Barrier 1“Define EU wide protocol to eliminate national differences in IT & interfaces used by Clearing & Settlement providers”

20032003 G30G30, Recommendation 2, Recommendation 2““Harmonise message standards & communication protocols”

20042004 ESCB-CESRESCB-CESR, Standard 16 (draft), 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………”

Giovannini Barrier 1

“National differences in the information technology and interfaces used by clearing and settlement providers should be

eliminated via an EU wide protocol

SWIFT should ensure the definition of this protocol through the Securities Market Practice Group”

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”

Slide 4 ACSDA_20051028

SWIFT meeting the challengePresent 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)

Slide 5 ACSDA_20051028

Securities

ISO 7775 (syntax = traditional FIN, such as MT 521, MT 500, …)

ISO 15022 (syntax = enhancedFIN, such as MT 502, MT 54x, …)

UNIFI (ISO 20022) (syntax = XML, such as Investment Funds, Cash Reporting, Bulk Credit Transfers, …)

Traditional FIN(e.g. MT 103)

Traditional FIN(e.g. MT 100, MT 202, …)

Other markets

ISO Standards

Slide 6 ACSDA_20051028

W3C

UN/CEFACT

e-bMoU

OMG

ISO/TC68

FIX

ISITC-IOAISSA

SMPG

SIA

FISD/MDDL

G30

GiovanniniTC68/SC4

WG

8 & WG

11

EPC/ECBS

ISTH

IFX

RosettaNet/PMP

OAGi

X12

BMA

EACT

FPML

ISDA

IFSA

OASISBolero

ICC

TC68

/SC6&

7

CEFACT/

TBG

5

IIBLP

UNCITRAL

IFSA

Securities Trade Finance

TC68/SC4&7

Payments Treasury

EAN/UCC

UNIFI - ISO 20022

CEFACT/

TBG

15

TWIST

Fedwire

CHIPSTCH

NACHA

UNIFI (ISO 20022)Overview of existing initiatives

Slide 7 ACSDA_20051028

A Single Protocol for Clearing and Settlement

What

is being

proposed?

Slide 8 ACSDA_20051028

Giovannini Barrier 1: Progress

2004 - Market research phase 2005 - Market consultation

– Paper published January 2005 – Consultation closed April 2005– Independent Advisory Group established in June 2005

to define protocol content whilst maintaining:– Key principles; Leverage, Openness, Neutrality,

Inclusivity– Business not a technology focus– Congruency with G30

– Summary of consultation responses published July 05

Slide 9 ACSDA_20051028

Giovannini Barrier 1: ProgressConsultation response statistics

71 responses to consultation

Responses from 21 out of 25 EU countries

plus 9 from non EU countries 70% from EU Organisations

– 23 Financial Institutions & FI ‘clubs’ (e.g. ISITC Europe)

– 12 [I]CSD’s / Clearing Houses

– 8 Equity Exchanges

– 6 ‘Other’ (Central Banks, Consultants etc)

– And 22 non-EU Institutions/Infrastructures

Slide 10 ACSDA_20051028

Protocol frameworkProposed recommendation

The original 9 element framework should be simplified into 6 elements over 2 layers

Network

Messaging

Data

Network

Messaging

DataSTANDARDS

SECURITY

SERVICES

Participant A Participant B

1

4

7

2

5

8

3

6

9Transfer

Data

Transfer

Data

STANDARDS

SECURITY

SERVICES

1

4

3

6

2

5

Participant A Participant B

Slide 11 ACSDA_20051028

Terminology: Protocol scope

ExchangeExchange

VMU / ETCPVMU / ETCP

Tra

de

Dat

e

Sp

ace

1S

pac

e 1

Pre

-tra

de

/ T

rad

e

Sp

ace

3S

pac

e 3

Cle

arin

g &

S

ettl

emen

t

OrderTrade

Institutional (buy) Side Street (sell) Side

Sp

ace

2S

pac

e 2

Po

st T

rad

e /

Pre

-Set

tlem

ent

Tra

de

Dat

e +

X

GCGC CCPCCP

SASA

IMIIMI B/DB/D

(I)CSD(I)CSD

SCSC

B/DB/D

Space 4Space 4 - Custody Services

Non Trade Related Activity

1

2

3

SASA

IMI: Investment Manager

B/D: Broker Dealer

VMU: Virtual Matching Utility

ETCP: Electronic Trade Confirm provider

GC: Global Custodian

SC: Sub-Custodian

SA: Settlement Agent (Clearer)

CCP: Clearing House / Central Counterparty

(I)CSD: (International) Central Securities Depository

Area of mandatoryProtocol usage

Area of mandatoryProtocol usage

Cash Clearing systemsand Central Banks

Cash Clearing systemsand Central Banks

Slide 12 ACSDA_20051028

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)

Slide 13 ACSDA_20051028

Next Steps Present draft recommendation:

– 17 October 2005 – SMPG– 18 October 2005 – SWIFT Board– 24 October 2005 – CESAME group

Industry review– October 27 2005 – January 27 2006

Final publication– March 2006

Please look at www.swift.com

Slide 14 ACSDA_20051028

Focus on the Data Layer:How far from common data standards are we?European CSD’s

Available StandardInfrastructure use –

Cross borderInfrastructure 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 58% 33%

IP Network 92% 92%

Slide 15 ACSDA_20051028

Common Data Standards - ACSDA

Available Standards

BIC

ISIN

ISO

Curre

ncy Code

ISO

Coun

try Co

de

ISO

15022 D

ata D

ictionary

ISO

15022 M

essage syntax

ISO

15022 M

essage S

et

SM

PG

(local) M

essage S

et

IP N

etwo

rk

Caja de Valores S. A.

Mercado de Valores de Buenos Aires S. A.

Entidad de Depósito de Valores de Bolivia S.A.

CBLC - Companhia Brasilerira de LiquidaÇâo e Custódia

CETIP - Câmaral de Custódia e de LiquidaÇâo

The Canadian Depository for Securities Limited

Depósito Central de Valores S.A.

Depósito Centralizado de Colombia Deceval S.A.

Central de Valores de Costa Rica

Eastern Caribbean Central Securities Depository Limited

Depósito Centralizado de Compensación y Liquidación de Valores DECEVALE S.A.

Central de Depósitos de Valores

The Depository Trust & Clearing Corporation

Bolsa de Valores Nacionales, S.A.

S.D.INDEVAL S.A. DE C.V.

Central Nicaragüense de Valores

Central Latinoamericana de Valores

CAVALI ICLV S.A.

STRATE Ltd.

Trinidad and Tobago Central Depository Limited (TTDC)

Bolsa de Valores de Montevideo

Slide 16 ACSDA_20051028

Securities Market Infrastructures on SWIFT

CREST

EuroclearEuroclear NL

Euroclear France

Clearstream

STRATE

JSE Securities Exchange

SISLCH.Clearnet

Sydney Futures Exchange

ECSDA

…and others!

Hong Kong FE

Omgeo

Singapore SE

DIFXMonte Titoli

Tokyo SE

London SE

Iberclear

FMC DTCC

CBLC

CAJVAL

NDC & DCC, Russia

INDEVAL

Slide 17 ACSDA_20051028

Communicating with Securities Market Infrastructures using SWIFT

Benefits for system owners

>>> increased internationalisation of client activities

Access to all types of domestic and international players

>>> market practice standardisation >>> trading >>> clearing >>> settlement >>> real time DVP >>> custody

>>> corporate actions >>> risk reduction

Global standards ISO 15022, XML, FIX for

Low entrance barriers for

Time to market is

Mission critical levels ofIM B/D B/D

VMU

(I)CSD

SC SA

Order

GC

SA

CCP

Exchange

>>> reliability, security and support

>>> short

>>> remote members

Ord

er/T

rad

eS

ettl

emen

tP

ost

-Tra

de/

Pre

-Set

tlem

ent

institutional (buy) side street side

Slide 18 ACSDA_20051028

&&uestionsAnswers

Slide 19 ACSDA_20051028

John FalkSecurities Market InfrastructuresSWIFT

A Single Protocol for A Single Protocol for Clearing and SettlementClearing and Settlement

ACSDA International Seminar, Punta del Este - Uruguay : 28th October 2005