Finance – Energy Sectors Cross-Functionality PlatformEUSN - November 16, 2016

Finance & Energy/Utilities

Cross-Functionality Platform

Blockchain – The Next Line of Defense for Cyber Security?

Appendices & Additional Information

Table of Contents

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Finance & Energy/Utilities

• Synergy• Security Ecosystem

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Synergy

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Securities Trading (Desks)Strong Regulatory & Compliance Data Security & Residency Data Reporting & Analytics

Marketplaces & Exchanges Industry Standards & ProtocolsShift to ITO & Cloud servicesComplex Event Processing (CIP)

• The Financial Services and Energy & Utility sectors have significant synergies

• Trading of financial products such as derivatives contracts (e.g. OPG, NGX)

• Both industry’s are highly regulated with focus on the end investor / consumer (e.g. Basel Accord, OSFI-CSA-IIROC-MFDA / U.S. Regulations and NAESB, NERC, NEB, OEB)

• Networks & industry Standards (e.g. FIX / SWIFT and Green Button)

• Data security/residency that protects consumer information and profiles

• Access, aggregation and analytics using large amounts of market data and distribution via low latency software and hardware accelerated technologies

FINANCE• GOVERNANCE: ISO, INDUSTRY DIRECTED• CONNECTIVITY: Public Internet / VPN and

dedicated access with Encryption• DATA: Use of industry standards (i.e. FIX,

SWIFT) with mandatory & optional fields• CERTIFICATION: Connectivity and Data Level• The more connected the more vulnerable

• New IT sourcing models are being implemented and there is a growing acceptance for cloud computing

UTILITIES• GOVERNANCE: NAESB, ISO, INDUSTRY• CONNECTIVITY: Public Internet access and

may include Encryption• DATA: Use of many industry standards • CERTIFICATION: TBD• The more connected the more vulnerable

• New IT 3rd Party Apps• Large scale public cloud computing and

connectivity to customers and 3rd Party vendors

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SECURITY ECOSYSTEM

Cross-Functionality Platform

• Securities Industry Data Exchange (SIDE)

• SIDE for Energy/Utilities

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SIDE

SIDE -Securities Industry Data Exchange - (First North Platform) was officially launched in August 2015. SIDE leverages a state of the art “Integration as service” platform residing on an winning cloud infrastructure (NTT / Dimension Data)

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Business OutcomesProviding an operational “on demand” service platform available for use in 26 countries that is highly secure and scalable, including:∙Data Transaction Services: Supporting

institutional post-trade across asset classes using many to many data formats in real-time

∙Reporting Services: Supporting both static reporting and real-time data analytics including for customer metrics (i.e. client profitability)

∙Secure Infrastructure: Hybrid cloud model provided by Dimension Data with dedicated network access and data encryption. SIDE uses audited SSAE 16, ISO 27001, ISO 27018 and CSA STAR certification to attest the ability to manage threats

SIDE Integrate - Connector Framework

SIDE for Energy/Utilities

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• Easy transition to the Green Button standard (XML based) as SIDE simply adds another “Connector” using the platform’s Connector Framework (GUI driven)

• Connectivity, Data integration & Reporting/Analytics capability “out of the box”

Further downstream integration may also be added, including accounting & billing systems.

Further extend integration services to accommodate non-standard to standard data mapping (i.e. proprietary to Green

Button). SIDE supports proprietary data formats including XML, Excel, Flat Files, Email, PDF, Proprietary Messaging (i.e.

MQ-Series) and even Manual Forms/Documents

Leverage out of the box integration as a services platform to certify the “Green Button Connector”

Blockchain – The Next Line of Defense for Cyber Security?

• Finance Perspective• SIDE Use Case (Blockchain)

– 2 Slides• Where Cryptography meets

Security Research• Is Blockchain coming soon to

Energy?

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Finance Perspective

1. Security & Scalability - self-regulated through Cryptography, while ensuring scale due to increasing transaction/data volumes in reduced timeframes

2. Reduce Cost and Operational Risk – Enable disintermediation (e.g. central counterparty/clearinghouse) to save cost and increase transaction settlement time to further reduce operational risk

• A blockchain is a data structure that makes it possible to create a digital ledger of transactions and share it among a distributed network of computers. It uses cryptography to allow each participant on the network to manipulate the ledger in a secure way without the need for a central authority/servers with assurance that each transaction is secure and immutable.

• Blockchain allows untrusting parties with common interests to co-create a permanent, unchangeable, and transparent record of exchange and processing without relying on a central authority.

• Key value propositions for Financial Securities Industry Participants

SIDE Use Case (Blockchain)

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ClientA

ClientB

ClientC

ClientD

ClientE

Bank 1

Bank 2

Bank 3

ClientA

ClientB

ClientC

ClientD

ClientE

Bank 1

Bank2

Bank3

SIDE Distributed

Ledger

Current State (Canadian Bank Client)• Institutional clients (e.g. a Pension Fund) deal

with a number of regulated securities dealers (e.g. a Canadian Bank Dealer) whereby the client receives a significant amount of paper, most often due to regulatory reasons, including:

• Trade Confirmations

• Client Statements

• Prospectuses (IPO, Secondary)

Mailing of Confirms, Statements & Prospectuses

Electronically Delivering Confirms, Statements &

ProspectusesFuture State (Canadian Bank Client)

• Create a central, single and secure location for counterparties to send and receive messages (i.e. trade confirmations) and reports (i.e. Statements and Prospectuses)

• SIDE Distributed Ledger (SDL) will simplify the complex web of manual documents mailed by securities dealers to their clients through secure electronic delivery

SIDE Use Case (Blockchain)

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SendingCounter-

Party

Receiving Counter-

Party

SIDEDistributed

Ledger

Portal/Website

View Message

Email Message

PostMessageautomatically

Post MessageManually

Solution• A sending counterparty (CP) adds a

message to the SIDE DL which effects an email to be sent to the receiving counterparty

• The receiving counterparty clicks on the email link and using their private key they can now access the message

Benefits• Security and Scalability: Use of

Distributed Ledger Technology (Blockchain) using Cryptography with “BigData” approach used by SIDE

• Reduce Cost and Risk: Eliminates the cost of physical document production and handling (both sender and receiver) and allows for Trade Confirmations to be sent on “T” (Trade Date) instead of “T+1” (Trade Date + 1 or next day)

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Where Cryptography meets Security Research

Using ...CRYPTOGRAPHY1. Confidentiality2. Privacy3. Non-repudiation 4. Integrity

ImmutabilityChain of

cryptographic hashes enforcing

secured time sequenced order

SMART CONTRACTS

algorithm enables complex asset or commodity (gas,

energy) transfer and an automated

exchange of rights

to achieve

Consensusindependent

algorithmic validation record of authenticity and sequence order

agreed by majority of network nodes

Trusted Shared Ledger

Network(Blockchain)

combined with

resulting inenabling

Smart contracts reside in a decentralised system accessible to anyone, that doesn’t require an intermediary party. This eliminates inefficient, error prone and costly back office processes such as confirmations, actualisation of volumes and numerous forms of reconciliation (Deloitte)

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BLOCKCHAIN coming soon to ENERGY?

• We refer to Transactive Energy YES, because it provides a secure platform and business models as a way to maintain the reliability and security of the power system while increasing efficiency among a growing distributed energy resources.

Based Upon Source: bakerstr-admin | Mar 10, 2015 | Barrager, Business models, Cazalet, Transactive Energy |

Appendices & Additional Materials

• Key Finance Industry Data Standards

• Key Drivers for Financial Industry Change

• Additional Materials - Upon Request

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Key Finance Industry Standards

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Established in 1973, SWIFT (Society for Worldwide Interbank Financial Telecommunication) is the predominant industry standard for the global banking industry

• ISO Data Standard (15022 to 20022 Data Dictionary is well defined)

• Secure encrypted network requires both dedicated network access and computer based terminal (CBT) for session login

• Requires both network and message certification governed by SWIFT

Established over 20 years ago, FIX (Financial Information eXchange) is the predominant industry protocol/standard for securities trading and trade related transactions

• Unlike SWIFT, FIX is not a corporation or legal structure and is maintained by industry participants through the “FIX Trading Community”, that is a non-profit standards body

• Initiated in the US for equity trading, FIX has become a globally recognized standard and is SWIFT’s primary competitor

• Like SWIFT, FIX is attempting to increase usage across the industry transaction lifecycle and value chain (pre-trade, trade, post-trade, clearing, securities lending etc.)

• Independent certification is required that includes the use of private communication networks, software (FIX Engine) and FIX session / message validation

Key Drivers for Financial Industry Change

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• Over the past 10 years the proliferation of secure internet based technologies have caused Financial Services companies to re-evaluate internal policy on matters related to IT ownership

• Social Media Networks (LinkedIn, Facebook and Twitter) enable organizations to integrate data from these sources for trend analysis, including investor sentiment patterns

• Cloud Computing is slowly gaining wider acceptance despite ongoing concerns about data access and security. Increasing knowledge of “what the cloud really is” allows Financial Services companies to eventually move forward;

• Subscribing to some public cloud applications such as corporate Email (O365)

• SaaS/PaaS applications have been used for years (e.g. Salesforce CRM)

• “Service Bureau” platforms are common in the industry and include highly sensitive personal and financial information (e.g. Investment Book of Record)

• Big Data has created the need to explore alternative technologies (including open source) that save cost (etc. servers/storage) and increase time to market for businesses

• “BlockChain” is by far the largest driver currently - the industry is both investing and seriously contemplating the implied risk of the technology that powers Bitcoin

• Fully transparent and unbroken through the entire transaction lifecycle

• Eliminates the need for financial intermediaries (institutions)

Additional Materials (Upon Request)

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Blockchain Technology

First North Presentations for Connected Conferences (2015 and 2016)

An introduction to Blockchain (Distributed Ledgers)

Whitepaper – Cloud Security Overview, SIDE Case Study and Research Reports

www.firstnorth.ca

Contact us at:

First North Group

161 Bay Street, 27th Floor, Toronto, Canada

416.572.2063 (Reception)

John Packwood

President & Managing Director

First North Group

jpackwood@firstnorth.ca

jpackwood@sidexchange.com

Puica Nitu

Managing Director, First North Energy

pnitu@firstnorth.ca

Yogi Golle

Principal Consultant, SIDE/Blockchain Development

Ygolle@sidexchange.com

Thank You!