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A Single Protocol for Clearing and Settlement

ACSDA International Seminar, Punta del Este - Uruguay : 28 th October 2005. A Single Protocol for Clearing and Settlement. John Falk Securities Market Infrastructures SWIFT. Recommendations, Barriers or Regulations. What is meant by a Single Protocol for

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A Single Protocol for Clearing and Settlement

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  1. ACSDA International Seminar, Punta del Este - Uruguay : 28th October 2005 A Single Protocol for Clearing and Settlement John Falk Securities Market Infrastructures SWIFT ACSDA_20051028

  2. Recommendations, Barriers or Regulations What is meant by a Single Protocol for Clearing and Settlement? ACSDA_20051028

  3. Recommendations, Barriers or Regulations 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………” 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” 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” ACSDA_20051028

  4. 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) ACSDA_20051028

  5. ISO Standards 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, …) ACSDA_20051028

  6. UNIFI (ISO 20022)Overview of existing initiatives Treasury Payments EPC/ECBS EACT CHIPS TCH RosettaNet/PMP IFSA TWIST NACHA OAGi FPML ISTH W3C X12 Fedwire OMG ISDA TC68/SC6&7 CEFACT/ TBG5 TC68/SC4&7 IFX ISO/TC68 UNIFI - ISO 20022 UN/CEFACT FIX TC68/SC4 WG8 & WG11 Bolero CEFACT/ TBG15 BMA OASIS SMPG e-bMoU FISD/MDDL IIBLP IFSA SIA EAN/UCC G30 ISSA ISITC-IOA ICC Giovannini UNCITRAL Securities Trade Finance ACSDA_20051028

  7. A Single Protocol for Clearing and Settlement What is being proposed? ACSDA_20051028

  8. 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 ACSDA_20051028

  9. 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 ACSDA_20051028

  10. Protocol frameworkProposed recommendation • The original 9 element framework should be simplified into 6 elements over 2 layers ACSDA_20051028

  11. Area of mandatory Protocol usage Cash Clearing systems and Central Banks Terminology: Protocol scope 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 Institutional (buy) Side Street (sell) Side Trade Date Order IMI B/D B/D Trade Space 1 Pre-trade / Trade Exchange 1 VMU / ETCP Space 2 Post Trade / Pre-Settlement Trade Date + X CCP 2 GC SC SA SA Space 3 Clearing & Settlement (I)CSD 3 Non Trade Related Activity Space 4 - Custody Services ACSDA_20051028

  12. 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) ACSDA_20051028

  13. 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 ACSDA_20051028

  14. Focus on the Data Layer:How far from common data standards are we? European CSD’s ACSDA_20051028

  15. Common Data Standards - ACSDA UPDATE ACSDA_20051028

  16. Securities Market Infrastructures on SWIFT Euroclear Euroclear NL Euroclear France Clearstream London SE CREST NDC & DCC, Russia DTCC FMC Omgeo ECSDA Tokyo SE Iberclear SIS Hong Kong FE LCH.Clearnet DIFX INDEVAL Monte Titoli Singapore SE CBLC Sydney Futures Exchange STRATE JSE Securities Exchange CAJVAL …and others! ACSDA_20051028

  17. Communicating with Securities Market Infrastructures using SWIFT institutional (buy) side street side Benefits for system owners Order/Trade • Mission critical levels of >>> reliability, security and support Post-Trade/ Pre-Settlement • Time to market is >>> short • Low entrance barriers for Settlement >>> remote members • Access to all types of domestic and international players >>> increased internationalisation of client activities • Global standards ISO 15022, XML, FIX for >>> market practice standardisation >>> trading >>> clearing >>> settlement >>> real time DVP >>> custody >>> corporate actions >>> risk reduction ACSDA_20051028

  18. uestions & Answers ACSDA_20051028

  19. ACSDA International Seminar, Punta del Este - Uruguay : 28th October 2005 A Single Protocol for Clearing and Settlement John Falk Securities Market Infrastructures SWIFT ACSDA_20051028

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