Need for Standardization and Interoperability in the Transformation of Capital markets

1. Need for Standardization and Interoperability in the Transformation of Capital markets R Vivekanand Head, eClearSettle Tata Consultancy Services

2. Our Lineage : TATA Group • India’s Largest Conglomerate - 91 operating companies across 7 industry sectors • Represents Excellence & Integrity • Trusteeship Concept • Pioneering Spirit • Leaders in multiple businesses • Total Market Cap - Rs. 196,422 Crs. ($ 42.8 bn.) as of 30th June 2006

3. About TCS • FY 2006 revenue of USD 2.97 Billion • Over 71,000 employees • Global presence - Operations in 47 countries, 169 offices • 1st Company in the world to be assessed at Level 5 for integrated enterprise-wide CMMI and PCMM • First and Largest • Software R&D Centre in India • Software Exporter in India • Awarded triple certification for • Quality (ISO 9001:2000) • Security (BS 7799-2:2002) • Services (BS 15000-1:2002)

4. Truly Global Presence • 169 Offices in 35 countries • 41 Delivery Centres in 11 countries Europe 19 2 UK & Ireland N. America 8 2 51 4 India 67 22 APAC ME & Africa 13 3 4 2 Iberoamerica 7 6 Sales Office Delivery Centres As on 30 June 2006

5. TCS BFS Solutions

6. CSD Expertise gained in 21 markets has helped us build a global perspective China Clear Deutsche Bourse SEGA NDC, Moscow XClear Korea Depositary CDS DTCC Taiwan Depositary KCC DIFX Saudi Arabia Malaysian Depositary NSDL Singapore Depositary NSCCL Philippines Depositary CCIL NCDEX Product Implementation / Solution Development RBI STRATE , South Africa Consulting TCS continues to be the only Indian Vendor to build large scale securities processing platforms globally.

7. Agenda • Business Drivers, Trends in the CSD space • Path to Transformation • Benefits of Global Standards • Need for interoperability • Local Practices • Technology • Market Transformation Model • STRATE – A case study

8. Trends in the CSD space Key Business Drivers • Globalisation - links • End investor services • Integrated Registry • Automated Corporate actions • Operational Efficiency • Risk Reduction • Increased Volumes / Liquidity • Access to Information • Cost Reduction Compliance to Standards Right Technology Retaining Local Practices MARKET TRANSFORMATION

9. Path to Transformation Financial Products Local Practices – Regional, National Rules, Legislation, Procedures, Practice Regulations Regulate, Monitor, Improve Regulate, Monitor, Improve Systems – Hardware, Networks, Links, Software Products, Solutions, Frameworks Global Standards - BIS, G30, ISO 15022 Security, Best Practice

10. The Standards Dilemma ISSA Giovannini IOSCO BIS G30 Recommendations SMPG FIX ISO 15022 Global Standards Local Practices Regional Practices National Policies Legislations Regulations Local Business Rules Religious Rules

11. Benefits of Global Standards • Familiarity and attractiveness to Global investors • Ready connectivity to the world to local participants • Lower software TCO • Products can be implemented instead of turnkey projects • Incorporate the lessons learnt by the rest of the world • Risk Management best practices • Settlement models • CSD / ICSD Links But no two markets are alike

12. Local Practices Consolidation and Harmonization EUROPE MIDDLE EAST Pre Validation Gross settlement Retail Markets Distinct Practices Yet Successful and suits the local market

13. Need for Interoperability • Expand reach to Global markets • Easy connectivity, Improve STP • Leverage investments made using technology • Service oriented architecture – Software as a service • Eliminate duplication of networks, infrastructure, software • Reduce operation costs

14. Technology • Multi Tier technology – Move away from monolithic tightly coupled systems • Interoperability, Service Oriented Architecture • Multiple Access Channels – Web, Phone, Mobile, Email • High availability and redundancy without high cost • Seamless Integration to external systems – to achieve STP

15. Market Transformation Model Financial Products Local Practices – Regional, National Rules, Legislation, Procedures, Practice Regulations Regulate, Monitor, Improve Regulate, Monitor, Improve Systems – Hardware, Networks, Links, Software Products, Solutions, Frameworks Global Standards - BIS, G30, ISO 15022 Security, Best Practice

16. CASE STUDY A market revolution - STRATE, South Africa

17. South African Market - 1998 • Regarded as a market with high Settlement Risk by GSCS Benchmarks (Minus 1.28 rating) • Low Foreign Investments, Flight of capital • Transactions could take weeks to settle or would fail • Major companies were moving their primary listing to London • May 1998 contract for system implementation signed with TCS • Dematerialization and Electronic settlement revolutionized the market • The new SAFIRES application was one of the first in the world to be ISO 15022 compliant - 1998 • Early adopter of SWIFTNet - 2002

18. South African Market - 2002 • Guaranteed Settlement • Heightened levels of Foreign Investment • Increased Liquidity • Reductions in Risk and increased efficiency • Easy connectivity to Global custodians • Standards and secure networks led to increased investment – trade volumes doubled 1998 1999 2000 2001 2002 South Africa (-1.28) 0.14 36.41 58.48 98.13 Full Demat Full system live SWIFT+Local Nw Full move to SWIFT Source = GSCS BenchmarksSettlement risk includes factors such as : Interest rate and overall cost of failed trades

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