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A Single Protocol for Clearing and Settlement

2 nd AECSD Conference, Moscow - 5 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 Clearing and Settlement?.

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A Single Protocol for Clearing and Settlement

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  1. 2nd AECSD Conference, Moscow - 5th October 2005 A Single Protocol for Clearing and Settlement John Falk Securities Market Infrastructures SWIFT AECSD_20051005

  2. Recommendations, Barriers or Regulations What is meant by a Single Protocol for Clearing and Settlement? AECSD_20051005

  3. Recommendations, Barriers or Regulations 2001 CPSS-IOSCO Recommendation 16: “Securities Settlement Systems should use or accommodate relevant international communication procedures & standards…” 2003 G30, Recommendation 2 “Harmonise message standards & communication protocols” 2003 Giovannini, Barrier 1 “Define EU wide protocol to eliminate national differences in IT & interfaces used by Clearing & Settlement providers” 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………” AECSD_20051005

  4. G30 Global Clearing and Settlement: A Plan of Action - Recommendation 2Harmonise messaging standards & communication protocols • “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” AECSD_20051005

  5. 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) AECSD_20051005

  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 AECSD_20051005

  7. A Single Protocol for Clearing and Settlement What is being proposed? AECSD_20051005

  8. Protocol frameworkProposed recommendation • The original 9 element framework should be simplified into 6 elements over 2 layers AECSD_20051005

  9. Protocol scope - Proposed - Short Term - Long Term Institutional (buy) Side Street (sell) Side Trade Date Order IMI B/D B/D Trade Space 1 Pre-trade / Trade IMI: Investment Manager B/D: Broker Dealer VMU: Virtual Matching Utility GC: Global Custodian SC: Sub-Custodian SA: Settlement Agent (Clearer) CCP: Central Counterparty ICSD: (Int‘l) Central Securities Depository Exchange 1 VMU / ETCP CCP Space 2 Post Trade / Pre-Settlement Trade Date + X 2 GC SC SA SA Space 3 Clearing & Settlement (I)CSD 3 Non Trade Related Activity Space 4 - Asset Servicing AECSD_20051005

  10. Focus on the Data Layer:How far from common data standards are we? European CSD’s AECSD_20051005

  11. Common Data Standards - AECSD AECSD_20051005

  12. 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 Monte Titoli Singapore SE CBLC Sydney Futures Exchange Strate JSE Securities Exchange CAJVAL …and others! AECSD_20051005

  13. 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: >>> trading >>> clearing >>> settlement >>> DVP >>> custody AECSD_20051005

  14. uestions & Answers AECSD_20051005

  15. 2nd AECSD Conference, Moscow - 5th October 2005 A Single Protocol for Clearing and Settlement? John Falk Securities Market Infrastructures SWIFT AECSD_20051005

  16. Securities Market Infrastructures - FIN Argentina Caja de Valores Australia SFE Austria OEKB Belgium CIK Euroclear Bank MTS Brazil CBLC Canada CDS Croatia Sredisnja Depositarrna Agencija Denmark VP Finland HEX France Euroclear France Euronext Paris – MATIF MTS Germany Eurex Clearing Deutsche Boerse MTS Greece Central Securities Depository Hong Kong HK Futures Exchange SEHK Options Clearing House Hungary Keler Italy Monte Titoli Borsa Italiana CCG Japan JSCC Kazakhstan Kazakhstan Stock Exchange Korea Securities Depository Latvia Central Depository Lebanon Midclear Luxembourg Clearstream Mexico S.D. Indeval Netherlands Euroclear Netherlands MTS Norway VPS Poland National Depository for Securities Portugal MTS Russian Depository Clearing Company Federation The National Depository Center Singapore Central Depository Singapore Exchange Slovenia Central Securities Clearing Corp South Africa STRATE JSE Securities Exchange Spain Iberclear MEFF MTS Sri Lanka Securities Settlement System Sweden VPC AB Switzerland SIS SIS x-clear Taiwan Securities Central Depository UK (& Ireland) CREST LCH.Clearnet USA ISCC DTCC Omgeo AECSD_20051005

  17. Market Infrastructures Infrastructure Update Euclid CREST HOME Communicating with Securities Market Infrastructures using SWIFT institutional (buy) side street side 1 Trading: connecting Exchanges Exchange Order/Trade Order IM B/D B/D 2 Clearing: connecting Clearing Institutions and Central Counter-parties Post-Trade/ Pre-Settlement VMU CCP 3 Electronic Trade Confirmation: connecting to VMU providers GC SC SA SA Settlement 4 Settlement & Custody: connecting Central Securities Depositories and International Central Securities Depositories (I)CSD IM: Investment Manager B/D: Broker Dealer GC: Global Custodian SC: Sub-Custodian SA: Settlement Agent AECSD_20051005

  18. Securities Industry SWIFTNet Solutions Giovannini Market Infrastructures HOME Proposed protocol:Still to do… • Present draft recommendation: • 17 October 2005 – SMPG • 18 October 2005 – SWIFT Board • 24 October 2005 – CESAME monitoring group • Pre-publication of protocol for industry consultation • October 2005 • Close of consultation • January 2006 • Expected final publication • March 2006 AECSD_20051005

  19. What Can and Does SWIFT bringto the Securities Markets? • Standards • Security, Reliability and Risk Resilience • Co-Operation • Services • Provides VALUE to the whole market • SWIFT has done it before AECSD_20051005

  20. Other G30 Recommendations • Creating a strengthened, interoperable global network • Eliminate paper and automate communication, data capture and enrichment • Develop and implement reference data standards • Automate and standardize asset servicing processes • Mitigating risk • Ensure effective business continuity and disaster recovery planning • Improving governance • Promote fair access to securities clearing and settlement networks 2 8 AECSD_20051005

  21. SWIFTStandards 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, …) AECSD_20051005

  22. Market Infrastructures Infrastructure Update Euclid CREST HOME Communicating with Securities Market Infrastructures using SWIFT institutional (buy) side street side Benefits for system members Order/Trade • Technical standardisation: Single window access to domestic and international systems through one interface Post-Trade/ Pre-Settlement >>> cost efficiency Settlement • Mission critical levels of >>> reliability, security and support • Business standardisation: ISO 15022, XML, FIX: >>> Market Practice standardisation>>> Straight Through Processing >>> Real-time DVP >>> shorter settlement cycles>>> risk reduction AECSD_20051005

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