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A year inStandardsOctober 2012

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Going beyondstandardsThe past few years have seen a surge in interest in standards across the financial services sector as efficiency and cost pressures haveincreased. In the first of a regular series of features on the topic, David Bannister says that 2012 is likely to see this trend accelerate

as different organisations start to collaborate more closely.

Embracing my inner geek, I have become involved in a

number of standards-related events and conferences over

the past few years, generally around the Standards Forum

activities of Swift.

But that has rekindled a passing interest that goes back

to my days as a reporter on Electronics Weekly in the late

1970s, where the annual mil-spec report was pored overby everyone in the UK defence technology sector not

standard? no sale ...

As what we now call IT started to take shape as a

completely separate industry, standards were also where the

news was the announcement by Digital Equipment, Intel

and Xerox of a standard called Ethernet has had a profound

and lasting effect on the world we live in.

Similarly, when the FIX Protocol was first announced

in London, I toddled along with a sharp pencil and was

rewarded by walking into a room containing 200 bank

technologists all wanting to talk about this new thing.

And I have to admit that some of the most interesting

and fun things Ive been involved in since joining Banking

Technology have revolved around standards.

Looking back, I see that all of those have involved

collaboration between organisations that might otherwise

have been competitors, and that is what I see most at the

moment: Swift, DTCC, Sifma, and others, working through

the Legal Entity Identifier specification, for instance.

Over the rest of this year, therefore, we plan to carry a

regular series of features tracking activities and issues in this

area, reporting on the many initiatives that are starting to

bear fruit and on new ideas bubbling under the surface.

Along the way, well be introducing the many characters

that inhabit the world of standards development

importantly, we will also be looking at how standards are

deployed in the real world, and how they are of practical

importance in improving the way the industry operates.

Of these, one of the first on the radar will be the Legal Entity

Identifier. This, says Tim Lind, global head of strategy, enterprise

content, at Thomson Reuters, has the potential to create new

Standards: the inventoryOne of the most common things said of the standards world is we love standards

thats why we have so many of them. This is true, but inevitable as different processes

and operations require different definitions.

A short guide to the alphabet soup of the standards world would probably

include the following though purists will argue that some of these, like FIX, arent

standards in the true sense, and there are some omissions that others might want to

have included.

AMQP Advanced Message Queuing Protocol: an open middleware approach that

allows applications to send and receive messages, but also to intelligently handle

messages through dynamically altering parameters such as performance and

security. Deutsche Brse uses AMPQ as the transport mechanism for its FIXML

messages in the Eurex system. JPMorgan sends 1 billion AMQP messages every day.

BIAN Banking Industry Architecture Network: A collaboration between vendors

and banks to set a common framework for banking interoperability using a ServiceOriented Architecture approach. It is working with the Object Management Group

and the International Financial eXchange Forum and, most recently, The Open Group.

FIBO Financial Industry Business Ontology: a standardisation, by the OMG, of the

content of the Enterprise Data Management Council Semantics Repository, which is

a repository of ontologies of financial instruments primarily securities instruments.

The goal is to standardise the terms and definitions of all reference data attributes

stored in the master files of financial institutions and passed among supply chain

partners.

FIX Protocol Financial Information eXchange Protocol: a messaging standard

developed for the real-time exchange of securities information, widely used in

trading systems. It has spawned a number of offshoots, including the FAST Protocol

FIX Adapted for Streaming used to support high-throughput, low-latency data

communications between financial institutions, particularly for the transport of high-

volume market data feeds and ultra low latency applications.

We know how standards can practically contribute to not only enablingautomation and reducing costs but also fostering innovation, by doing

things in a simpler and more efficient way.Juliette Kennel, head of standards, Swift

MARCH 2012


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opportunities, as well as increase operational efficiencies.

But first there are some details to be sorted out.

The priorities follow the original objective, which it

to increase transparency of Credit Default and Interest

Rate Swaps trades, therefore it makes sense to use the

DTCC Trade Information Warehouse, which is where that is

collected. Many of the entities are actually funds, and a fund

is really a relationship between a trustee and a trustor, so the

SIFMA working groups are bringing clarity in how funds will

be identified, says Lind, adding that the fact that the work is

being done in Europe and the US is a delaying factor. SIFMA

is working on the concerns, and the Financial Stability Board

is working on it in Europe, but the bottom line is that there is

no formal mechanism to co-ordinate across the Atlantic, sothe LEI is a microcosm of that challenge and highlights the

need for communication and patience.

Does this mean that the project is on hold in some way?

Not at all, he says: In terms of the ISO 17442, without formal

FSB endorsement it might be imprudent to formally ratify

the standard until the FSB draws its own conclusion, but we

are moving forward with LEI as though it were a foregone

conclusion. For Thomson Reuters, LEI is a key that we use

to not just identify an entity but link it with value-added

information, so it will be much more precise to map and join

data sets instead of relying on textual descriptions.

Also making headway is the Banking Industry

Architecture Network, which recently announced a

partnership with The Open Group to integrate their

individual industry frameworks for specific use in the

banking industry. Mapping together these frameworks will

accelerate project delivery, while dramatically reducing IT

integration costs.

The pair have collaborated to produce a white paper, in

which the core elements of the two individual frameworks

have been projected onto each other.

Hans Tesselaar, executive director of BIAN, said: The Open

Group is a serious heavyweight in architectural standards.

With its project approach and ability to deliver not to

mention its reputation as the anchor point of the standardsindustry The Open Group adds much value to the BIAN

open standards mission. We expect banks, which have

already adopted TOGAF, will also adopt the BIAN standard,

and the banking industry can take another step towards

interoperability.

BIAN originally started as a vendor group you could

argue that it really started as a SAP project, though it now

has a number of bank people in key positions ( Tesselaar

works for ING).

On the bank front, BIAN has ABN Amro, Banco Galicia,

Commonwealth Bank of Australia, Credit Suisse, Deutsche

Bank, Deutsche Postbank, ING, Kutxa, Rabobank, Scotiabank

Group, Standard Bank of South Africa, UniCredit Group, and

Zrcher Kantonalbank as members. On the supplier side, it

currently lists Callata & Wouters, Capital Banking Solutions,

CGI, Coretransform, Fernbach, HCL Axon, IBM, IFB group,

IKOR, Infosys, Innobis, Microsoft, SAB, SAP, SunGard, Swift,

and Temenos.

One vendor that isnt a member of BIAN is Misys. Barry

Kislingbury, global solutions manager for payments and

messaging at the vendor, says that Misys is indeed interested

and monitors progress Ive been to a few BIAN meetings,

he says but membership is not inexpensive and to gain

the full benefits considerable time needs to be committed.

Kislingbury also questions where the boundaries are to

be drawn in the competition/collaboration debate.

Swift is a great standards body: the Standards Developers

Kit is extremely good and we completely support what they

are trying to do with it, but in many areas now Swift are actively

competing with their partners, he says.Swift itself has a broad range of Standards related

announcements up its sleeve, which we will be returning

to in the next issue and following in the run-up to Sibos in

October.

As an organisation that both develops and deploys

standards, we know how they can practically contribute to

not only enabling automation and reducing costs but also

fostering innovation, by doing things in a simpler and more

efficient way, says Juliette Kennel, head of standards at Swift.

I am convinced that standards and innovation go hand

in hand, so am looking forward to reading the articles that

Banking Technology has planned in future issues.

FPmL Financial products Markup Language: Managed by ISDA, FpML was developedfor the OTC derivatives market by JP Morgan. Like FIX, it is a very widely used de facto

standard.

ISO 20022As the ISO puts it: A universal financial industry message scheme is the

international standard that defines the ISO platform for the development of financial

message standards. Its business modelling approach allows users and developers

to represent financial business processes and underlying transactions in a formal

but syntax-independent notation. These business transaction models are the real

business standards. They can be converted into physical messages in the desired

syntax. At the time ISO 20022 was developed, XML (eXtensible Mark-up Language)

was already the preferred syntax for e-communication. Therefore, the first edition of

ISO 20022 proposes a standardized XML-based syntax for messages.

LEI Legal Entity Identifier: Under post-crisis pressure from regulators, international

industry bodies including Swift, Sifma, the DTCC and others are working to create a

useable standard to identify parties in trades. It is expected that this will become an

ISO standard ISO 17442, in fact.MDDL Market Data Definition Language: is an XML-based messaging format for

exchanging information related to Financial Instruments, corporate actions and

market-related data. MDDL was developed by the Financial Information Services

Division of the Software & Information Industry Association.

XBRL eXtensible Business Reporting Language: an XML-based standard that tags

information in business documents such as annual reports in such a way that they

can be processed automatically.


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Why standards matterAt the Swift Standards Forum event in Paris at the end of last year, Banking Technologycaught up with John Murphy,

managing director of Trace Financial, to discuss why the company was involved in the event and what issues it is

addressing through the use of standards.

Q.Why do standards matter to you as a supplier?

Our business is built on implementing message standards.

This means applying message standards to solve a business

problem. Since a message standard only has meaning when

implemented, and only delivers value when part of an

integrated flow, then a given published standard has to beintegrated with client systems and that area causes pain for

most organisations.

Q.Why? Where are the pain points?

Traditionally this integration has been viewed as a technical

task and wrapped up with general middleware issues such as

protocols, connectivity and monitoring. This means purchasing

decisions for solutions that work with standards have been

taken by staff whose primary focus is technical and who, in

many cases, are unaware of the challenges presented by

implementing standards.

This has resulted in many organisations evolving evermore complex infrastructures that have become difficult to

change and difficult to test. We have spent many years assisting

customers with their messaging. Connectivity has become more

and more a standard commodity (FTP, MQ, TCP and so forth) and

subject to infrequent change; whereas message standards have

become more complex and ubiquitous.

More business services rely on messaging and involve

more and more parties. As the needs of more parties are

accommodated then the complexity of the standard and

hence implementation gets more involved. Add in year-on-year

change driven by business needs, regulatory requirement or

standards revisions, and organisations start to struggle with their

complex infrastructures. This is the problem space we address.Historically the move to middleware and associated

messaging mushroomed in the mid-1990s. Before that

payments had been automated but securities automation

lagged behind. In the UK the Crest initiative (lets ignore the

scarring experience of Taurus) forced messaging as a settlement

method and moved financial institutions to consider the general

issue of middleware solutions.

The technology was already addressed in the US healthcare

market where the need was established to link up giving

someone an aspirin with sending an invoice and making an

insurance claim. Hence many of these solutions were migrated

from the US healthcare market to the finance industry.

Q.How do standards help you address the needs of your

clients?

For our clients agreeing to use a particular standard is akin to

agreeing which language to use; it enables communication

and standards become the language of business. Markets have

become international and the adoption of standards facilitatestrading and settling any instrument, in any market anywhere.

Of course, this also means things can get out of control more

quickly, as in the recent scenario with sub-prime debt being

packaged and sold and leaving organisations unsure of precise

exposure. There again, it is standards that will be the tool used

by regulators to establish central reporting and monitoring of

trading activities.

It doesnt matter whether our clients are looking to

trade internationally, seamlessly and quickly or comply with

regulatory authorities; all these functions require a language

and communication and hence a standard. The challenge for

the client is fluency how quickly can it adapt, implement and

integrate standards? An organisation with a high level of fluency

will be able to support new services with minimum effort;

integrate them with existing processes and systems as well as

deal with on-going change as standards and processes evolve.

Q.Quite a complex relationship, then?

As time passes no standard gets simpler. They involve more

messages, each message involves more data and the data

items get more complex. Compare, for example, the number of

messages in FIX 4.1 with FIX 4.4; look at the number of parties

on, say, the Notice of Execution message in each version and

finally compare the complexity of definition of a party. At

every level complexity has increased as the needs of moreand more parties are accommodated. This helps clients with a

more functionally complete, and viable, solution but presents a

challenge in coping with the complexity. It results in a love-hate

relationship between clients and standards but it is not one that

is going away.

Q.Are there particular standards or issues around

standards that are currently of concern?

Every standard has its issues but they vary greatly from one to

the next. They also cover different ground. For example Swift is

a message standard but it is also a network and generally client

issues are how to create the message, how to test it complies

MARCH 2012


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with all standards in the User Handbook and how to transport

the message to and from the Swift network.

For Crest there is a message standard and a network but

also a business service for settlement and clearing; so the client

issues are how to create the message, test it complies with the

DEX, transport it on the relevant network and then track the on-

going status of transactions by requesting status updates and

responding accordingly.

With FpML there are multiple standards, no network and

clients mutually agree how to adapt standards for their own

needs no one uses a vanilla version of any of the FpML

standards.

There are also numerous standards without any critical mass

of users that would lend credibility in spite of lots of committed often voluntary effort by intelligent people to define the

standard. If it is difficult to see the connection between the

spend on implementing a standard and an associated business

benefit, the project will never get to the top of the pile and

attract focus and funding. In the Swift world it is not surprising

that established users resist migrating from ISO15022 because

it is doing a good job for them; meanwhile new users would

prefer an ISO20022 and XML-based standard.

Q.There are also perception issues, arent there?

There are some myths or general misconceptions around

standards and these generally come down to an expectation

that standards should simplify messaging. The fact is that a

complex transaction implies any message model also has to be

complex. And if that model tries to accommodate the needs of

multiple parties to allow widespread usefulness then the level of

complexity will increase. We call this the Standards Paradox: as

you accommodate more needs complexity grows. This is neither

good nor bad just a fact of messaging life.

Another common misconception is that XML is in some

way a strategy for messaging and that XML will also simplify

messaging neither is true. Try representing Einsteins Theory

of Relativity or James Joyces Ulysses in XML and they will not

suddenly become simple. Of course there are many tools to

facilitate working with XML but standard open tools workingwith complex structures and rules combined with the need to

integrate with lots of non-XML in-house systems does not lead

to messaging fluency.

Testing is another significant issue area. To test that a

message is consistent with a given standard in a development

environment is beyond the majority of financial institutions.

It is impossible to look at a message instance and determine

whether all mandatory fields, data formats, options and market

practice rules have been adhered to. Standards bodies vary

greatly in terms of testing facilities that are available and they

tend to vary from none at all to being available at certain times

subject to booking etc. From a project perspective efficiency

View from a bank: Ian Chittick, Lloyds Banking GroupIn one of the Swift Standards Forum sessions at Sibos in Toronto

last year, one session addressed the question of why the technical

plumbing issues of messaging standards should be of any interest

to senior people working on the business side of the institution.

The answer of one participant was straightforward: They help

us to make money.

Its a view that is echoed by Ian Chittick of Lloyds Banking

Group. The reason that it is so important to a non-technical business person is that

once you get into the exchange of financial information, the standards facilitate the

business.

Chittick says: the problem with standards is the second s there are too many of

them. This is true across technology, he adds the proliferation of browser versions

complicates the provision of internet banking services, for instance.He adds that the provenance of standards is important. Swift has done a great

job, but is has always been a bank approach. We dont even have to think about how

we have to talk to another bank, but when it comes to corporates, the situation is

different and we need to be more flexible.

Ultimately, however, standards are there to facilitate the business. One of the

interesting things is the value of bureaux: as a bank, it is not our core business to map

and translate between data formats we dont want to differentiate on the ability to

accept file-based transactions; we want to differentiate on the quality of our services

and products.

Chittick distances himself from the standards making process. Intellectually,

some people do get a buzz out of it. But for me it is about getting interoperability to

the point where you are facilitating the interesting parts of the business.

Ian Chittick is head of the Global Channels team within the Transaction Banking division

of Lloyds Banking Group.

is greatest when testing is integrated with the development

cycle and for that an electronic version of the standards that

encapsulates all rules is required.

There are numerous other issues like the way standards are

defined, documented and published; how changes (delta) are

tracked and documented, how one assesses the areas of an

implementation affected by a given change. The way that rules

are defined and local market practice encapsulated. The way

some standards are imprecise or vague and cannot be precisely

implemented electronically i.e. they are guidelines rather than

anything more specific. But the above is probably sufficient for

now.

Q.What are your current areas of focus and how do you seethat changing in the medium- to long-term?

Our current area of focus remains providing Transformer that

makes the implementation of standards faster, cheaper, higher

quality and more adaptable. We do also provide targeted

messaging solutions where a message standard is integrated with

a set of business rules and transaction flows to deliver a targeted

messaging solution for a specific business process. There is huge

room for improvement in the level of fluency with messaging

standards in most financial organisations and recent history

suggests this situation will persist so we see lots of opportunities

to solve client issues and improve existing infrastructures.


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Swift gears up for NY launchof MyStandards in MayThe online standards management and customer service tool from Swift is ready to go live.

David Bannisterreports on why it has been attracting so much attention.

MyStandards, the new web-based management and

communications tool developed jointly between Swift and a

group of pilot users will officially be launched in New York at the

beginning of next month.

The service is intended to provide a comprehensive

mechanism for financial institutions to communicate serviceinformation with their customers, as well as improve internal

management of standards and market practices.

Bank of New York Mellon, Citi, Clearstream, JP Morgan,

RBC Dexia, SIX, T2S and the UK Payments Council, have been

collaborating on MyStandards in a closed pilot, and are now

expected to be joined by others as the launch date approaches.

Initial reports from the closed trial emerged in a session at

the Sibos event in Toronto last year, where it became clear that it

will go beyond its original brief of being a simple management

tool, thanks in large part to the interactive rapid development

methodology that was used to develop it.

Speaking at a session in the Standards Forum part of Sibos,Bernard Lenelle, senior vice-president, product management

for core products and business strategy at Clearstream, said the

process had meant that we have been very close and had a

constant interaction with the developers.

Veronique Peters, project manager at Bank of New York

Mellon, agreed: It has been really comfortable Swift has been

asking for feedback all through, and weve been getting the

results of that come back to us.

The success of the development methodology has already

seen it adopted in a number of other projects, observed Brian

Crabtree, director of market practices standards and Swift at

Citi, who described it as a very effective, collaborative, iterative

approach.Essentially, MyStandards is a wiki, a web-based method

of collaborating on the creation and sharing of information,

the most famous example of which is Wikipedia. Financial

institutions can use MyStandards to capture information

about their use of standards and their business and market

practices. Internally this improves documentation of this

kind of information, and addresses the problems of change

management.

Typically, within Citi, for example, this is done manually

using Excel spreadsheets to capture the information, and the

spreadsheets have to be transformed into actionable change

requirement projects as new products and services are added.

This can be a very heavy process, said Crabtree. For Citi, the

main direction is to make that effort easier to manage, and to

improve sales and implementation with new customers as well

as for internal dissemination of all information.

Lenelle said MyStandards acts as a single repository of

all data, which is something we have been looking for for along time. The ease of contribution means that there is a risk

that the database could become cluttered by some users

adding or amending data, so it will still require a disciplined

management approach.

Asked if this meant that there was a danger that the

standards approach could itself be debased by users adding

endless work-arounds and quick-fixes of their own, BNY

Mellons Peeters said: Within the boundaries of the standard,

there is freedom in terms of the information you are

propagating that is part of your business process and it is

important to know about that.

Lenelle, who is co-chair of the corporate actions

sub-group of the Securities Market Practice Group, said

capturing of market practice is also greatly facilitated by

the MyStandards tool. By collaborating on this, institutions

will be able to concentrate on more competitive issues.

We should not be competing on standards we should

compete on services and MyStandards can communicate

what those services are to customers.

The launch of MyStandards has been a classic soft launch

as well as the trails at Sibos last year, the Swift Standards

people have been actively promoting it and seeking

participation ahead of the official launch.

Before the May launch event in New York, there will be an

opportunity to discuss the service at the Swift London BusinessDay at the end of April, a repeat of last years sucessful event.

In the meantime, interested parties can sign up to look at the

service for themselves at www.swift.com/MyStandardswhere

free trials are available till the end of April.

Banking Technology and Swift have teamed up to host a

roundtable event with some of the initial pilot participants and

other interested parties. This will appear online to coincide with

the New York launch event, as well as in a later issue of Banking

Technology.

To make sure that you are registered to receive a

complimentary issue go to www.bankingtech.com/register.

APRIL 2012


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Why standards bodiesneed to stick togetherBanks cannot complete on back-office functions. This opens the door to collaboration on standards, says Hans Tesselaar.

Prior to 2009, there was seemingly little need for standards

within financial services. Continued high turnovers ensured

there was little, or no, talk of efficiency, transparency or

passing savings on to customers, and reducing the vast

investment on IT integration was a non-issue. This was the

case until the banking crisis, which resulted in $1.5 trillion

in bank write-downs being realised from 2007 to 2009 (IMGGlobal Financial Stability Report, April 2010).

The financial crisis of 2008 is a term now used to discuss

a wide range of ills. Yet there is little doubt of the impact

it has had on financial services. Not only are banks now

scrutinising expenditure a lot more closely, but they must

also provide evidence of efficiency and cost-cutting if

they are to regain public trust. This increased focus on

expenditure naturally brought about a period of change

within the industry.

In parallel to the scrutiny of balance sheets, banks

made the stark realisation that they cannot compete on

back-office systems the battleground for innovation

and customer acquisition and retention lies in front-officecustomisation. This discovery opened the door to financial

services standards and collaboration.

Financial services: the next frontier

Standards bodies have long played a part in other industries;

the International Organisation for Standardisation has been

publishing standards since 1947, across industries ranging

from agriculture and construction, through mechanical

engineering to information technology. Yet the financial

services industry has lagged behind. However, in light of the

ongoing economic stagnation being experienced across

Europe, the financial services industry continues to look to

improve efficiency, and the employment of standards has

been recognised as essential to achieving this.

The importance of standards is clear when we consider

the significance of interoperability. Interoperability is the

key to ensuring that different systems can communicate

effectively. In the context of software implementation, the

integration costs both in terms of time and finance are

prohibitive. Integration costs are often as much as triplethe

purchase cost of the original software and, as a result, many

banks are opting to replace specific parts of their existing

IT, which have either become obsolete or are difficult to

maintain, with off-the-shelf software.

The common use of standards could ensure that a banks

systems, semantics and expectations are in-line, reducing

the cost, time and risk associated with the communication

process between different IT systems. Undertaking a

core banking system renewal, for example, if both bank

and vendor are fully interoperable and working from the

same set of standards, would not only reduce the cost of

integration (which can be tens of millions of pounds), butthe business case would be improved, allowing banks to

bring new and improved functionality to market at a greater

speed. This is good news for banks, for which innovation is

the key to staying ahead of competitors, but it is also good

news for software vendors, as banks are then increasingly

willing to invest in IT.

Standards bodies truly practicing what they preach are

increasingly looking to collaborate with each other. Integrating

individual industry frameworks allows all parties to leverage their

standards, for greater reach to banks and software vendors. BIAN,

for example, works with Swift, the Object Management Group,

the International Financial eXchange Forum and The Open

As more organisations seek to collaborate in order to increasecapability in terms of efficiency, cost-saving and flexibility, increased

emphasis is placed on the importance of communication

MAY 2012


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Group. The Object Management Group works with a number of

other standards bodies, across different industries, such as the

Healthcare Information and Management Systems Society, with

which they collaborate on the creation of healthcare standards.

Inter-organisational collaboration occurs for a number of

reasons and has great potential for verticals such as financial

services. The Open Group and BIAN partnership came about

after The Open Group identified a need within their member

base for more thorough standards, specifically around

banking. When applying The Open Group Architecture

Framework in a banking

environment, the BIAN content speeds up the workby providing banking-specific architecture content. BIAN

benefits from such a partnership as TOGAF provides a

structured approach and adds value to the BIAN deliverables

for the project approach and capability to per form.

The point is that standards bodies focus on different

standardisation layers, and working together allows bodies

to offer broader and further reaching sets of standards.

Furthermore, in an age of overlapping industries and spaces,

offering a collaborative approach to standards, in which

already defined standards are reused, allows organisations

already invested in an existing standard to safeguard this

investment whilst adopting alternative frameworks on a

different level. Naturally each body has its own roadmap and

timelines set by their members; it is the alignment of these

roadmaps which presents the greatest challenge.

Why are standards bodies aligning?

The issue of collaboration among standards bodies has really

only come onto the agenda in recent years. This may be for

a number of reasons. Firstly, technological advances have

resulted in ever more generic underlying technology across

industries. The price of hardware has dropped considerably

and data and memory capacities have improved, resulting

in a more level playing field between the industries. This

has, in turn, allowed these industries to adopt common bestpractices in non-value add, non-differentiating, back-office

systems and processes. Secondly, and this is certainly true

for the financial services sector in recent years, regulatory

pressure is on the increase. The heavy hand of the regulators

can be felt across all industries, especially where data is

involved, and this has further increased awareness of the

possibilities of cross-industry standards collaboration.

The need for collaboration between standards bodies

Swift, BIAN, OMG, IFX and others is clear for both banks

and software vendors. Rather than aligning with just one

standard in the hope that it will become the de facto, they

can be sure that there will be no competition between

bodies, and therefore can avoid the potential risks this

would involve. Banks need to retain the flexibility to design

their own roadmap, knowing there is no r isk from aligning

the technology with a certain standard.

Standards where next?

The increasing complexity associated with IT architecture

means standards have never been more important.

Furthermore, as more organisations seek to collaborate in

order to increase capability in terms of efficiency, cost-

saving and flexibility, increased emphasis is placed on the

importance of communication. As a result, organisationsand systems that can converse with one another will

increasingly lead the pack. It is no surprise, therefore, that

a number of standards bodies have emerged, seeking to

encourage further inter-organisational collaboration.

The standards landscape is an evolving one and,

although the existing bodies are likely to stay separate

for at least another couple of years, it is probable that we

will see ever more alignment and collaboration as the

standards mature and technologies enable a more seamless

integration of the different layers of standardisation. Within

the next five years, there is the possibility that we will see

one generic financial services industry standard emerge.

Likewise, it is not difficult to imagine standards crafted

for the retail banking space crossing into other spaces,

for example insurance. Despite the accelerated uptake of

standards within financial services, it is unlikely that we

will see any new players entering the market for one

thing, existing bodies cover the whole landscape, from

application-application, business-business, messaging and

semantics, all standardisation levels are represented.

Nevertheless, it would be premature to declare the death

of internal standards, such as IBMs Information FrameWork.

Proprietary standards hold vast amounts of value in terms of

financial property, and as such their importance is unlikely

to be diminished; although they will face increasing pressureto become more aligned with open standards. This is

demonstrated by IBM recently joining BIAN as a member,

and taking a seat on the board of directors.

A fundamental principle of open standards is to not reinvent

the wheel, so it is encouraging to see standards bodies taking

their own advice, and collaborating to repurpose existing

frameworks. There exists a demand from the industry for further

cooperation; it is no longer enough in this ever-integrated

market for a standards body to cover just one area.

Hans Tesselaar is executive director at BIAN, the Banking

Industry Architecture Network


9/14




Taking care of businessIts 20 years since the Financial Information eXchange protocol first took the trading world by storm.

David Bannisterspoke to FIX Protocol Limiteds Stuart Adams about its role for the future.

Twenty years ago several hundred dealing room IT and market

data specialists gathered at Salomon Brothers premises in

Buckingham Palace Road. Representatives of Goldman Sachs,

JP Morgan, Merrill Lynch, NatWest Markets, Nomura, Schroders

the whole of Londons trading and investment managementcommunity, pretty much, was there.

Theyd come to hear about the Financial Information

eXchange Protocol, developed by Salomon Brothers and

Fidelity Investments as a simple means of sending equity

trade data between institutions. I was there reporting for

the newsletterDealing with Technology. Taken aback by

the turnout, I asked the head of market data at one of the

broking firms what everybody doing there. He gave me a

withering look and said: Because if we want to trade with

Sallys, which we do, then we have to format our messages

this way. Soon.

In the intervening 20 years, FIX, managed by FIX Protocol

Ltd, has become the dominant pre-trade messaging andexecution protocol, spawning variants that encompass High

Frequency Trading and allow the protocol to be embedded

in silicon and incorporated into routers that allow for

intelligent order routing, low latency and other applications.

Hardline standards people sometimes dont like FIX being

referred to as such, but if youre looking for an example of a

de factostandard, youd be hard pushed to find a better one.

Which, in part, explains why FIX is a fundamental part

of the Standards Investment Roadmap. First produced in

2008 at Sibos in Vienna, the Roadmap brings together FIX,

the Financial Products Mark-up Language, Swift messages

and the eXtensible Business Reporting Language, showing

where each could perhaps should be used. Also involved

are implementation specialists the International Securities

Association for Institutional Trade Communications ISITC

and market data specialists the Financial Information

Securities Division, which has been instrumental in the

development of the new Legal Entity Identifier standard.

With the exception of Swift, all of these groups were

largely the vision of small groups of like-minded individuals,

which have grown by accretion into larger groups: how all of

these are now coming together shows how important it has

become to improve information flow across the industry, for

many reasons including cost, efficiency and transparency.

What is really interesting is that over the past few

years what we have seen is a realisation that standards, in

general, have become something that is important rather

than something that is just taken for granted, says Stuart

Adams, EMEA regional director at FPL. In the past people

looked at the evolution of FIX in the pre-trade space, initiallyfor equities and then into other asset classes, and they are

realising that while the protocol is free, the infrastructure

that you put in place to run it is not, so it is becoming even

more important to follow the use of those standards. For

example, in regulation: how can we use standards to address

regulatory requirements?

Adams says that in the regulatory world this is working

in the opposite direction too, with recent proposed US

legislation referring to the need to have non-proprietary,

free and open standards in place for the processing of

information not in financial services, but in areas such as

child protection welfare.

From something that has been taken for granted, people are now seeingstandards as fundamental in how they take their business forward.

JULY/AUGUST 2012


10/14




Some of the politicians in the US who are behind that

legislation also understand

that the exchange of information between agencies and

between countries throughout the whole financial lifecycle

can be facilitated in such a way that you have transparency

and you mitigate systemic risk if you are using the right

types of standards, says Adams. It comes out of left field,

but it makes sense. From something that has been taken forgranted, people are now seeing standards as fundamental in

how they take their business forward.

In one sense, standards like FIX have become intrinsic

and robust to such an extent that they are make it easy to

address more complex issues, and have laid the ground

work for much of the current debate on business processes,

market practices and regulatory frameworks.

We are working very closely with Swift, and others, and

it is very much a united face that we take forward, says

Adams. On the roadmap, we have done joint meetings in

Washington, we have done joint meetings in Brussels, where

we have gone as Swift, FIX, FpML and XBRL and what we aretalking about is the business process. The common factor

is that we are trying to make sure we have interoperability

in the business process under ISO 20022, not just an ISO

standard. Again it comes back to protecting the business

investment that people that have already made.

As the dust slowly settles from the financial crisis that

began in 2007/8, it is becoming clear that standards and

common business practices need to combine with a

workable regulatory framework for the financial services

industry to move forward.

It really is roll up your sleeves time, says Adams.

Politicians talk holistically about what they want to achieve

but what it comes down to is the delegated powers thatare going to the European Securities Markets Authority,

and then ESMA taking guidance from the industry on how

to address the practical implications. How do we get the

regulations into being without burdening the industry with

a lot of additional cost? That is where standardisation is

starting to come forward and we are finding a greater level

of engagement.

As the Standards Roadmap has evolved, most recently

with the inclusion of XBRL, so the range of people involved

has had to broaden. XBRL is mandated by the US Securities

and Exchange Commission for company accounts and

reporting, which is is all very good in itself from the point

of view of having machine readable company accounts,

but, Adams says, for it to be truly useful, the involvement of

issuers is essential, and FPL has been working with XBRL on

this to add the appropriate workflows to the roadmap.

While all of the good work that is being done by those

toiling at the coal-face to align standards, business processes

and market practice, regulators are focusing with some

urgency on over-the-counter derivatives trading, and thisis the focus of a lot of work right now, says Adams. It is

ongoing and the regulation is changing quicker in that

space, so there is a lot of activity.

Also high on the agenda is the adoption of the Legal

Entity Identifier. Though people have been working

on definitions and structures for more than a decade,

the LEI comes all the way from the G20 governments:

down through the Financial Stability Board, through the

International Organisation of Securities Commissions

to regulators, to the standards bodies, starting with the

International Standards Organisation.

Without oversimplifying it, from an FPL perspective,

essentially it is data that is going to be included in a FIX field

and transmitted, says Adams. We have actually taken it a

little further than that in terms of looking at the party details,

the relationships between parties, and the hierarchies of

those relationships, but in essence it is data that is going

to be transmitted. What is important behind that is that at

the ISOCO level, a lot of the things that are talked about are

about transparency, which is about information, and when

it comes down to it, those are the same principles that are

behind a lot of our initiatives.

Adams says that there is currently a lot of interest in

the standards roadmap from the regulators. The good

thing is, because we are not a trade association lobbyingfrom a particular position, it is much easier for us to have

conversations with them, as we are completely neutral, he

says.

FPL is also about implementation, he says, not just talking

about the issues. A good example is the risk management

guidelines we have just published. That was from a coming

together of various market participants, and identifying

what information was being passed as part of an electronic

transaction, and what checks and balances should be in

place. It meant some tweaks to individual tags in the data

that was being transmitted, but overall it was about looking

at the business process and putting best practices in place.

How do we get the regulations into being without burdening the industry with alot of additional cost? That is where standardisation is starting to come forward.


11/14




David Bannister, editor,

Banking Technology

(moderator)

PARTICIPANTS

CHAIRMAN

Stew Cofer, SWIFT

product manager,

JPMorgan Treasury

Services

David Broadway,

senior technicaladviser, Investment

Management

Association, and co-

chair of the Securities

Market Practice Group

Investment Funds

Working Group

Marc Delbaere,

head of research &

development, SWIFT

Standards

MyStandards, officially launched this month, is

a development that goes to the heart of what

SWIFT is doing to reduce the cost of managing

the implementation of standards, according

to no less a person than SWIFT chief executive

Lzaro Campos.

He may well have been understating thecase: initial reports from pilot users at Sibos in

Toronto last year were very positive, and as the

launch takes place in New York, a momentum is

gathering behind the initiative.

So what is MyStandards? The service

is intended to provide a comprehensive

mechanism for financial institutions to

communicate service information with

their customers, as well as improve internal

management of standards and market practices.

According to Marc Delbaere, the initiator and

business owner of MyStandards, the original productidea started some two years ago. It started towards

the end of 2009 when we did a full analysis of all of

the pain-points in the industry around standards,

he says. We were looking at the complete end-to-

end chain of what was happening, from defining

standards through to implementation, and we

realised that SWIFT had a somewhat restricted view

of what was happening.

Delbaere says that SWIFT identified two issues

that needed to be addressed. One of the early

things we recognised was that harmonising

global market practices was the tip of the iceberg

and the reality was that the industry, in dealingwith all of these specifications and standards,

had all sorts of other constraints, such as local

regulation or limitations of back-end systems.

That was one of the things we wanted to fix,

he says. The other was change management.

These standards change over time and every

time something changes, since we dont have

fully integrated change management from the

source of the standards to integration in systems,

this causes massive costs across the industry.

We wanted to treat change as something more

consumable all the way down from when

business people decide to change something,

to where you need to implement the change in

your systems. Really, those were the main two

drivers to the project.

A central part of the development was the

involvement of the user with a the range of

banks and other interested parties broughtin from the beginning and others joining as

development progressed to the open pilot stage.

Bank of New York Mellon, Citi, Clearstream, JP

Morgan, RBC Dexia, SIX, Bundesbank and the UK

Payments Council all contributed to the project,

as did the Securities Market Practice Groups.

Stew Cofer, SWIFT product manager,

JPMorgan Treasury Services: We were

approached early 2011 to participate in the

pilot. We had some queries about it s scope

and ambition, but immediately recognised the

value and had some ideas for initial use. Our

customers increasingly purchase services from

multiple financial institutions as they grow; it

follows that they increasingly benefit from better

standards management. These multi-banked

clients are honest and share with us the pain

they experience from variations generated from

different interpretations of standards by their

service providers; they are a driving reason we are

so involved in standards creation and enrichment

across many business areas. MyStandards seemed

a natural step in the right direction. Initially, we

sponsored content into MyStandards from a cash

management and a securities perspective.One of the things that is clear is that

MyStandards will address different needs for

different groups, and for many the attraction is

less to do with the change management issue

than with the ability to communicate standards

information quickly and uniformly to clients.

For JP Morgan it was less to do with the

first problem and more with the second. For

an organisation of our size, annual standards

changes are well tended. The communication

element was attractive because we are part of a

community that recognises the current process

A tool for changeTo coincide with the launch of the MyStandards product, SWIFT and Banking Technology combined to bring

together some of the people involved in the pilot development to discuss how the product has evolved and

where they see it going post-launch.

MAY 2012


12/14




could improve, specifically in getting the

standards into applied business language in

a uniform way, says Cofer. For us the appetite

for being involved was based on our clients

need to understand applied use across their

service providers. Like many institutions we

have robust documentation, on boarding

processes, and interfaces with the industry.

JPMorgan is probably like a lot of institutions

in that when we write documentation,

standards are the starting point. The result

after we, competitors included, all strive forthe best way to apply these is some good

documentation; yet our customers still feel the

inconsistency. Ill claim some small bragging

rights here being the first to contribute a

practice/usage guideline to MyStandards in

the pilot has put us in a great position on this

point. We were very impressed at the output

and were able to give SWIFT requirements

that would directly benefit our customers in

very specific use cases. To be fair, most of what

an institution might need was part of the plan

from day one.

This, he says, will allow easier management

and dissemination of that documentation.

The involvement of potential users early

in the process was a departure for SWIFT,

and crucial to the development in fact,

collaboration changed the direction of the

development substantially.

In the beginning we had a fairly good idea

of the problem we were trying to solve, but if

you look at the evolution of the product from

what we thought we would build to what we

ended up building, there is quite a significantdifference theres perhaps a 30% difference

between the feature set that we planned

and what has turned out, says Delbaere.

The way that happened was that we were

sharing stories and screen mock-ups with the

customers from the start and there was a lot

of interaction. They were telling us, we will

have more of that and less of that and this

continuous feedback was invaluable.

SWIFT, like most IT-centric operations, uses

Agile development methodologies internally.

But what was unusual was the amount of

customer inclusion, very, very early in theprocess, he says. The first things we showed

were sometimes very sketchy, but it showed

where it might go. That was the deal, to be

able to set up expectations at the right level

and make sure that we were going in the right

direction.

Cofer says that it worked from his

perspective: We really have seen SWIFT

address almost everything that we asked

them to do.

David Broadway, senior technical adviser

at the Investment Management Association,

and co-chair of the SMPGs Investment Funds

Working Group, was one of those who came

to the development later, and he agrees that

the iterative development has been central.

The first time I saw MyStandards was at

an SMPG meeting a year ago when it was

introduced informally. We started using an

early version of the editor component to

capture the discussions around the messages

we were working on at the time, he says. At

that stage we were doing it as part of the beta

test and in that that process we identified

bugs which the facilitators took back to theircolleagues at Swift. It was the first step, but we

actually did use it and the work we captured

at that stage we were then able to use.

Broadway says that while the service isnt

yet fully mature, this constant redevelopment

gives him confidence that it will develop

further. It has a little way to go in terms of

what I have seen, but I already know that

there are future developments coming along,

which is part of the iterative approach. For

example, I joined the process in November

and was on a conference call in January and


13/14




all of the things Id come up with had already

been dealt with.

Broadway says that his funds market

practice group currently has PDFs describing

market processes, supported

by spreadsheets describing the

component usage. What we want to do

next is to replace those spreadsheets withMyStandards representations of them, and

that will be a massive improvement on what

we have today in terms of what we see when

we try to capture market practice and the

consistency of whats presented as output.

This immediately eases the task faced

by national market practice groups when

it comes to comparing their processes.

Currently each group will have captured the

processes slightly differently and formatted

the spreadsheets differently. The consistent

MyStandards approach will ease this Thetools are there within MyStandards to do it all

on screen and that delivers extra capabilities

that we dont have today, he says.

Cofer adds that by taking this approach

there are benefits for the wider industry. This

is where Swift did a great job youre in the

funds space, and Im in the treasury services

space, but those suggestions really benefit

every other business area that might use

MyStandards, he says. Swift has taken that

perspective across the standards landscape,

so we got a lot of benefit that we hadnt asked

for.These benefits will only be fully realised

when there is a greater uptake, These benefits

will only be fully realised when there is a

greater uptake, however. The information has

to be in there, of course, says Broadway. Swift

has been working to load existing SMPG and

NMPG documentation into MyStandards we

still need to do some validation at this stage

but although it wont be in the public domain

until we validate it, there is an existing body

of work.

In the early days this implementation

will be at different speeds as different

stakeholders are at different stages of

adoption of standards most of the SMPG

and NMPG working groups date back to the

move from older standards to ISO15022, for

instance, and are just starting the transition

to ISO 20022, while the more recently formed

funds group was set up with ISO 20022 inmind.

We came from a slightly different starting

place, says Broadway. The people that

have been doing market practice in 15022

will see a very different representation in

MyStandards to what they are used to its

more hierarchical, and in my experience

you can visualise the message far more

easily than with flat tables. Weve had the

hierarchical presentation with ISO 20022

on the investment funds side, but without

the ability to capture processes in the same

place and amend them to create your

own specifications to make an optional

component mandatory, for instance for the

purposes of market practices. It is about doing

what you want to do in context, far better

than weve ever been able to do.

Cofer agrees: You cant compliment the

interactive nature and visual presentation of

MyStandards enough. Theres just nothing

like it.

Competition versus collaboration is

something that is talked a lot about, but

MyStandards could raise issues in some mindsabout where the boundaries are: surely if you

have more efficient processes than the bank

next door, it is a competitive advantage that

youll want to protect?

Cofer says that this might once have

been the case, but no more. Efficiency is

always an advantage but what if everyone

was equally efficient in a agreed way? he

says. I think a gap did perhaps exist for best

practice documentation, but MyStandards

will change that forever. No matter what the

adoption rate is, there has already emerged a

good way to describe standards. Im very pro

MyStandards at the moment, especially for an

institution since the content that is in there

now generates, with a click, your own client

documentation in a variety of formats.

The existence of a central source of

information will be one of the drivers to

wider adoption that will also remove this as acompetitive issue. The information is being

used by one consumer, but contributed by

many, and no institution is going to want

to not be one of the many, though there

is no motivation to be the only one on

MyStandards, he adds.

Broadway says that this is already the

case in other areas. In the securities world

it is a many-to-many relationship between

institutions. You can compete on services,

but the way you want information to flow

is to everyone each institution, such as

a custodian or an investment manager, is

connected to many counterparties, and the

more standardised the messages are between

them, the better for everyone.

Delbaere says that the diversity of the

industry was something that SWIFT was

aware of right at the beginning. When we

started, we realised we were looking at a

very diverse environment, and there would

be different needs as different business areas

were dealing with standards in very different

ways. At the end, when you abstract it, the

fundamental problems are all the same. Canyou describe what you are doing today? Thats

not easy, and everyone does it differently, so

just providing that capability is helpful, he

says. From a product point of view, what do

people care about? They care about what they

do today, and what the drivers for change are,

and that is what we started with.

Best practice groups are one way to

address these needs but the other way

is just to create a community, says Cofer.

MyStandards is very good at taking one part

of the process and uploading it, which is the

We used to compare national market practices manually on a spreadsheet, lining

up the countries and doing a gap analysis manually but in MyStandards it pulls itup and in 10 seconds or whatever, it does the analysis.

David Broadway, IMA


14/14




My part of MyStandards. But you will only

get more engagement where people have an

input on the reasons for the changes.

Cofer divides the potential users of

MyStandards into three groups. The first

are those who consume the standards that

already exist and we have seen immediate

value from that: instead of looking at ahandbook, we interact with a click and see

the standards instead of digging through

user handbooks, he says. The second group

are those who are adding their information;

contributors such as large institutions, market

practice groups, and SWIFT itself. Cofer says

there are challenges here as you are see actual

use and interpretation versus the standards

in the cold light of day. The third group,

the wider community can examine the

dynamic that exists between standards and

interpretations. It allows them to understandwhat one institution does in relationship to

a standard as opposed to another institution

or how one market behaves differently than

another from the same base standard, he

said. Previously, when a multi-banked client

wanted one way of doing things with all of its

banks, they often chose to meeting with all of

their banking providers at once to realise their

goal; in-person, real-time co-opetition. With

MyStandards youd have the results of that

meeting on your screen without the meeting

at all.

Delbaere agrees: It also allows you tosay: this is what we do today and if you want

to communicate with us you have to do

it like this. As a community we can evolve

standard practices over time. We see it as a

way of bridging the gap between all of the

organisations defining standards and usage

(typically the big financial institutions, market

practice groups and market infrastructures)

and the ones that need to consume these

specifications efficiently.

For Broadway, the ability to extract data

in consistent format is a plus. It allows you

to pull the information out in a format that

you can distribute in a way that suits you for

that particular purpose, he says. We used to

compare national market practices manually

in spreadsheets, lining up the countries

and doing a gap analysis manually but in

MyStandards you can pulls them up together

and in 10 seconds or whatever, it will do theanalysis for you.

Cofer is equally enthusiastic about this

functionality. The export of XML schemas

that we can get is very useful, he says. Only

recently were we able to pull up schemas and,

with the help of Swift, put them into one of

several formats that our clients might prefer.

We communicate today using spreadsheets

and PDFs, but our creation time is much

shorter using MyStandards. And let s not

forget that a JPMorgan MyStandards spec

is then in the same format as one of our

competitors MyStandards specs. It s all about

consistency for our clients when we know

they have other providers.

In terms of large-scale deployment,

Cofer says there remain questions for a large

organisation in terms of the administration

that will be required and in terms of the

boundaries of who can see what, but he

says that if history teaches us anything, it

is that people will move on with this and

administration will become a focus after key

requirements are met.

Delbaere says that SWIFT has beenaddressing this. It is a difficult problem, he

says. We have tried to keep administration

and privacy features as simple as possible but I

am sure we will continue to get requirements

in this area.

The boundaries issue goes to the heart of

the matter, it is at heart a system for sharing

information. We have to be happy about

what we are sharing, and perhaps even more

important is a grasp on and control of who

sees what we share, says Cofer For us, the

MyStandards push is really about what it can

do for our clients. Often when a client moves

into the standards space for banking, there is

a natural knowledge exchange between that

client and their experienced provider(s). We

signed up for the pilot as we believed it would

aid this conversation, provided MyStandards

was executed properly.

He elaborates on this theme. Largelywhat MyStandards is enabling and again

we are pushing the client benefit is that

the people uploading market practices are

part of the same community as people who

are consuming them. The challenge is still

business applicability so the consumers can

put the standards into practice in an easily

understood, consistent manner. Even though

this is a role SWIFT cant play, they have

provided a fantastic platform to advance and

simplify the conversation.

With the launch of MyStandards this

month, SWIFT is introducing a powerful tool

that has a number of roles to play in the future

harmonisation of the industry, while also

improving efficiency and reducing costs for

the users. It is clear from the pilot work that

it also has a role to play in the relationships

between financial institutions.

But it is also just the beginning: as the

contributors to this article have pointed out,

there is still work to be done in populating

and validating the service, and in drawing in

the wider community.

As a cloud-based service, MyStandardswill always have one production version, as it

were, but it will continue to evolve to become

still better, says Delbaere. We will continue

to develop in the same mode, iteratively and

interactively. We have monthly checkpoints

with users to determine where we are and

where we can go. We expect that to turn

into a sort of user group to drive it forward.

From my point of view it is very important to

continue doing it as we have with the pilots,

because that has been one of the success

factors of the initiative.

You cant compliment the interactive nature and visual presentation ofMyStandards enough. Theres just nothing like it.

Stew Cofer, JP Morgan

Documents

Standards SWIFT