Securities Initiatives

Securities at SWIFT Initiatives Priorities

5th March 2013

v04

Securities at SWIFT – Initiatives Priorities

Brett Lancaster

SWIFT

Juan Elias

SWIFT

Lou Piezzo

SWIFT

Securities at SWIFT – Context

Sell-Side Connectivity

96% penetration

by Market Cap

Buy-Side Connectivity

88% penetration by

AUM

Securities Firms

Connected 822

by BIC code

Agenda

4

5 Case Study

Latam

4 Case Study

Post Trade

3 Initiatives

Priorities

2 Vision

& Strategy

1 ‘New

Normal’ Drivers

In the ‘new normal’, clients are driven by … … cost management and ‘doing more with less’

5

Voice of the Customer

Regulation

Growth Costs

In the ‘new normal’, clients are driven by … … cost management and ‘doing more with less’

6


Costs

• Internal demand to manage costs and ‘do more with less’

• Continued drive to improve STP rates and efficiency

• Drive for centralized architectures and standardization

Regulation

Growth

In the ‘new normal’, clients are driven by … … growth and/or the reach for new clients

7


Costs




Regulation

Growth

• Drive for revenue growth and/or extended reach into new market segments in the face fierce global competitors

• Customer demand to create shareholder value

In the ‘new normal’, clients are driven by … … the swathe of new and sweeping regulation

8


Costs




Growth

• Drive for revenue growth and/or extended reach into new market segments in the face fierce global competitors

• Customer demand to create shareholder value

Regulation

US Dodd-Frank Wall Street Reform Act: • Regulatory reporting • Centrally cleared derivatives • Increased collateral requirements • Demand for trade repositories CSA • Canadian Securities Administrators - NI

24‐101 for trade matching / settlement CPSS-IOSCO • Principles for Market Infrastructures to

ensure robustness and risk management

Agenda

9

5 Case Study

Latam

4 Case Study

Post Trade

3 Initiatives

Priorities

2 Vision

& Strategy

1 ‘New

Normal’ Drivers

Our vision is to become the backbone of the industry

2. ‘Grow the Core’ - Drive traffic

to allow cost reductions

1. Become the fabric of the

industry

3. ‘Expand the Core’

Offer innovative products &

services

4. Become the defacto partner for our clients,

working at C-level

… to become part of the fabric

10

Vision




industry



services


working at C-level

11

Vision

Our vision is to become the backbone of the industry … to grow traffic to allow unit cost / TCO reduction




industry



services


working at C-level

12

Vision

Our vision is to become the backbone of the industry … to offer value added services




industry



services

4. Become the defacto partner , working at C-level

13

Vision

Our vision is to become the backbone of the industry … to ensure customer-centricity

Evolution not revolution Protect and grow the core and add value beyond messaging

14

Strategy

Strategy

Drive STP and improve operational efficiency to

reduce costs

Drive reach, and growth through new

segments and markets

Help firms meet

regulatory requirements

Protect and grow the core & add value beyond messaging

Anchored by global standards and Market Infrastructures

Agenda

15

5 Case Study

Latam

4 Case Study

Post Trade

3 Initiatives

Priorities

2 Vision

& Strategy

1 ‘New

Normal’ Drivers

Thou

ght L

eade

rshi

p

16

Services Messaging Market Infrastructures

DTCC

CPA – ISO 20022

Brazil - Anbima / Galgo

CDS

FRB US ISO20022

Indu

stry

C

omm

ittee

s E

xter

nal

Con

fere

nces

SWIF

T

Com

mun

ity

Eve

nts

Collateral Management

FinCEN Regulatory Reporting

Post Trade

FINTRAC Funds

Asset Services

Trade Repositories

Initiatives priorities

eStatements 3SKey

MyStandards / SDK

MI Resiliency

Accord Matching

SWIFTRef Reference

Data

Sanctions Screening

Sanctions Testing

Biz Intelligence

•IS

ITC

, IS

DA

, SIF

MA

, X9

Sec

uriti

es, C

FTC

S

tds

•X9

, BA

FT-IF

SA

, N

AC

HA

, AFP

, IP

FA

•IS

ITC

, AC

SD

A, I

SD

A,

SIF

MA

, FTF

, XS

P

•A

FP, N

AC

HA

, CP

A,

BA

FT-IF

SA

, FFI

EC

, E

uroF

in, T

expo

, AC

I, IP

UG

SO

FA, L

AR

C, S

ibos

, C

BF,

WC

BF,

Cor

p D

ay, S

tand

ards

Fo

rum

s

Post Trade Brazil - Anbima / Galgo

Securities - Current Securities - Planned

Agenda

17

5 Case Study

Latam

4 Case Study

Post Trade

3 Initiatives

Priorities

2 Vision

& Strategy

1 ‘New

Normal’ Drivers

What is Post-Trade?

18

Wha

t is

it?

Issu

es &

Tr

ends

Vi

sion

SW

IFT

Sol

utio

n SW

IFT

Roa

dmap

Counterparty B

[3]

[1]

[2]

1. Trade by Front Office

Counterparty A executes

trade with Counterparty B

2. Post Trade by Back Office Exchange Confirmations Match Confirmations

3. Post Trade by Back Office

Settlement of trade obligation i.e. cash / stock move

Counterparty A

Back Office Back Office

Bank / Custodian

Bank / Custodian

Post-Trade Issues and Trends

19

Wha

t is

it?

Issu

es &

Tr

ends

Vi

sion

SW

IFT

Sol

utio

n SW

IFT

Roa

dmap

Regulation

US and European regulatory push to move OTC derivatives trading and clearing onto electronic platforms

Shorten Settlement

Cycles

Preparation in Europe for T+2 settlement as required by the Central Securities Depositories Regulation; and preparation for the launch of TARGET2-Securities in 2015

Resources Costs & STP

Headcount reduction among large brokers and asset managers

Drive to reduce Post-Trade costs

Lack of STP costs the industry $12B annually 1

10% of transactions result in mismatches 2

15% of trades fail to settle on time 3

Cross border transaction involves up to 25 people, processes or systems

4

30% of trade failures are a direct result of inaccurate reference data

5

Source: Financial Information Services Division

Post-Trade Vision

20

Wha

t is

it?

Issu

es &

Tr

ends

Vi

sion

SW

IFT

Sol

utio

n SW

IFT

Roa

dmap

Source: CB Tower Group

• Establish a truly global, multi-asset class, multi-product Post-Trade Service offering

• Help our members with the regulatory transformation of the Post-Trade ecosystem

• Remain connected to local and global client trends

SWIFT Post-Trade Solutions

21

Wha

t is

it?

Issu

es &

Tr

ends

Vi

sion

SW

IFT

Sol

utio

n SW

IFT

Roa

dmap

Trade Confirmation / Allocation Matching Reporting Clearance Settlement

Existing Future

Local Match GETC

Industry Hub

Translation

Watch Reports

Lite2 Access

Accord for Securities

Accord for Treasury

Accord CSD Pre-Settle Matching

CLS TPS

Accord for Securities CCP Link

Project Concert Accord Platform Renewal

Trade Lifecycle

1

3

2

4

SWIFT Post-Trade Solutions 1) Global Electronic Trade Confirmation (GETC)

22

Global Custodian

Settlement Agent or

CSD

Investment Manager

Broker Dealer

Block Trade (MT513) Allocation (MT 514) Confirm (MT 515) Affirm (MT 517)

Settlement (MT 541 or 543 )

Settlement (MT 541 or 543 )

Wha

t is

it?

Issu

es &

Tr

ends

Vi

sion

SW

IFT

Sol

utio

n SW

IFT

Roa

dmap

SWIFT Post-Trade Solutions 1) Global Electronic Trade Confirmation (GETC)

23

Addresses the non-automated market with Business Partner MOS (Amigos). Fixes a key STP gap for the community

• Live - 2 Investment Managers, 5 Broker-Dealers • Projected to grow to 10+ IM’s and 20 BDs by year end

Partners – MOS, Traiana, LSE, FiServe, Fidessa, Bloomberg, Broadridge, Salerio, Kofax, ITG, Smartstream

SWIFT to consider an alternative for Central Matching reusing the Platform Renewal – Project Concert

Wha

t is

it?

Issu

es &

Tr

ends

Vi

sion

SW

IFT

Sol

utio

n SW

IFT

Roa

dmap

SWIFT Post-Trade Solutions 2a) Accord for Securities – Prime Broker to Executing Broker

24

Wha

t is

it?

Issu

es &

Tr

ends

Vi

sion

Executing Broker

Prime Broker

Daily Trade Report

1. Automated pre-matching

4. Settlement OK

Custodian

Custodian

Agent Agent CSD (PSET)

2. Real time status updates + exception handling on GUI + full

reporting in MT 998

2. Real time status updates + exception handling on GUI + full reporting in MT 998

3 . Accord matching uses:

• Cross-reference table linking local codes to BICs

• Table with specific rounding tolerances, per PSET

SWIF

T S

olut

ion

SWIF

T R

oadm

ap

SWIFT Post-Trade Solutions 2b) Accord for Securities – Broker to Broker

25

Wha

t is

it?

Issu

es &

Tr

ends

Vi

sion

Broker

Broker

Trade

X-Clear EuroCCP CCP

Confirmed Trade Chosen CCP

Alternative CCPs

MT518 Confirm

MT548 Status

SWIF

T S

olut

ion

SWIF

T R

oadm

ap

SWIFT Post-Trade Solutions 3) Accord for Treasury

26

Wha

t is

it?

Issu

es &

Tr

ends

Vi

sion

SW

IFT

Sol

utio

n SW

IFT

Roa

dmap

Accord Subscriber or

non- Subscriber

Accord Subscriber

• 470 in 70 countries • Banks • Brokers • Custodians • Fund Managers • Corporates

Deal Confirmations: (MT 300, 305, 306, 320,

330, 340, 341, 360, 361, 362, 392, 600)

Copies of SWIFT

Confirmations

~~ or ~~ Copies of non-SWIFT data: fax, e-mail, e-FX portals, Broker feeds,

Reuters, etc

• Real-time Confirmation Matching Service • Real-time Reporting and Exception Handling • Availability of >99.97% last 5 years • >90K msgs/hour observed matching capacity • Common matching rules + user-defined rules • Financial Liability for Matching results • Integration available for various Back-Office Systems

SWIFT Post-Trade Roadmap Working with Partners

27

Wha

t is

it?

Issu

es &

Tr

ends

Vi

sion

SW

IFT

Sol

utio

n SW

IFT

Roa

dmap

SWIFT Post-Trade Roadmap 4) “Concert” Accord Platform Renewal - New Features

28

Wha

t is

it?

Issu

es &

Tr

ends

Vi

sion

SW

IFT

Sol

utio

n SW

IFT

Roa

dmap

Rapid Implementation

of New Instruments

Project Concert

Flexible Integration

Options

Enhanced Exception

Management

Integration with e-mail

and csv File Upload

Customizable Matching

Rules

Modern GUI Accessed via Internet

Agenda

29

5 Case Study

Latam

4 Case Study

Post Trade

3 Initiatives

Priorities

2 Vision

& Strategy

1 ‘New

Normal’ Drivers

• Larger markets preparing for the future

• Medium Sized Players looking to be more competitive via partnerships and Regional Integration

• Recent crisis brought about creation of CCP’s and focus on collateral pools

• Smaller markets looking to “catch up”

Future Looks Bright

Latam Trends

30

Tren

ds

Prio

ritie

s A

NB

IMA

M

ILA

Catchup

Collateral

Partnerships

Latam Priorities Focus on Large MI’s and regional integration projects

31

Tren

ds

Prio

ritie

s A

NB

IMA

M

ILA

Other Mexico Chile Brazil

• ANBIMA/Galgo • CETIP Collateral

Management project

• Onboarding Broker Dealers and AM

• Support migration to ISO20022

• Supporting Intergloval Service Bureau

• Continue to onboard Broker Dealers

• Exploring participation in MILA

• Exploring our post trade offering

• Network and messaging for COMDER

• Providing Standards based consulting

• Exploring Participation in MILA

• Supporting DCV’s cross border needs

• Onboarding Broker Dealers and AM

• MILA = Latin American Integrated Market

• Creation of CSD’s in Uruguay

• Post Trade in Colombia

• Looking to onboard more CSD’s and CCP’s

Admin- istrator

Asset Controller

Placement Agent

Liability Controller

ANBIMA – Brazil’s Post-Trade Challenge

32

Tren

ds

Prio

ritie

s A

NB

IMA

M

ILA

Instruction / Allocation

Confirmation

ANBIMA Galgo

Local Asset Managers

Local Brokers Exchange

Local Custodians

Matching Matching Settlement

Execution

Confirmation

Funds Registration

Funds Administrator

Cash / Portfolio Custody positions & trades

ANBIMA / Galgo iMercado BM&F Project Merger?

Cash / Portfolio Custody positions & trades Proprietary Solutions

• SINACOR

• RTM Network

• MTA/MTB/CBLC Net

• STI ANBID

Phase 1

Phase 2a

Phase 2b

MILA - Mercado Integrado Latino Americano

33

Tren

ds

Prio

ritie

s A

NB

IMA

M

ILA

Mexico - Grupo BMV

• 138 listed companies • USD 460B Market

Capitalization

MILA Today

• 582 listed companies • USD 650B Market

Capitalization

MILA Tomorrow

• 720 listed companies • USD 1.1T Market

Capitalization

Brazil

Mexico

Colombia

Peru

Chile Brazil - BM&F Bovespa

• 364 listed Companies • USD 1.2T Market

Capitalization

Q&A

? 34

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Economy & Finance

Securities Initiatives