Standards Forum SG Powerpoint Deck (Part II)

ISO 20022 HARMONISATION CHARTER Magdalene Goh, Business Solutions Manager, SWIFT

Agenda

ISO 20022 Harmonisation

Version and Release Management process

Global Market Practices

Towards a harmonised use of ISO 20022 Call made by global and regional Financial Institutions …

Less variation, more global market practice on ISO 20022

Provide a predictable environment for MI communities (versions, release mgmt..)

Best practice sharing for community adoption & implementation

1 2

3

The ISO 20022 Harmonisation Framework – Principles … the answer of the MI Summit

Share information on ISO 20022 messages, versions and

market practice used with other Market Infrastructures

Market Practice

Publish your standards information in a consistent format on MyStandards

[messages/versions used, release timeline, market practice]

Version & release management

Define and document further market-or service-specific

usage guidelines (using global MP as basis)

Adherence

Information sharing

Publication

Market practice

Adopt latest message version for any new project

Synchronize standards upgrades with industry

MT release cycle

Remain up-to-date with ISO 20022 standards release

Adhere (where possible) to global ISO 20022

market practice

The ISO 20022 Harmonisation Framework – Endorsement and Support

•  ACH Colombia •  Bank of Canada •  Central Bank of Kosovo •  Hong Kong Interbank Clearing •  National Bank of Ukraine •  Payments Canada •  SADC **

•  ASX •  Barbados Stock Exchange & Barbados

Central Securities Depository •  Clearstream •  Euroclear •  Hong Kong Exchanges and Clearing •  Jamaica Exchange/CSD •  KDPW •  LCH •  National Bank of Belgium •  NSD •  OeKB CSD •  SGX •  VP Lux •  VP Securities Denmark •  VPS Norway •  Ukrainian National Securities and Stock

Market Commission

•  CLS

Payments markets Securities markets FX markets Market Practice

Release management

MyStandards

** SADC Banking Association is representing the following countries: Angola, Botswana, Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, United Republic of Tanzania, Zambia, Zimbabwe

Nov 2016

•  SMPG

•  PMPG

Supporting

24

11 Supporting MIs*

Endorsing Endorsing Endorsing

Supporting •  DTCC •  Jasdec

Supporting •  APCA •  Banca d’Italia •  Bank of England •  Deutsche Bundesbank •  EBA •  ECB •  Reserve Bank of South Africa •  The Clearing House •  US Federal Reserve

Supporting

Endorsing MIs

* MIs that are part of the MI Summit, except PMPG and SMPG

Agenda




Positioning version and release cycle alignment in the Harmonisation Charter

The pure ISO 20022 standard leaves too much flexibility, preventing consistency and cost efficiencies Versions: several versions of a same message can be used forever, at discretion of FMI for its community Release cycle: each FMI can decide independently when to adopt new message versions A call for alignment …

Categorise MCR Apply annual release cycle

Upgrade with every new message

version 1 2 3

ISO 20022 Best Practice

No impact Unclassified impact Mandatory impact

Used by selected community?

No change Technical change Business change Version increase No Yes Yes

Back-office update No Yes No

No

Yes

Best practice 1: Categorising Change Requests

E.g. Add mandatory field E.g, Reduce length of optional field or Add optional field

SWIFT analyses impact of MCRs on ISO 20022

base messages

FMI analyses impact on its community

1 32


Upgrade with every new

message version 1 2 3

Best practice 2: Upgrade with every new message version….

•  Applies to steady state situation only, so not during migration

… to allow Financial Institutions to use 1 version across FMIs

FMI to upgrade to every new message version …

•  If and When it arrives •  Independent of the reason for the new message version (technical/business)




Best practice 3: Apply annual release cycle

Illustration of Release cycle for SR 2016




Conclusion

ISO 20022 Best Practice recommendations

…. approach requested by FIs, approved by FMIs

Alignment with FIN/MT

release

Minimise annual

implementation cost

Bundling of ISO 20022

CRs

Effective as of Standards Release 2018

Agenda




•  Investment Funds -  Defined by the Securities Market Practice Group (SMPG) -  Published on www.smpg.info and MyStandards

•  Settlement and related services used by TARGET2 Securities (T2S) -  Published on MyStandards

•  Collateral management for communications between CCP and CMs -  Published on MyStandards

•  Settlement and reconciliation Creation of ‘generic’ settlement templates (for use outside T2S markets)

=> 90% done - Work will be finalised by Q1 2017

•  Corporate actions Work will start end of 2016/early 2017 (CA Notification as a start)

•  Proxy Voting •  Cash management •  Post-trade

ISO 20022 market practice for securities and payments

•  High Value Payments -  Sponsored by the Payments Market Practice Group (PMPG) -  ‘Like-for-Like’ approach -  Published on MyStandards

•  Real Time Payments - Ongoing work by ISO 20022 Real Time Payments Group (RTPG) – 70 stakeholders from 17 countries - Covers payments initiation, Clearing & settlement and investigation handling - Published on the ISO Website

•  High Value Payments ‘Plus’ -  Sponsored by the PMPG -  Beyond like-for-like -  Phase I ongoing and work to be published on MyStandard (By Q1, 2017)

•  Low Value Payments No demand to-date

Status: Nov 2016

Available Ongoing Future

Secu

ritie

s Pa

ymen

ts

INTRODUCTION TO MYSTANDARDS Fabien Depasse, Head of MyStandards, SWIFT http://mystandards.swift.com/ [email protected]

Fragmentation and change of industry messaging specifications Cost of onboarding new customers and migrating communities The same problem applies across different channels (SWIFT, host-to-host, e-banking) Change over time

Different standards

used in different ways

surname

Global Standards: MT/MX/ISO 20022

Market practices

Implementation guidelines

A lot of options

Formats-related challenges

2

Not just a repository of specifications

Multi-format Documentation

Self-service Internet Testing

Shared View of Readiness

Powerful Comparisons

A Consistent Industry Approach

Getting standards-related issues out of the way

Publish specifications

Publisher

Test against specifications

Consumer

MyStandards continues to grow

17

MyStandards in numbers

22.500+ Registered users

16.000+ Usage guidelines

100+ Publishing organisations

Industry Adoption

Main areas of success

Use Cases

Corporates onboarding

ISO 20022 migration

Global custody

Standards Release

Regulatory reporting Application testing

Market practice adherence

Benefits of MyStandards

Faster time to revenue

Cut onboarding time by half

Cost Savings

Self-service model offloads integration managers

Smooth customer experience

Easy to do business with your bank

Risk Reduction More control on process and depth of

testing

Applies across channels (SWIFT, host to host, e-banking, …) 20

Benefits illustrated

Typical Implementation timeline – “Before” and “After”

Source: Citibank at MyStandards User Group – Nov 2015 21

APAC AND SINGAPORE FUNDS STANDARDISATION Armin Choksey, Director, Asset Management, Assurance & Advisory, PricewaterhouseCoopers LLP Boon-Hiong Chan, Director, Head of Market Advocacy, APAC, Global Transaction Banking, Deutsche Bank AG Singapore Garry Chan, Director, Transaction Banking, Local Product Manager – Securities Services, Standard Chartered Singapore Tony Lewis, Area Head, HSBC Securities Services, Singapore, Moderated by Marco Attilio, Global Key Account Director, Asia Pacific, SWIFT

23

APAC and Singapore Funds Standardisation

Armin Choksey PricewaterhouseCoopers LLP

Garry Chan Standard Chartered

Singapore

Chan Boon-Hiong Deutsche Bank AG

Singapore

Tony Lewis HSBC Securities

Services, Singapore

Moderator Marco Attilio

SWIFT

Singapore update and state of the Asian fund passports SWIFT standardisation forum

28 February 2017

PwC

Singapore update

25

PwC February 2017

126 licensed commercial

banks*

180 insurance companies

80 insurance

brokers

269 registered fund

management companies

401 fund management

companies

Evolution of AuM of Alternative assets (SGD billion)

Snapshot of Singapore today

Countries with the biggest inflows of HNWIs

Luxembourg, 64.9%

Ireland, 19.3%

France, 1.1% UK, 2.6%

Jersey, 0.5%

Germany, 0.2%

Others, 11.4%

Origin of foreign fund

registrations in Singapore

(in number of funds)

10,100

13,600

19,700

22,200

42,400

45,000

114,100

0 20,000 40,000 60,000 80,000 100,000 120,000

UAE

Canada

Hong Kong

Australia

US

Singapore

UK

70.0 58.9

27.3

57.9

108.0 93.0

38.0

80.0

119.0

136.0

69.0

85.0

0

20

40

60

80

100

120

140

160

Hedge Funds Private Equity Real Estate REITs

2013 2014 2015

PwC

Singapore’s fund’s industry has evolved in the last decade, to sophistication

Investment Funds’ Universe

Retail Investors Accredited/Institutional Investors

Unit Trust REIT Hedge Funds

Private Equity/ Venture

Capital funds

Real estate/

Infrastructure funds

0

500

1000

1500

2000

2500

3000

3500

portfolio managers

investment analysts Traders

0 100 200 300 400 500 600 700 800

2005 2012 2015

Licensed Fund Managers

Registered Fund Managers

Exempt Fund Managers

Demographics of investment professionals has changed and increased significantly

Number of fund managers has dramatically increased and all of them are regulated

PwC

Tracking the growth of Singapore’s asset management industry

28

12 18 27 38 62 66 86 125 124 151 274 276 307 344

485 573 720

891

1,173

864

1,208 1,354 1,338

1,626 1,818

2,359 2,571

0

500

1,000

1,500

2,000

2,500

3,000

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Singapore funds

allowed to fully invest

globally

SFA introduced,

offshore funds

regime opens

MAS and GIC award mandates totalling S$30 billion to external asset

managers

Review of the SFA, resulting in the Enhanced

FMC regime in 2012

AUM in Singapore (in SGD billion)

Designated Unit Trust

status introduced

“Big Bang”; progressive opening of investible

universe

Various new tax incentives schemes for Funds introduced

Boutique FMCs grow

under Exempt FM

scheme

Regulatory exemptions granted for

HNWI

Source: MAS, PwC Research 2025?

S$5tn?

PwC

Singapore Variable Capital Company – coming soon! PwC saw the need and responded

►  2013 - A 12-month effort engaging the industry and MAS. Surveyed the asset managers (local and global) and listened to their needs

►  Oct 2013 - Presented a detailed White Paper to the MAS team

►  April 2015 - PwC was awarded the mandate to conduct a legal study and presented the final report in March 2016

►  March 2016 – Singapore Government announced the introduction of S-VaCC within 12 months.

►  December 2016 – PwC in association with Drew & Napier completes drafting the legislation

►  Early 2017 - intended public consultation

►  Implementation date is to be confirmed

PwC

How many passports in Asia today?

30

PwC

There are three fund recognition/passport schemes in existence in Asia Pacific

Hong Kong – China Mutual Recognition

Status: Live 1 July 2015 Countries in scope: China, Hong Kong

Status: MOC signed in April 2016, - 18 months to full implementation Countries in scope: Australia, South Korea, New Zealand, Japan, Thailand Philippines expected to sign and Singapore is temporarily out of scope

Asia Region Fund Passport

Status: Live 25 August 2014 Countries in scope: Malaysia, Singapore and Thailand

ASEAN CIS

31

PwC

What’s the growth?

32

PwC

Impetus for growth – Asian fund passports

33

PwC

ASEAN CIS

34

PwC

ASEAN CIS – A journey of one thousand miles

35

The ASEAN CIS passporting scheme splits funds into two categories – recognised and authorised funds. Recognised funds are available for sale across multiple jurisdictions and authorised funds are funds approved in their home domicile for the ASEAN CIS scheme and are awaiting recognition in other countries. Malaysia’s CIMB was fast out of the blocks but Singapore currently has a greater diversity of asset managers. How the scheme develops and how popular funds will be in countries outside of their home domicile will be watched with avid interest.

0

1

2

3

4

5

6

7

Malaysia Singapore Thailand

ASEAN CIS Participating Funds by Geographic Location

Recognised Authorised

0

1

2

3

4

5

6

CIMB Amundi* Maybank (MY)

Maybank (SG) Nikko ONE Phillip

ASEAN CIS Participating Funds by Manager

Recognised Authorised

Source: PwC, SEC, MAS, SC

*The Amundi fund is Authorised in Thailand but recorded as being a non-retail fund Source: PwC, SEC, MAS, SC

PwC

Mutual Fund Recognition Scheme

36

PwC

China-Hong Kong Mutual Recognition of funds ("MRF")

37

Hong Kong China

Total AUM (including locally domiciled mutual funds only) US$60 billion RMB5,241.4 billion

Total number of mutual funds 1,126 2,027

Total number of mutual funds eligible for MRF About 100 About 850

Number of mutual funds applied for distribution

48 China-domiciled funds have been approved for distribution in Hong

Kong

7 Hong Kong-domiciled funds have been approved for distribution in

China

The Securities and Futures Commission in Hong Kong (“SFC”) and the China Securities Regulatory Commission in China (“CSRC”) jointly launched the Mutual Recognition of Funds scheme which has become effective since 1 July 2015. The scheme allows eligible funds to be distributed in each other’s market through a streamlined vetting process.

PwC

MRF – Cresting the hill

Source: PwC, SAFE

38

After a spectacular August, the demand of Hong Kong investor’s for Chinese funds seems to have dried up. Whether this is due to the launch of the Shenzhen-Hong Kong Stock Connect, a reduced appetite for exposure to China through Chinese funds, more attractive overseas or local investment options, or other reasons remains to be seen. Chinese investors already meager demand for Hong Kong-domiciled funds has reduced further, though the October dip is consistent with decreased fundraising for local funds in that month.

-500%

-400%

-300%

-200%

-100%

0%

100%

200%

300%

400%

(1,000)

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

MoM

cha

nge

(%)

RM

B (m

)

Southbound Flows, 2016

Net flows MoM change MoM change (RHS)

-300%

-200%

-100%

0%

100%

200%

300%

400%

(20)

-

20

40

60

80

100

120

MoM

cha

nge

(%)

RM

B (m

)

Northbound Flows, 2016

Net flows MoM change MoM change (RHS)

PwC

Asia Region Funds Passport

39

PwC

Asia Region Funds Passport

40

April 2016

?

PwC

ARFP - UCITS comparison

41

Set up in Home prior to Host

UCITS III – Host registration

Limited additional requirements for hosting

Management Company = Operator

Fair value principles Custody of assets by

Trustee/operator and not “depository”

Independent depository/ operator

Single entity risk 15% v/s 10%

Reporting obligations Sec lending 50% v/s 100%

NAV calculation by Operator Delegation limitations

Synthetic short- selling through derivatives

Physical short- selling banned

Depository responsible for delegation

Degree of similarity

Low

Similar

Identical

PwC

Key takeaway

42

PwC

Key takeaways

43

Existing range of locally approved schemes should be the starting point

Delegation rules favour Asian product to be manufactured locally

Restrictions on investments into other funds will prevent feeding into “recognised” UCITS schemes

Distribution is not “passportable” and local representatives need to be appointed

Fund standardisation will create efficiency

Currency control issues cannot be ignored and tax treatment requires a closer assessment

Draft

PwC

Contact us

© 2017 PricewaterhouseCoopers LLP. All rights reserved. "PricewaterhouseCoopers" and "PwC" refer to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL). Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm's professional judgment or bind another member firm or PwCIL in any way.

Justin Ong Partner Asia Pacific Asset & Wealth Management Leader +65 6236 3708 [email protected]

Armin Choksey Director Asian Investment Fund Centre leader +65 6236 3359 [email protected]

Global Fund Distribution

The ROLE OF ISO 20022 STANDARDS IN THE WORLD OF DLT

Alexandre Kech, Head of Securities & FX Markets, APAC, SWIFT

SWIFT and DLT

IOSCO meeting March 1st 2017

Applying DLTs in the financial services industry: requirements


Strong governance – Governance models with clearly defined roles and responsibilities of parties, business and operating rules.

Data Controls – Controlled data access and availability to preserve data confidentiality.

Compliance with regulatory requirements – Ability to comply with regulatory requirements (e.g. Sanctions, KYC, etc.).

Standardisation – Standardisation at all levels to guarantee straight-through processing (STP), interoperability and backward compatibility.

Identity framework – Ability to identify parties involved to ensure accountability and non-repudiation of financial transactions.

Security and cyber defense – Ability to detect, prevent and resist cyberattacks growing in number and sophistication.

Reliability – Readiness to support mission-critical financial services.

Scalability – Readiness to scale to support services which process hundreds or thousands of transactions per second.

DLT maturity, more R&D needed


Strong governance – Role of centralized governance versus open-source models needs to be investigated further.

Data Controls – Work required to better define what kind of data must reside in the ledger and be distributed.

Compliance with regulatory requirements – R&D related to regulatory compliance in a distributed ledger environment will need to come from both the industry and regulatory bodies.

Standardisation – Fundamental questions to be addressed (DLT standard and interoperability, ISO 20022 re-use, interoperability with legacy, smart contract standardisation).

Identity framework – Key management, both in terms of issuance/identity and recovery, requires close examination.

Security and cyber defense – More work required to allow for partial or complete data protection on the ledger through the use of encryption or selective distribution.

Reliability – Needed definition of the right software management and release policy principles in distributed environment, in line with best practice of the industry such as ITIL.

Scalability – R&D to be carried out to assess available consensus algorithms and validation methods against realistic and representative business throughput requirements.

Reference Data ISO 17442 Legal Entity Identifier ISO 9162 Business Identifier Code ISO 4217 Currency code Etc.

Data Exchange ISO 20022 Universal financial industry messaging scheme


Linux Foundation Hyperledger Project ISO/TC 307 Blockchain and electronic distributed ledger technologies

Technical standards Business standards


Technical standards

Linux Foundation Hyperledger Project ISO/TC 307 Blockchain and electronic distributed ledger technologies


Linux Foundation Hyperledger Project

Brian Behlendorf Executive Director

Blythe Masters Governing Board Chair

Open source collaborative effort to advance cross-industry blockchain

technologies. The Linux Foundation hosts

Hyperledger as a Collaborative Project under the foundation. Craig Young

Governing Board Member



ISO/TC 307 Blockchain and electronic distributed ledger technologies Standardisation of blockchains and

distributed ledger technologies to support interoperability and data interchange among

users, applications and systems.

First meeting in April

Craig Dunn Chairperson

Stephen Lindsay Global Head of Standards


Business standards

Data Exchange ISO 20022 Universal financial industry messaging scheme

DTCC, US JASDEC, JP [Post-trade]

Galgo, BR

T2S, EU

CSD, LI

55

EVK, EE

CSD, LT

ASX [Corp.Act]

CLS

Treasury MI Securities MI

SGX [Corp.Act]

JASDEC & TSE, JP

[Corp.Act]

CN

NSD, RU

VP Sec DK

HKMA [CA]

Snapshot December 2016

SADC

LCH.Clearnet, UK

Euroclear, ESES

NBB-SSS, BE

IR

TR

VP Norway

Euroclear FI

VP Lux

BM MY

OeKB, AU

KDPW CCP, PL

BN

KSEI [Post-trade]

IDX [Corp.Act]

SGX [Post-trade]

ISO 20022 Adoption – Securities MI & Treasury MI – From discussion to implementation

HKEX

SMMD & MMSR

MiFID II / MiFIR

SFTR

CTCCR, RU

Securities Reporting (Non-MI, Regulator initiative)

ASX [Post-Trade]


Bond Lifecycle Proof of Concept

Technology Eris/Tendermint platform. Smart Contract written in Solidity

Why Thought leadership Towards a product

What Bond ISO20022 Value-added features

Area Securities and Standards

Blockchain address linked to legal identity certified by certification authority, including

central revocation capabilities

ISO20022 business model applied to DLT

Data access controlled through smart contact based on identity and

assigned profile

Private blockchain with Closed User Group and

user profiles

PBFT consensus algorithm for fast

consensus

Bond Lifecycle Proof of Concept

ISO 20022

In future, open,

DLT-specific business

standards will be required.

Leverage ISO 20022 to

avoid reinventing the wheel and to

enable interoperability

Information Paper conclusions

Benefit from existing business standards like ISO 20022



Business standards

Reference Data ISO 17442 Legal Entity Identifier ISO 9162 Business Identifier Code ISO 4217 Currency code Etc.


Reference data standards

ISO 9162 Business Identifier Code (BIC)

ISO 17442 Legal Entity Identifier (LEI)

ISO 4217 Currency Code

ISO 3166 Country Code

ISO 10383 Market Identifier Code (MIC)

ISO 6166 International Securities Identification Numbers (ISIN)

ISO 20022


2017 and beyond

Distributed Ledger – SWIFT position

•  SWIFT’s focus is on building technical, operational and business capabilities with a view to evolving our platform such that DLT-based services could be offered to our 11,000+ members, when the technology matures and firm business use cases emerge.

•  Drawing upon its long history of fostering industry collaboration, SWIFT will leverage its unique set of capabilities to deliver a distinctive DLT platform offer for the benefit of its community.

•  ISO 20022 for DLT perfected, evangelised & implemented, eg. ASX project, GPI Nostro account reconciliation POC, ISO working groups, Industry.


DLT Sandbox

DLT Sandbox

User Interface

Integration capabilities

RMA

SWIFT value add features

PKI

CUG RBAC

Supporting multiple use cases Multiple connectivity

options

Fast deployment Support for community

testing

Up to 50 nodes Up to 100 TPS The DLT sandbox enables customers to experiment use cases with SWIFT and demonstrate our financial cooperative value proposition

Nostro account reconciliation

Securities use case being

defined

Questions Thank you

Closing Remarks

Sharon Toh, Head of ASEAN, SWIFT

www.swift.com

Presentations & Public Speaking

Standards Forum SG Powerpoint Deck (Part II)