SWIFT and DTCC
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SOFA 2013

SOFA 2013

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SWIFT and DTCC SWIFT and DTCC Presentation Transcript

  • SWIFT and DTCCAn update on joint initiatives in thesecurities arenaSWIFT Operations Forum Americas 20135 March 2013
  • Work Session SWIFT and DTCC – an update on joint initiatives in the securities arena Malene Paul Patrick John McMahon Janssens Barthel Straley SWIFT SWIFT DTCC DTCC 2
  • Agenda• Legal Entity Identifier (LEI) and the CICI Utility• Corporate Actions Reengineering• Collateral Management• Q&ASWIFT Operations Forum Americas - March 5, 2013 3
  • Legal Entity IdentifierCICI UtilityPaul JanssensLEI Programme Director, SWIFT5 March 2013
  • • Industry and regulatory requirements for legal entity identification• Partnership between DTCC and SWIFT (2011) – Not for profit organisation – Owned by the financial industry – Serving the financial industry – Utility Infrastructure• DTCC – International and US headquartered – Avox subsidiary = recognized industry leader in reference data management• SWIFT – International and EU headquartered – Recognized industry leader in standardisation• CICI Utility launched : 21 August 2012SWIFT Operations Forum Americas - March 5, 2013 5
  • Regulatory Framework• Governance – Regulatory Oversight Committee (ROC) – Charter – 50 Authorities – Executive Committee – Committee of Evaluation and Standards – Oversee the global LEI system• Central Operating Unit (COU) – Foundation in CH – Federation with Local Operating Units (LOU)• Private Sector GroupSWIFT Operations Forum Americas - March 5, 2013 6
  • CFTCReporting requirements (Part 45)• Reporting firms must report transactions to registered swap data repositories• Reporting firms must identify themselves and counterparties with CICIs• Effective Date – CDS and IRS = 31 December 2012 – FX, Commodity and Equity Derivatives = 28 February 2013 – Transactions between two non swap dealers or two non major swap market participants = 10 April 2013 http://www.cftc.gov/ucm/groups/public/@lrfederalregister/documents/file/2011-33199a.pdfSWIFT Operations Forum Americas - March 5, 2013 7
  • EMIR• Central role for ESMA – With Local / National supervision• Moving OTC Derivatives to centralised clearing (CCPs)• Standardisation of OTC Derivatives contracts• Increased market transparency via reporting to Trade Data Repositories• Timing – EMIR Legislation published > September 2010 – Political Agreement > February 2012 – Level 2 Measures (ESMA) > September 2012 – Regulatory Technical Standard > March 2013 – Implementation > September 2013 8
  • CICI Utility Overview• Statistics – 50,000 records – US firms = 50 % – Certification = 50 % – Funds – Users = 8,000 – Download of dB = 15,000• Next steps – Bulk files – Payment methodSWIFT Operations Forum Americas - March 5, 2013 9
  • SWIFT Operations Forum Americas - March 5, 2013 10
  • Reporting RequirementsWhat does it mean for me ?• Registration – Self-Registration – Which entities, all subsidiaries, all funds ? – Certification if pre-populated records – Who is responsible for registration and maintenance• Data Management – Download the database – Cross-reference data to internal identifiers – Understand requirements – Prepare systems for reporting transactionsSWIFT Operations Forum Americas - March 5, 2013 11
  • Project management – Data discipline Natural Corporates FinancialConsolidation persons Institutions Finance Retail Banking Legal Operations Asset ManagementCompliance IT Risk Corporate and Investment Banking Sales Counterparties 12 SWIFT Operations Forum Americas - March 5, 2013
  • Take Away www.swift.com/lei www.ciciutility.orgSWIFT Operations Forum Americas - March 5, 2013 13
  • DTCC / SWIFTISO 20022 Messaging forCorporate Actions Reengineering March 5, 2013 DTCC Non-Confidential (White) © DTCC 14
  • Key Milestones – Building ISO 20022  Implemented ISO 20022 Corporate Action Announcements ISO 20022  New Data Model New Browser  Implemented New Data Model Implemented New Browser Nov 2011   Implemented Message Delivery over SWIFT Network  Pilot Firms Receiving ISO 20022 messages from DTCC Production System Nov 2011 - Pilot  Pilot Firms golive with ISO 20022 messages Ongoing   Additional Clients began to review and plan to adopt ISO 20022 Jan 2012 - Client Adoption  Additional clients committed to begin testing Ongoing  Client Subscription  Flexible End of Day / Intraday Option Apr/May/June Options  New Message Protocols: SMART (FTP/NDM) and SWIFT (FileAct) 2012  Market Practice Enhancements  Mandatory / Voluntary Indicator Project August 2012  SR 2012 ISO 20022  Implemented Annual SR 2012 ISO 20022 Release Nov 2012   Start Pilot testing for Phase III Distributions Phase III  Sample messages for Entitlements and Payments Sept 2012 - Distributions  Sample messages for Instructions Ongoing  Production parallel testing DTCC Non-Confidential (White) © DTCC 15
  • DTCC Timeline 2013 - 2014 2012 Phase III 2013 Phase III Distributions Pilot Distributions Parallel 2014 Full Deployment 2012 Testing Production TestingISO 20022 Pilot for Distributions Full Lifecycle ( Testing ) Sept Entitlements & Processing - Sample ISO 20022 MessagesDevelop Client Training Materials Dec Distributions Elections - Sample ISO 20022 Messages 2013Pilot Parallel ProductionTesting of ISO 20022 Entitlements & Feb - Dec Deploy ISO 20022 Ent. & Sett. (Client Parallel Prod Testing)SettlementsParticipant Registration Process for new browser Feb - Dec Client Prototype Overviews & Training (Webinars / Webcasts)Client Testing: EDS on New Browser (PSE) July - Dec Test Inbound ISO 20022 EDS Instructions Messages (PSE) DTCC Non-Confidential (White) 2014Deploy ISO 20022 Messages for Distributions InstructionsContinue to Support CCF Files Q2 2014 Q2 2014 Deploy New User Interface for Distribution Processing Retire PBS/PTS Distributions Functions for Active Processing © DTCC 16
  • ISO 20022 Benefits• Flexibility – both in terms of its content and tailoring of output. As new corporate actions are developed, the messaging standard can change to meet the demands of the business, not the other way around.• XML Syntax – due to its widespread support, XML allows for easier processing and more efficient yearly maintenance.• Schema Validation – used to confirm that each data element is populated with a valid value.• Greater Straight-Through Processing (STP) – corporate action events will be announced using a data model that conforms to market practice, which also contains less narrative or “free text” and more fielded and tagged data.• Unique Corporate Action ID for Each Event – can be tracked through the life cycle of the event – from announcement, to election, entitlement, and payment.• Enhanced Data Elements – a more comprehensive and granular number of data elements, which allows for greater accuracy and, ultimately, less processing risk on the part of the customers.• Maintenance of a Global Standard – In defining a data new model for U.S. and global corporate actions, DTCC worked closely with SWIFT, (ISO 20022s registration authority), the Securities Markets Processing Group (SMPG) and the International Securities Association for Institutional Trade Communication (ISITC. These were reviewed and approved by the Securities Standards Evaluation Group (CA SEG), a group of international industry experts who accept or reject changes to the ISO 20022 standard’s repository. The yearly standards process requires DTCC to constantly review, scrutinize and maintain its standard to ensure compliance with market practice. This in turn will lead to less ad hoc maintenance and instead institute a systematic approach to the business rules driving the file formats, not the other way around. DTCC Non-Confidential (White) © DTCC
  • ISO 20022 – DTCC Client Benefits1. Real time Messaging  Over 50% of events are delivered earlier, as cited in recent case study2. Greater Straight Through Processing (STP) – average of 26% more data available in fixed fields in ISO 20022  Reduces reliance on narrative text, allowing for more efficient processing  Reduced risk through the reduction of errors due to streamlined, automated processes  Client cost savings3. Unique Event Identifier (CA ID / COAF) allows for downstream scrubbing vs. other vendors4. Automating the DTCC Election process  Eliminating the manual election / instruction process can lead to operation efficiencies, risk reduction and potential FTE savings  462,785 manual distribution elections and 279,419 reorg elections occurred in 20115. Instruction Statement Report – CAST ISO 20022 Message  Automates the tracking process for outstanding election balancesDTCC Non-Confidential (White) © DTCC 18
  • DTCC / SWIFTCollateral Management March 5, 2013 SWIFT Operations Forum Americas - March 5, 2013 19
  • High Level Potential STP Model for Collateral Processing (Margin Transit) DTCC Confidential (Yellow) Confidential Treatment Requested by DTCC/DTC/NSCC/FICC Pursuant to the Freedom of Information Act 20
  • Preliminary Evaluation of an Industry Solution: Margin TransitSTP MarginingDescription • Provides straight-thru-processing, including: • Matching of a margin call • Settling of collateral, including netting settlement obligations and simultaneous settlement during multiple cycles during a day • Safekeeping and messaging for segregated margin accounts • Reporting and recordkeeping of Collateral • No credit or settlement guarantee will be provided to participantsScope • All bilateral and cleared OTC arrangements, including all collateral types • Product could be used for any collateralized products and for other types of collateralStakeholderBenefits: Cost Reduction • Reduction in margin call and settlement personnel as a result of straight thru processing • Reduction in fail processing, compensation claim and credit overages’ costs • Lower funding costs due to transparency & certainty regarding collateral settlement, e.g. netting, settlement cycles • Standardized recordkeeping and reporting for regulators and other industry constituents • Lower costs initiating and managing safekeeping accounts Balance Sheet • Reduction in capital costs as a result of reduced funding, less volatility, simultaneous settlement of cash payments – e.g. Savings margin, coupons etc. Risk • Greater scalability, capacity to handle volatility of processing during times of stress • Reduced intraday funding • Elimination of faxing, emails and telephone calls surrounding margin call & settlement processIssues and • Connectivity clearing banks, custodians and securities depositories to move cash and securitiesDependencies • Reference data, e.g. SSI’s and LEIs • Regulatory approvalsPotential Providers • Margin Matching and Messaging – AcadiaSoft, TriOptima and SWIFTand Partners • Settlement Staging and Netting -- DTCC • Cash Settlement, & Security Settlement & Segregation – DTCC, Central Banks, ICSD’s, Custodians 21
  • Q&A ?SWIFT Operations Forum Americas - March 5, 2013 22
  • SWIFT Operations Forum Americas - March 5, 2013 23