SWIFT for investment managers
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SWIFT for investment managers SWIFT for investment managers Document Transcript

  • SWIFT for investment managers How can you benefit from SWIFT - as many other asset managers already do? How can you further optimise your benefits from SWIFT? End-to-end solutions for the securities industry
  • Dear investment manager, You are at the forefront of every securities transaction. Multiple communication flows, a wide range of counterparties and many asset classes put a strain on your business environment and introduce risk. SWIFT offers you standardised electronic messaging and a single, low cost way of communicating with all your counterparties. These key components allow you to automate your processing environment. Automation with SWIFT enables you to achieve three key benefits: - Gain competitive advantage - Improve risk control - Improve your bottom line In the following pages, you will find a description of how these benefits are realised. Every investment manager is different, so we will work with you to determine how you can best achieve these benefits. Read why one investment manager says, “The scalability we get through SWIFT automation is huge. We would not have been able to support our growth and stay in this business without it.” Contact us to discuss how your institution can best benefit from SWIFT. Yours faithfully, Francis Remacle Member of the SWIFT Executive Committee Head of Securities Industry Division www.swift.com
  • Take advantage with SWIFT About this guide This guide for investment managers is designed to provide existing and potential users of SWIFT with an overview of SWIFT’s product and service offering. It highlights your specific business needs and requirements, and offers suggestions as to how you can use SWIFT to gain competitive advantage, improve risk control and improve your bottom line. For the purposes of this guide, an investment management institution (IMI) is defined as an institution responsible for making decisions to buy, hold or sell financial instruments. This includes insurance companies and government institutions that also have this responsibility. The term investment management institution also applies to investment managers, asset managers, fund managers and portfolio managers. Turn the page for more information on the value SWIFT can bring to your organisation...
  • Benefits you can attain through using SWIFT How can you benefit from SWIFT as many other asset managers already do? How can you further optimise your benefits from SWIFT? Improve operational efficiency Pg. 1 Gain competitive Reduce cost & time to market Pg. 3 advantage Improve customer service Pg. 5 Reduce processing risks Pg. 7 Improve risk Reduce operational uncertainties Pg. 9 control Reduce capital requirements Pg. 11 Reduce processing costs Pg. 13 Improve your Reduce cost of change Pg. 15 bottom line Reduce business expansion cost Pg. 17 ROI (return on investment) tool Pg. 19 Customer analysis tools Market gap analysis Pg. 20
  • Section 1: SWIFT’s value proposition for investment managers SWIFT’s value proposition for investment managers Improve operational efficiency Pg. 1 Gain competitive Reduce cost & time to market Pg. 3 advantage Improve customer service Pg. 5 Reduce processing risks Pg. 7 Improve risk Reduce operational uncertainties Pg. 9 control Reduce capital requirements Pg. 11 Reduce processing costs Pg. 13 Improve your Reduce cost of change Pg. 15 bottom line Reduce business expansion cost Pg. 17 ROI (return on investment) tool Pg. 19 Customer analysis tools Market gap analysis Pg. 20
  • Gain competitive advantage Improve operational efficiency “We started using SWIFT about a year ago. Efficiency wise it has been unbelievable. Now we are able to reach about 90% straight through processing (STP) for outgoing messages.” Investment manager using SWIFT Increase automation • seamless integration with your front and back-office systems + Reduce risk and cost • reduction in manual processing through automation • reduction in processing errors and failed trades + Improve operational control • automation means you can focus on exception processing • greater internal and external regulatory compliance = Increased operational efficiency 1
  • Improve operational efficiency In today’s market place, you need to take advantage of every option available to help make you more competitive. Returns on investments can be impacted by failed trades, errors and losses, all of which proliferate in manual processing environments. Benefits Increase efficiency through automation The key to automation is the use of standards with a single communication platform. By standardising your business process flows for orders, settlement instructions, reporting, corporate events, payments, foreign exchange and treasury functions, you can integrate your front and back office and communicate with your counterparties using one language. You will then derive increased efficiency through automation. Reduce risks & costs through reduced processing errors When working in an automated environment, you reduce the risk of manual processing errors. Integrating the exchange of information with your counterparties directly into your processing applications eliminates the need for rekeying, and therefore eliminates the possibility of rekeying errors and misinterpretation of trade details. The associated costs of operating in a manual environment, along with the costs incurred through errors and failed trades, are reduced as a result of automation. Improve operational control of your business Without automation, your efforts are focused on the processing and rekeying of information. Automation enables you to focus on exception processing. Problems or errors that do arise are identified and can be acted upon immediately. The result is an improvement in operational control. The more control you have, the less chance there is for errors and subsequently, fewer failed or late trades. 2
  • Gain competitive advantage Reduce cost and time to market “Before we had SWIFT, we had proprietary terminals all over the place. Staff needed to be trained on all the different systems and data was rekeyed all day long. Now, we simply have one system.” Investment manager using SWIFT Improve scalability • volume independent processing + Increase reusability • standardisation across all asset classes • covering all your counterparties (7600 institutions in 200 countries) + Reduce cost and time • enable your current environment for business expansion for future business needs = Reduced cost and time to market 3
  • Reduce cost and time to market In order to meet customer needs and take advantage of market trends, you need to be able to change and expand your business as opportunities present themselves. Manual processing environments are slow to change, which inhibits business expansion and the introduction of new products, thereby reducing competitive advantage. Benefits Business growth through scalability By automating your business processing environment, through the use of message standards and a single method of communication with all of your counterparties, you will reduce the impact of volatility in transaction volumes. As your business expands, with increased assets from new and / or existing clients, automation provides you with a scalable processing environment. Business expansion through reusability Through the use of message standards and a single method of communicating with all of your counterparties (including brokers, custodians, exchanges and central securities depositories), you have a solution that can be reused as you expand your business focus into new and different areas. These message standards are suitable for multiple asset classes including equities, fixed income, investment funds, money market instruments, foreign exchange, derivatives and financial payments. Reduce cost and time of expanding business New business expansion is easily undertaken with an automated environment. This is due to reduced costs and time needed to bring new business products to market. 4
  • Gain competitive advantage Improve customer service “If we were to report everything over fax, we would probably need twice as many people to do this. We have increased our traffic tenfold without really increasing the headcount.” Investment manager using SWIFT Increase service monitoring • focus on exception processing + Reduce errors and • reduction in processing errors failed trades • timely detection and resolution of potential trade fails + Improve customer • timely reporting satisfaction • focus on what matters to your customers = Improved customer service 5
  • Improve customer service The bottom line for any successful business is impacted by how satisfied your customers are. A satisfied customer creates a real competitive advantage, and can serve to attract new business. Benefits Increase service monitoring An increase in the automation of your processing environment allows you to focus on exception processing. This provides you the opportunity to increase the monitoring of your business and transaction processing you carry out on behalf of your customers. This can be achieved through the use of message standards and a single method of communicating with all of your counterparties. You will be better able to monitor pending trades, manage cash balances, and report on positions and activity to your customers. Reduce errors and failed trades through automation An automated environment reduces the risk of manual processing errors. Integrating the exchange of information with your counterparties directly into your processing applications eliminates the need for rekeying, and the misinterpretation of trade details. The increased focus on service monitoring means that you will discover errors that do occur much sooner, and be in a better position to provide problem resolution. Ultimately, the quantity and severity (e.g. associated cost) of errors and failed trades will be reduced. Improve customer satisfaction With a higher level of service monitoring and a reduction in errors and failed trades, you will be better able to focus on your customers’ investment needs. The operational concerns of your customers will be fewer. Ultimately, you will see an improvement in customer satisfaction and therefore an increase in competitive advantage. 6
  • Improve risk control Reduce processing risks “Without SWIFT, we would certainly need to double the number of operations staff and maybe even more. Fluctuations in the business cycles would cause problems because we would have to pull in temporary staff. This would increase the risk and further reduce efficiency.” Investment manager using SWIFT Reduce misinterpretation • industry accepted standards for more of information than 300 business processes • standardisation across all asset classes + Assured communication • assured identity of the sender • assurance of delivery + Reduce errors and • reduction in processing errors failed trades • timely detection and resolution of potential trade fails = Reduced processing risks 7
  • Reduce processing risks Many transactions exchanged in the financial industry are written in an unstructured way. This leaves room for interpretation and rekeying errors, introduces translation issues and ultimately delays the entire processing chain. This presents a very real, and costly, possibility of failed trades. Operating and maintaining multiple applications, syntaxes, databases and security infrastructures, combined with operating in a manual processing environment, significantly increases the operational risks associated with transaction processing. Benefits Reduce misinterpretation of information The use of standards to exchange information ensures that you talk to your counterparties in one language. Combined with a single communication method this allows you to automate your communication flows. This reduces the potential for misinterpreting information through translation issues and rekeying errors. Assured communication of information By using SWIFT as a communication channel, you are assured of the identity of the sender of the information as all communications are authenticated. Furthermore, you are assured that information you have sent to your counterparties has been safely received because delivery is guaranteed. Reduce processing errors and failed trades When working in an automated environment, you reduce the risk of manual processing errors. Automating the exchange of information with your counterparties eliminates the possibility of rekeying errors and misinterpretating trade details. The increased focus on service monitoring means that you will discover any errors that do occur much sooner, and be in a better position to provide problem resolution. Ultimately, you will reduce the quantity and severity (e.g. associated cost) of errors and the risk of failed trades. 8
  • Improve risk control Reduce operational uncertainties “Security and reliability are the cornerstones of SWIFT. They will always remain SWIFT’s key values”. SWIFT Board Member Increase resilience • always available • zero risk environment + Increase control and • automation means you can focus compliance on exception processing • greater internal and external regulatory compliance + Assured settlement • reduction in processing errors • timely detection and resolution of potential trade fails = Reduced operational uncertainties 9
  • Reduce operational uncertainties The ability to continue daily operational processes, even in the event of catastrophic disasters is a key challenge for the financial industry. You want to be assured that the settlement of your transactions will take place. You want certainty that your communication channels are available and operational at all times. Benefits Increase business resilience With a resilient communication platform, you will be protected from losing any business because your services are unavailable or late. You can conduct your business in the certainty that you will always be able to communicate with your counterparties, as and when required. Increase control and compliance of your business An increase in the automation of your processing environment (through the use of message standards and a single method of communicating with all of your counterparties) allows you to focus on exception processing. This provides you with the opportunity of increasing the monitoring of the service and transaction processing you carry out on behalf of your customers. Automation, reach, trust of sender and guaranteed delivery means that you are in control of your operational and processing environments. Assured settlement of your transactions Integrating the exchange of information with your counterparties eliminates the possibility of rekeying errors and misinterpretating transaction details. The increased focus on service monitoring means that you will discover any errors that do occur much sooner, and be in a better position to provide problem resolution. You and your customers can be more assured of the settlement of transactions. 10
  • Improve risk control Reduce capital requirements “Operational risk is the risk resulting from inadequate or failed internal processes, people and systems or from external events.” Basel II Increase security and • always available resilience • zero risk environment + Reduce operational risk • reduction in manual processing through automation + Lower reserve requirements • Lower Basel II capital requirements thanks to lower operational risk (if applicable to your institution) = Reduced capital requirements 11
  • Reduce capital requirements Whilst the financial services industry has always been considered as robust in terms of resilience, events in recent years have proved that there can be no room for complacency. Stringent regulatory requirements have become hot topics for the industry as a whole. Benefits Increase security and resilience in your business environment SWIFT services, in the form of a communications network and messaging standards, are always available. You can conduct your business in the certainty that you can communicate with your counterparties, as and when required. The SWIFT network is highly secure & trusted, and is used by major financial institutions in 200 countries around the world. Reduce operational risk through increased automation When working in an automated environment, you reduce the risk of manual processing errors. The global reach available through SWIFT (more than 7600 users), combined with the security and availability of the network, means that you are assured of the sender’s identity when receiving information from your counterparties, and assured that the information you are sending will be delivered. A controlled processing environment with the right level of security will contribute to reducing your operational risk. Lower reserve requirements The Basel II framework will impact a significant number of investment managers. For those affected, lowering your operational risk by using the most secure messaging infrastructure will enable you to lower your capital reserve requirements when using advanced measurement approaches. 12
  • Improve your bottom line Reduce processing costs “The cost of SWIFT is insignificant compared to the cost of other more manual messaging methods.” Investment manager using SWIFT Increase standardisation • industry accepted standards for more than 300 business processes • standardisation across all asset classes + Simplify communication • single method of communication with all your counterparties + Increase automation • seamless integration with your front and back-office systems = Reduced processing costs 13
  • Reduce processing costs Margins in the investment industry are under continued pressure. If you want to sustain profitability, you need to ensure processing costs are under control. Automation is acknowledged as the key to success in this area. Benefits Reduce cost and errors through standardisation The use of message standards greatly enhances the efficiency of information exchange. Standards should cover all process flows including orders, settlement instructions, reporting, corporate events, payments, foreign exchange and treasury functions. This ensures that you talk to your counterparties in one language. Standardisation is the first logical step to take if you want to automate communication flows. Simplify communication Using a single communication method to exchange financial information enables you to reduce the multiple communication channels currently used to talk to your counterparties, such as fax, Internet and proprietary links. Using standardised electronic communication, your flows will be greatly simplified, thereby leading to efficiency gains and ultimately a reduction in overall processing costs. Increase automation and focus on exception processing The combination of message standards and a single communication method is the first step to establishing an automated environment within your processing and operations departments. Increased automation allows you to focus on exception processing, and ultimately, spend more time servicing your customers. 14
  • Improve your bottom line Reduce cost of change “Our transaction volumes can vary significantly from one day to the next. However, the effort involved in generating our SWIFT based settlement instructions sent to custodians is very limited, given the high levels of automation we have achieved in this area. ” Investment manager using SWIFT Increase standardisation • industry accepted standards for more than 300 business processes • lower cost of making changes to processing environment + Increase reusability • standardisation across all asset classes + Increase scalability • volume independent processing = Reduced cost of change 15
  • Reduce cost of change The financial industry is constantly changing. Investment products are becoming increasingly advanced and new emerging markets are opening up. Market practice and standards are constantly evolving, and transaction volumes are forever fluctuating. Your institution needs to be able to keep up to date with these changes. Changes that impact your operational and processing environments often require a significant investment, both from a financial and resource perspective. Benefits Increase efficiency through standardisation You can communicate with your counterparties in one language, using standards that cover the entire business process chain, including orders, instructions, reporting, corporate events, payments, foreign exchange and treasury. Standardisation gives you the means to safeguard your operational efficiency in an ever-changing environment. Lower cost of change through reusability With one communication platform and one set of message standards you can talk to all of your counterparties (including brokers, custodians, exchanges and central securities depositories). These message standards are suitable for multiple asset classes including equities, fixed income, investment funds, money market instruments, foreign exchange, derivatives and financial payments. This significantly lowers the cost of making changes to your operational and processing environments. Reduce cost of change and growth through scalability With increased business from new or existing clients, your volumes will increase. An automated processing environment reduces the impact of an increase in volumes, providing you with scalability. New business can be easily absorbed into your existing environment with minimal increase in cost. 16
  • Improve your bottom line Reduce business expansion cost “SWIFT is definitely a scalable solution. We could double our volumes without noticing.” Investment manager using SWIFT Increase reach • covering all your counterparties (7600 institutions in 200 countries) + Increase reusability • standardisation across all asset classes + Increase scalability • volume independent processing = Reduced business expansion cost 17
  • Reduce business expansion cost You need to be able to change and expand your business as opportunities present themselves. However, bringing new products or services to the market is a costly and time consuming exercise when you are working in a manual environment. Benefits Increase reach to your counterparties As you expand your business, your network of counterparties grows. SWIFT is used by more than 7600 financial institutions (including investment managers, broker / dealers, custodians, banks, securities depositories, exchanges, fund administrators and market data providers), in 200 countries. This extensive reach enables you to communicate with your counterparties in a secure, low cost and automated way, 24 hours a day / 7 days a week. Lower cost of change through reusability You can reduce cost and complexity through automated communication with multiple counterparties across multiple asset classes by using one communication platform and one set of message standards. The messages standards are suitable for multiple asset classes including equities, fixed income, investment funds, money market instruments, foreign exchange, derivatives and financial payments. Reusing your operations and processing environment significantly lowers the cost of expanding your business. Reduce cost of change and growth through scalability As your business expands, with increased assets from new or existing clients, your volumes will increase. With the automation of your processing environment the impact of an increase in volumes is reduced. Automation provides you with a scalable processing environment, meaning you can easily absorb new business into your existing environment. You can focus your attention on what really matters: growing your business and providing excellent customer service. 18
  • Return on investment tool SWIFT’s Return on Investment (ROI) tool is used by your SWIFT representative to help you put together the business case for using SWIFT. It provides an easy way to calculate the savings you can get from using SWIFT in different areas of your business. It also helps you prioritise which business processes you need to automate first. Contact your SWIFT representative to calculate the financial benefits for your organisation and see what SWIFT can do for you. The tool will go through the following steps: - Introduction (how to use the tool) - Flow (looking at your current business processing flows) - Setup (looking at your infrastructure needs) - Result (an estimate of your costs and savings from using SWIFT) The ROI tool will take into account your current communication means and volumes and the investment needed to use SWIFT. The tool will also take into account additional integration and project costs. The end result of the tool is to provide you with an estimate of the ROI that the use of SWIFT can deliver to you, including: - Cost of using SWIFT - Comparison of the cost of SWIFT versus cost of other communication means - Payback period for your investment in SWIFT 19
  • Market gap analysis tool For existing users of SWIFT the Market Gap Analysis tool analyses whether you make optimal use of SWIFT. Do your traffic patterns match the ones of other investment managers in the industry? By comparing your traffic to the benchmark you can see where you can still make better use of SWIFT. Example of market gap analysis tool YTD IMI traffic report: INVMGR01 Benchmark criteria: >100 bn AUM The benchmark consists of 49 BICs Europe UK & Ireland Traffic breakdown sent Traffic breakdown received Institution Institution distribution CAT1 distribution sent received CAT2 CAT3 Benchmark Benchmark distribution CAT5 distribution received sent CAT9 Institution traffic evolution sent and received 18 000 16 000 14 000 12 000 10 000 8 000 Sent Rcvd 6 000 4 000 2 000 0 sep-03 oct-03 nov-03 déc-03 jan-04 fév-04 mars-04 avr-04 mai-04 juin-04 juil-04 aoû-04 Your SWIFT relationship manager will be happy to share the results with you. 20
  • Section 2: About SWIFT 1. Introduction 22 1.1. Investment management institution (IMI) 22 1.2. SWIFT 22 2. Business functions 24 2.1. Equities, fixed income & listed options 26 2.2. Investment funds 28 2.3. Payments & cash management 30 2.4. Treasury 32 3. Who can connect to SWIFT? 34 3.1. Categories of SWIFT user 35 3.2. SWIFT pricing and fees 37 4. How can you connect to SWIFT? 40 4.1. Direct connectivity 41 4.2. Indirect connectivity 42 5. SWIFT Partner Solutions 44 5.1. Vendor segmentation 45 5.2. Global label programme 46 About SWIFT 5.3. Working groups and vendor support 47 6. About Standards 48 6.1. International Organisation for Standardisation (ISO) 48 6.2. Securities Market Practice Group (SMPG) 48 6.3. Standards convergence 49 6.4. Bank Identifier Code (BIC) 51 7. Industry co-operation 52 7.1. Board committees and working groups 52 7.2. National member group 52 7.3. National user groups 53 7.4. Industry bodies & regulatory authorities 53 7.5. Sibos – financial services forum 55 8. About SWIFT 58 8.1. Our vision 58 8.2. Our mission 58 8.3. Facts and figures 58 8.4. SWIFT: history & evolution 58
  • 1. Introduction This guide for investment management institutions (IMIs) is designed to provide existing and potential users of SWIFT with an overview of SWIFT’s product and service offering. The focus is on investment management institutions, highlighting your specific business needs and requirements, and offers suggestions as to how you can use SWIFT to gain operational efficiencies, reduce risks and costs, and ultimately gain improvements in straight-through-processing (STP). 1.1. Investment management institution (IMI) For the purposes of this guide, an investment management institution is defined as an institution responsible for making decisions to buy, hold or sell financial instruments. This includes insurance companies and government institutions that also have this responsibility. The term investment management institution also applies to asset managers, fund managers and portfolio managers. 1.2. SWIFT SWIFT is the industry-owned co-operative supplying secure, standardised messaging services and connectivity to more than 7,600 financial institutions in 200 countries. These institutions exchange millions of messages valued in trillions of dollars every business day, and are active in the payments, securities (equities, fixed income & listed options), treasury (foreign exchange, money markets & derivatives) and trade services markets. Over the course of our history, more and more securities institutions have joined SWIFT. Today, investment management institutions, broker-dealers, custodians, securities depositories, clearing organisations, exchanges, central counterparties, virtual matching utilities, electronic trade providers, proxy voting service providers, market data providers, distributors, transfer agents and fund administrators rely on SWIFT to reduce the complexity, risk and cost of their domestic and international transactions. SWIFT facilitates standardised communications and processing at all levels of the lifecycle of equities, fixed income, listed options and investment funds transactions – from trade order through to settlement and custody services. 22
  • SWIFT’s support for securities processing lifecycles l ra t Pre-trade t e en l l a em C o ag n ma Tr ad e len d in s r it ie g Sec u Equities, fixed income en t et t lem / tr ad e & listed options Po s t Pr e-s Co c t i rp on a or s & at g r i n en t e ea m Sec u r it Cl t t l e rep o r ti s ie se ng A/C opening ta Da & maintenance i c ing at t St p o r re Tr an sf rep o r s io n s er s t in g m is Co m Investment sw i t r s & funds s che e Or d Ca p o r re sh tin fl o g ng w rti NA V po /P rep o r i c e Re rting 23
  • 2. Business functions As an investment management institution, you are involved from the very beginning of the traditional equities and fixed income transaction lifecycle (e.g. trading), and may well be involved in all settlement and custody related processes, as well as all aspects of investment funds distribution. Additionally, many of your securities related business processes lead you to be involved in payment, foreign exchange, money market and derivative related functions. Business functions of an investment management institution (IMI) Equities, fixed income & listed options Investment funds Foreign exchange IMI Money markets Payments Derivatives Cash management Within the following pages, the applicable SWIFTSolutions for each business area are shown in the SWIFTSolutions per Process diagrams. The intention is to highlight the solutions available. For a more detailed overview of each solution, including the specific message standards available, refer to the applicable chapter in the SWIFT’s Products & Services section of this guide. 24
  • Business areas SWIFTSolutions + offerings Sub-section Equities, fixed income ISO 15022 message and listed options standards (Cat. 5) SWIFTNet FIX 2.1 Investment funds SWIFTNet Funds ISO 15022 message standards (Cat. 5) 2.2 Payments and cash Category 1 and 2 message management standards Category 9 message standards SWIFTNet Cash Reporting 2.3 Treasury: Category 3 message standards Foreign exchange SWIFTNet CLS third party service Money markets Derivatives SWIFTNet Accord 2.4 25
  • 2.1. Equities, fixed income & listed options Within the equities, fixed income and listed options markets, there are four spaces through which activity is focused, covering initial trading through to settlement and custody events. Reporting & custody Pre-trade / Post -trade / Clearing & Trade Pre-settlement settlement The players most typically involved in these markets, with whom you need to communicate, include the following: - B/D (Broker / Dealers) - VMU (Virtual Matching Utilities) / ETCP (Electronic Trade Confirmation Providers) - Custodians - in some instances, directly with I/CSD (Central Securities Depositories, including Domestic and International) - in some instances, directly with Exchanges (member sponsored direct access) Client side Street side IMI B/D B/D Exchange VMU / ETCP CCP Custodian Clearer Clearer I/CSD 26
  • SWIFTSolutions per process & space Pre-trade / Trade + Post trade / Pre-settlement + Clearing & settlement processes Business IOI / Order / Execution / Allocation / Confirm Settlement process Process Quotes Pre-allocation / Affirmation instruction / Confirm Pre-trade / Trade SWIFTNet FIX SWIFTNet FIX ** ISO 15022 & & MT 502, 509, ISO 20022 ISO 20022 513 messages * messages * Post trade / Pre -settlement SWIFTNet FIX ISO 15022 & MT 514, ISO 20022 515, 517 messages * Clearing & settlement ISO 15022 MT 508, 524, 54x, 578 * The first delivery of new ISO 20022 messages for the Pre-trade / Trade space are scheduled for availability Q4 2004. ** ISO 15022 MT 5xx refers to a specific message type (e.g. MT 502 = Order to Buy or Sell). Reporting & custody services processes Business Lending & Corporate actions Depositary Process Reporting borrowing & entitlements receipts / Collateral Custody services * Securities ** ISO 15022 * Market data ISO 15022 ISO 15022 MT 516, 526, 581, reporting MT 53X, 549, provider MT 56X 582 (Ldg / Bor) initiative over 575, 576, initiative MT 587, 588, 589 FileAct 584, 586 ISO 15022 MT 503-507, 527, 558, 569 (Collateral) * Details of the Securities Reporting and Market Data Provider initiatives can be found in Section 3 of this guide. ** ISO 15022 MT 5xx refers to a specific message type (e.g. MT 535 = Statement of Holdings). 27
  • 2.2. Investment funds Within the investment funds industry, there are four spaces through which activity is focused, covering initial account set-up through to orders and reporting. Reporting & custody Account Orders Transfers management & confirms The players most typically involved in the investment funds industry, with whom you need to communicate, include the following: - Investor - Distributors and hubs (or Concentrators) - Transfer agents / Registrars - Fund administrators - Investment management institution - Custodian / Trustee - Cash agent Investor Distributor Concentrator Transfer agent / Registrar Fund administrator Custodian / Investment Cash agent Trustee management institution Note: An investment management institution can play several of the roles depicted in the above diagram. 28
  • SWIFTSolutions per process & space Account management + Orders / Confirmations + Transfers processes Business Account Orders (including switches) process Process Transfers management / Confirmations Account management SWIFTNet Funds (new ISO 20022 messages) Orders & confirms SWIFTNet Funds * ISO 15022 (new ISO 20022 MT 502, 515 messages) Transfers SWIFTNet Funds ISO 15022 (new ISO 20022 MT 540, 542, messages) 544, 546 * ISO 15022 MT 5xx refers to a specific message type (e.g. MT 502 = Order to Buy or Sell). Reporting & custody services processes Business NAV price Other reporting Corporate Account reporting process Process (cash flow, commission, report (holdings, transactions, etc.) static data) actions Reporting & custody SWIFTNet Funds SWIFTNet Funds * ISO 15022 SWIFTNet Funds ISO 15022 (new ISO 20022 (new ISO 20022 MT 535 (new ISO 20022 MT 56X messages) messages) messages) * ISO 15022 MT 5xx refers to a specific message type (e.g. MT 535 = Statement of Holdings). 29
  • 2.3. Payments & cash management During the course of carrying out your securities business, you will need to pay away and receive monies (with regards to settlement of trades, dividend income, etc.), and therefore can be both the ordering customer and the beneficiary customer in the diagram below. Payments are made through your financial institution, either directly through a bank, or indirectly through a custodian. You may also be involved in the reconciliation of cash positions between your own records, and those of your banks and / or custodians. Typical payments & cash management flows Clearing & settlement market infrastructure Ordering customer’s Beneficiary customer’s financial institution financial institution Typical role of investment management Ordering institutions Beneficiary customer customer SWIFTSolutions per process Business Customer Financial institution Cash management process payments payments & customer status * MT 101, 103 MT 200 - 203, MT 900, SWIFTNet cash 205, 210 910, 935, reporting 940 - 942, (XML standards) 950 * MT xxx refers to a specific message type (e.g. MT 101 = Request for Transfer). 30
  • Customer payments Financial institution Cash management & transfers customer status Category 1 messages Category 2 messages Category 9 messages are deal with payments, or deal with payments, or exchanged between information about information about financial institutions, either payments, in which the payments, in which all on behalf of themselves, ordering party or the parties in the transaction other financial institutions, beneficiary, or both, are are financial institutions. or customers. They not financial institutions. include confirmations of debits and credits, and cash statements. 31
  • 2.4. Treasury SWIFT offers a range of standards that cover different treasury market segments: - Foreign exchange (FX) - Money markets (Loan deposit; call / notice) - OTC derivatives (Foreign currency options; Forward rate agreements; Interest rate derivatives) Many of the treasury messages are specifically aimed at investment management institutions, allowing you to instruct and confirm FX and money market deals with broker / dealers and custodians. Additionally, the MT 300 and the MT 304 messages can be used to confirm and advise FX trades requiring settlement through CLS (Continuous Linked Settlement (CLS™) bank). CLS is an industry initiative, represented by over 60 shareholders from the world’s largest financial institutions, to reduce risks associated with cross-currency transactions. CLS bank delivers continuous linked settlement services to ensure final and simultaneous settlement of cross-currency financial transactions. SWIFT provides the network components to connect CLS bank with its members and third party CLS users. Typical treasury flows Clearing & settlement market infrastructure IMI’s financial Counterparty’s financial institution institution Investment management Counterparty institution (IMI) 32
  • SWIFTSolutions per process Business process Process Foreign exchange Money markets OTC derivatives * MT 300, 303, 304, MT 320, 321, MT 303, 305, 306, 307, 308, 380, 381 330, 350 340, 341, 360 - 362, + + 364, 365 SWIFTNet accord SWIFTNet accord + + SWIFTNet accord SWIFTNet CLS third party service * MT xxx refers to a specific message type (e.g. MT 300 = Foreign Exchange Confirmation). 33
  • 3. Who can connect to SWIFT? The following table highlights the wide variety of financial industry players who can currently connect to SWIFT. Some players can connect directly to SWIFT while others are able to connect indirectly via such services as an MA-CUG (member administered closed user group). An MA-CUG allows SWIFT Member’s to establish their own closed user group, through which they can communicate with non-SWIFT connected counterparties over SWIFT. Financial industry players Connect to SWIFT Connect to SWIFT directly indirectly * Securities (equities, fixed income & listed options) Investment management institutions ✓ Broker / Dealer ✓ CCP (central counterparty) ✓ Exchange ✓ VMU (virtual matching utility) ✓ ETCP ✓ (electronic trade confirmation provider) Custodian ✓ (ICSD / CSD) [International] ✓ Central securities depository Market data provider ✓ Corporates ✓ Securities (investment funds) Distributor ✓ Investors intermediary ✓ ✓ Fund administrator ✓ (independent Transfer agent / Registrar ✓ financial advisor’s cannot currently Portfolio / Fund manager ✓ connect directly.) Concentrator / Hub ✓ Custodian / Trustee ✓ Payments, foreign exchange, treasury Bank ✓ Clearing systems ✓ RTGS (real time gross settlement) systems ✓ Treasury counterparties ✓ Market infrastructures (e.g. CLS) ✓ * All players can, if they choose, connect indirectly to SWIFT. 34
  • 3.1. Categories of SWIFT user There are three categories of SWIFT users: Member (shareholder): An eligible organisation holding a share in SWIFT SCRL, including banks, eligible securities broker-dealers and regulated investment management institutions. A Non-shareholding Member is an organisation which complies with the eligibility criteria of a Shareholder (Member), but either chooses not to or is itself prevented from becoming a Shareholder (Member). Note: SWIFT shares are re-allocated amongst its members at least every three years. The share re-allocation is calculated based upon each members network based invoice (e.g. the fees paid to SWIFT for use of its services). For non-shareholding members, once their network based invoice entitles them to five SWIFT shares, they must become a shareholder by purchasing the required shares at the next share re-allocation. Sub-member: An organisation more than 50% directly or 100% indirectly owned by a Member. A Sub-Member must fall under full management control of the Member. Participant: Any organisation may be permitted to make use of specific services of SWIFT as a Participant, provided it complies with the criteria of eligibility of a particular category of Participant. Participants are not entitled to shares in the capital of SWIFT. The following are some of the categories of participants currently accepted on SWIFT: - Central depositories and clearing Institutions - Fund administrators - Recognized exchanges for securities and related financial instruments - Registrars and transfer agents - Securities Electronic Trade Confirmation (ETC) service providers - Securities market infrastructure system participants - Securities proxy voting agency - Trust or fiduciary services companies MA-CUGs (Member Administered Closed User Groups) Addressing the institution-to-client market, MA-CUGs enable SWIFT members (as described above) to create their own private communities and extend SWIFT-based services to their corporate clients who are not connected directly to SWIFT. A key benefit of an MA-CUG is that it allows you to build services on your existing SWIFT infrastructure. This 'reusability' offers a more cost-effective approach to providing client services than developing proprietary solutions, and also allows a considerable advantage in the time-to-market. For more information on MA-CUGs, contact your SWIFT representative. 35
  • SWIFT’s legal definition of an investment management institution SWIFT recognises three types of investment management institution (IMI): - Primary IMI (e.g. investment manager, asset manager, fund manager, etc.) - Insurance company - Government institution Primary IMI The following conditions need to be fulfilled to be recognised as a primary IMI: i. Are primarily engaged in the management of Asset portfolios (which must be composed, at least in part, of securities); and ii. Are authorised by a competent regulatory authority to conduct such primary business activity; and iii. Are subject to relevant regulations applied by such competent regulatory authority. iv. In countries where conditions ii) and iii) do not apply, are sponsored as an investment management institution by at least two-thirds of the S.W.I.F.T. SCRL shares held by the members in the country of origin of the applicant and either (a) by a minimum of ten members, or (b) by one percent of the total S.W.I.F.T. SCRL shares. Either i), ii) and iii), or i) and iv) must apply. The support referred to in iv) (a) and (b) may be provided by a combination of members from and / or outside the country of origin of the applicant. Insurance company The following conditions need to be fulfiled to be recognised as an insurance company: i. Are engaged in the management of asset portfolios (which must be composed, at least in part, of securities), in connection with their primary business activity, which is either the provision of investment management services to other persons or the underwriting of insurance or both; and ii. As above under primary IMIs. iii. As above under primary IMIs. iv. As above under primary IMIs. Either i), ii) and iii), or i) and iv) must apply. The support referred to in iv) (a) and (b) may be provided by a combination of members from and / or outside the country of origin of the applicant. 36
  • Government institutions The following conditions need to be fulfiled to be recognised as a government institution: i. An agency, department or institution of a national, regional or state government or public international organisation (“public authority”) qualifies as an investment manager if primarily engaged in the management of asset portfolios (which must be composed, at least in part, of securities) on behalf of and for the account of such public authority; and v. As above under primary IMIs. vi. As above under primary IMIs. vii.As above under primary IMIs. Either i), ii) and iii), or i) and iv) must apply. The support referred to in iv) (a) and (b) may be provided by a combination of members from and / or outside the country of origin of the applicant. 3.2. SWIFT pricing and fees Financial institutions joining SWIFT incur fees based upon the way in which they connect to and use SWIFT. As a co-operative, SWIFT aims to continuously lower average message prices. SWIFT pricing is value based, allowing users to pay only for the products and services they use. Pricing is also loyalty based; the more an institution uses SWIFT, the lower the per-unit cost (e.g. per message costs decrease as an institution’s traffic invoice increases). Co-operative based Prices decrease as cost effectiveness increases 1991 average message price 2002 FIN Value based The right solution for the InterAct right need at the right price FileAct Browse Loyalty based The more you use SWIFT, Unit prices the lower your unit prices Low SWIFT usage High 37
  • The various fees can be broken down into three categories: - joining and connecting to SWIFT - using SWIFT services and SWIFTSolutions - other SWIFT services Joining and connecting to SWIFT Institutions incur a variety of fees dependent on their status and type of connectivity: Fee Definition Joining fee One-time fee dependent on member, sub-member or participant status of the joining institution SWIFT BIC (8 characters) - destination Annual recurring fee SWIFT user handbook Annual recurring fee FIN/SWIFTNet FIN logical terminal (LT) One-time fee Security fee One-time and recurring fees related to the registration and maintenance of security officers, PKI and BKE certificates and/or USE equipment SWIFT IP network connectivity fees Recurring fees dependent on the type of connectivity (managed or dial-up), the bandwidth and the country where the connection is implemented SWIFT interfaces Dependent on whether institution uses SWIFT or 3rd party vendor interfaces One-time and software maintenance recurring fees dependent on volume of transferred traffic Up-to-date fees for all of the above can be obtained by contacting your SWIFT representative. Using SWIFT services and SWIFTSolutions For FIN and SWIFTNet messaging, and for some of the new SWIFTNet business solutions, fees are based on the volume and size of transferred messages or files and are typically charged to the sender of the message (except when otherwise specified or agreed with SWIFT). Note: some SWIFTSolutions are charged based on a flat service fee. The price per message is typically defined according to the following criteria: - The institution’s global tier determined by the institution’s overall financial contribution related to usage of SWIFT services. The more the institution uses SWIFT services, the better the tier in terms of price per message. 38
  • - The route used by the transfer, either, domestic, international or intra- institution. The domestic route is defined by the country of the sender and the receiver. Intra-institution traffic is the traffic transmitted between destinations that are part of the same financial institution. International inter-institution traffic is all other communication. - The optional value-added features selected for the transfer of message or file (e.g. priority, delivery notification, etc). - The size of the transferred message. Up-to-date fees for all of the above can be obtained by contacting your SWIFT representative. Other SWIFT services SWIFT delivers directory, documentation and education services to its community. Up-to-date fees, along with details of these services, can be obtained by contacting your SWIFT representative. 39
  • 4. How can you connect to SWIFT? To be able to connect to SWIFTNet, users require: - a network connection to SWIFT's secure IP network (SIPN) - SWIFTNet Link - an interface SWIFT users can choose to manage their own technical connectivity (direct connectivity) or they can outsource their connectivity either to a Service Bureau or by the use of a shared connection (indirect connectivity). Example of direct connectivity to SWIFT’s secure IP network (SIPN) Customer premises Local loops Access networks Backbone Network Partner 1 VPN router box POP SIPN M-CPE Network backbone Partner 2 network OPCs Backbone SIPN Access access Network points SIPN 40
  • Example of indirect connectivity to SIPN [via Service Bureau] Service bureau Customer A WAN VPN internet box point to point connections SWIFTNet Customer other SNL VPN B box - SWIFTNet Connectivity - interface solution Customer N Diagram Acronyms VPN – Virtual Private Network M-CPE – Managed Customer Premises Equipment POP – Point of Presence SIPN – Secure IP Network OPC – Operating Centre Whether you choose to connect directly or indirectly is an internal business decision. It is SWIFT’s goal to ensure that all of its users have choice in this respect. Some of the points to consider as to whether to connect to SWIFT directly or indirectly are as follows: - Are you a global, regional or domestic institution? - Are you planning on expanding your physical presence in the future? - Do you have multiple business lines, or are you focused in one area? - Are you planning on expanding your business lines in the future? - Are your volumes high, or do you anticipate your volumes increasing in the future? 4.1. Direct connectivity To be able to use SWIFTNet services, you require a network connection to SWIFT's secure IP network (SIPN), SWIFTNet Link and an interface. Secure IP network is SWIFT's highly secure and extremely reliable network. Full redundancy, advanced recovery mechanisms, first class operations and customer support services ensure continuous network availability for SWIFTNet services. SWIFTNet Link guarantees interoperability between our customers. SWIFTNet Link is our unique underlying software module that encapsulates transport, service management and security technologies. 41
  • Interface - The SWIFTAlliance product family includes interface products for both SWIFTNet and FIN. SWIFTAlliance WebStation and SWIFTAlliance Gateway are our SWIFTNet interface products. SWIFTAlliance Access and Entry are our FIN-specific interfaces. In addition to SWIFT’s own interface products, third party interfaces are also available from SWIFT’s service partners. 4.2. Indirect connectivity There are two ways for a SWIFT user to connect indirectly to SWIFTNet: A SWIFT-registered Service Bureau (SB) provides user facilities management and / or data processing services, supporting their access to, and use of, the SWIFT messaging services. A Service Bureau may thus operate various connectivity components (such as a connection to the SWIFT network or interface software) for the benefit of, or on behalf of the users for their prime and / or backup connection. For a current list of SWIFT registered Service Bureaux, refer to www.swift.com. A shared connection occurs whenever different SWIFT users connect through the same interface equipment to SWIFT in such a way that they could be simultaneously logged on. What is the difference between Service Bureaux and shared connections? Both offer the same indirect connectivity solution. However, in the case of a shared connection, the party operating the connection is also a SWIFT user, while in the case of Service Bureaux, it is not. SWIFT provide a variety of connectivity options depending on each individual customer’s needs and requirements, ranging from fully resilient and redundant permanent connections down to dial-up connections, either directly or indirectly. For detailed information on how you can connect to SWIFT, please contact your SWIFT representative. 42
  • 5. SWIFT Partner Solutions SWIFT Partner Solutions is responsible for establishing and maintaining business relationships at all levels between SWIFT and external partner vendors. One of our main aims is to improve communication and the sharing of information between SWIFT and providers of applications and services for the Investment Management Industry. Partner solutions works with third-party providers who develop and support solutions that focus on SWIFT readiness, traffic automation and straight through processing to help our customers achieve end-to-end automation. SWIFT traditionally works with various partners to extend its product offering beyond the network and messaging layers. - Application vendors - Consultants - Interface providers - Installation experts Partner Solutions' objectives are to: - Facilitate SWIFTNet implementation for members - Increase STP and reduce total cost of ownership to members - Leverage SWIFT’s business potential through its partners network Over 60 partner companies active in the investment management industry have been identified. Partner Solutions will seek to work with these vendors within the framework of our established programmes and projects, as described further in this section. 44
  • 5.1. Vendor segmentation Partner solutions typically segment the vendor community in the following way: Market Business applications infrastructure service Banking Securities ERP providers Integration services Consultancy / Middleware Interfaces Messaging Network, connectivity Vendor segment focusing on the investment management industry Solution stack provided by SWIFT and by third party providers Solution stack provided by SWIFT 45
  • The securities business applications are obviously highly relevant for the investment management community. The types of business applications identified as key for this industry are: - In the pre-trade/trade space: FIX engines and Order Management Systems - In the post-trade/pre-settlement space: FIX engines, Order Management Systems, ETC providers and reconciliation applications - In the clearing and settlement space: back office platforms and reconciliation applications - In the custody space: corporate actions processing The investment funds distribution vendor landscape is slightly different as niche players have been developing extremely focused business applications catering for the specific needs of distribution, fund accounting and transfer agency. Partner solutions identified the following application types as highly relevant for the mutual funds industry (in addition to the ones relevant for the investment management industry generically): - Distribution platforms - Transfer agency applications - Fund accounting systems - Portfolio management applications The middleware or EAI stack is the main component involved in the gathering of the business flows and the construction of the messages. This application category is spanning multiple spaces (also for funds distribution) and serves as the concentrator and transformer of business flows beyond the interface. The market infrastructure service providers are traditionally seen as technical infrastructure providers. Nevertheless, these are extremely relevant for the investment management community, and Partner Solutions carefully monitor the evolution within this partner segment. The consultancy and integration services stack would intervene at all stages in an implementation process (architecture, business analysis, testing, etc). 5.2. Global label programme Partner solutions' global label programme certifies third party applications that support SWIFT functionality and messages, through validating the integration of third party applications into SWIFTAlliance interfaces, and accrediting providers of SWIFT-related services. For the securities industry, labels have been awarded to third-party providers who have developed solutions covering specific securities processes and SWIFTNet Business Solutions, including the following: - Securities Custody and Settlement - Corporate Actions - SWIFTNet FIX - Securities Reconciliation - SWIFTNet Funds 46
  • The following labels support the investment management industry, but also span multiples industries: - SWIFTReady Financial EAI: targeted at middleware providers - Provider of SWIFT Accredited Solutions: targeted at consultancy houses and integration specialists For details on SWIFT’s current range of Partners, please contact your SWIFT representative, or go to www.swift.com. 5.3. Working groups and vendor support In the context of specific business solutions and initiatives, Partner Solutions also engage in closer relationships with niche players to ensure that each solution being rolled out is understood by its partners and well implemented. SWIFT also involved these specialist partners in the validation and review of specific business solutions deliverables through the creation of working groups. The SPIFA (SWIFT Partner Investment Funds Automation) working group is composed of 15 companies helping us refine our SWIFTNet Funds business solution. As this solution has multiple facets and tackles multiple business flows, SWIFT carefully selected key players in the funds industry, including consultancy houses, middleware and business applications providers for transfer agencies, fund accountants or distributors. More generically, one of the key missions of Partner Solutions is to ensure that at least three vendors support each business solution or initiative that SWIFT is rolling out. 47
  • 6. About standards Standards are an essential element of SWIFT's global offering. We are committed to the collaboration of efforts and convergence of standards, so that you can benefit from cost savings, eliminate redundancies and seize the opportunity to expand into previously untapped markets. SWIFT offers a range of securities standards, in both FIN and XML syntax, which facilitate the link between front and back office operations of financial institutions. This leads to interoperability and higher straight-through- processing (STP) rates throughout the entire securities, payments and treasury transaction chains. In order to achieve a common industry standard for the financial industry, SWIFT works in close co-operation with the international standards setters and several financial industry bodies, including ISO, the Securities Market Practice Group and FIX Protocol Ltd. This section highlights some of these organisations and how we work with them, along with an overview of the industry’s standards convergence efforts. 6.1. International organisation for standardisation (ISO) ISO is the world's largest developer of standards. ISO is a network of the national standards institutes of 148 countries with a Central Secretariat in Geneva, Switzerland that co-ordinates the system. SWIFT is the registration authority for a number of ISO standards related to financial operations including the BIC (Bank Identifier Code), the MIC (Market Identifier Code), the ISO 15022 securities message standard and the new UNIFI (ISO 20022) financial message standard. 6.2. Securities market practice group (SMPG) SWIFT acts as a facilitator to the SMPG. The objective of this industry group is to create globally harmonised market practices, which enhance STP at an industry level. Securities market practices Market Practice Rules for existing securities messaging standards (e.g. FIX, ISITC, and ISO 7775) have been historically defined after industry participants have implemented the standards. To further complicate industry information flows, each industry participant has defined its own usage rules separately and differently. This has resulted in an inefficient exchange of information whereby standards and their associated market practice rules have been interpreted and implemented differently by each industry participant in each geographic market. This inefficient exchange of information has limited (STP) in the securities industry. 48
  • SMPG In July 1998, SWIFT sponsored the organisation of the SMPG. The formation of the SMPG resulted in the establishment of National Market Practice Groups (NMPG) in more than 30 geographic markets comprised of investment management institutions, broker / dealers, custodian banks, central securities depositories and regulators. The membership of the SMPG and the NMPGs are committed to the vision that standards, in conjunction with defined market practices, will bring the industry closer to its goal of achieving STP. The SMPG is a tactical initiative focused on enhancing the current securities industry infrastructure. However, this group also realises the further benefit of industry utilities in supporting conformance to standards and market practice. As such, there is active dialogue between the SMPG and other industry initiatives (e.g. ISITC-IOA) in order to ensure that the tactical work of the SMPG provides a first step toward the restructuring of the securities industry. SMPG process The SMPG is open to all participants interested in creating globally agreed market practices for the securities industry. This objective includes the harmonisation of non-regulated geographic differences as well as consistent implementation by securities industry participants for processing within and across all markets. Monthly meetings of the NMPGs and twice-yearly meetings of the SMPG cover issues ranging from standardised methods of informing custodians to register shares, to creation of NMPGs in non- participating countries. NMPG countries — as of January 2004 Austria, Australia, Belgium, Brazil, Denmark, Canada, Croatia, Czech Republic, Finland, France, Germany, UK and Ireland, Greece, Hong Kong, Hungary, India, Israel, Italy, Japan, Luxembourg, Malaysia, Netherlands, Norway, Portugal, Poland, Russia, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Thailand, Turkey, United States and the Eurobond Markets. Further information on the SMPG is available from www.smpg.info. 6.3. Standards convergence There are numerous message development initiatives addressing financial information flows, driven from both inside and outside the financial industry. They are generally driven by communities of users looking for more cost- effective communications to support specific financial business processes. It is possible to preserve interoperability and consistency between standards developed by different organisations, if a common standardisation approach is adopted. Such a common standardisation approach has to include a common message development methodology, a common validation / prioritisation process and a common financial repository. The international standards setters, such as ISO and UN/CEFACT, are guiding the industry towards the standard use of methodologies and tools. 49
  • SWIFT’s strategic priority supports this convergence at three levels: - SWIFT is actively supporting ISO and UN/CEFACT in the development of a common approach and has offered to be the Registration Authority for the common financial repository - SWIFT is committed to use this common approach and promotes it actively to other standards initiatives developing financial messages - SWIFT makes every effort to select relevant standards initiatives to support and avoid duplication of efforts by Financial Institutions in multiple standards initiatives that would cover the same financial transactions The adoption of such a common standardization approach by as many message developers as possible will prevent the development of inconsistent, non-interoperable and overlapping message standards, whilst allowing a large degree of freedom for message development initiatives to emerge and prosper. The target is the harmonization of all messages sent and received by financial institutions, between themselves, with their clients and with the market infrastructures that participate in the execution of financial transactions. FIX protocol limited (FPL) Co-operation with FPL is key to convergence of securities message standards between the front and back offices. While the SWIFTNet FIX Hub allows SWIFT to transport FIX messages, the ultimate goal is to provide a full set of securities messages in the same XML language. In 2001 SWIFT and FPL signed a memorandum of understanding. Since then, SWIFT and FPL have contributed jointly to the development and approval of the ISO 20022 standard. Under the ISO umbrella, SWIFT and FPL have developed a set of ISO 20022 compliant pre-trade / trade message models, which are expected to be available in late 2004. Future efforts between SWIFT and FPL will focus on the development of message models in the post trade / pre-settlement space. FIX representatives are also working with SWIFT (as well as several industry players) on the new investment funds messages, being developed in compliance with the ISO 20022. The first set of investment funds message standards are now complete, and will be available for use on SWIFT in late 2004. FpML / ISDA Co-operation with FpML (financial products mark-up language) is key to the convergence of standards for the OTC FX and interest rate derivatives business. FpML are a part of ISDA (International Swaps and Derivatives Association) of which SWIFT is a member. FpML have already started defining an XML directory for OTC derivatives and SWIFT are working with them to promote an adoption of the ISO 20022 methodology. Market data definition language (MDDL) MDDL was launched in 2001 by the Financial Information Services Division (FISD) of the Software & Information Industry Association (SIIA). MDDL’s aim 50
  • is to build XML standards covering pricing information and reference data for financial instruments. From its inception MDDL has evolved in parallel with the development of the ISO 20022, and is looking to become ISO 20022 compliant. To ensure the convergence of standards in this area, SWIFT helped MDDL to gain access to ISO, and have supported the creation of a new ISO working group (WG11), which is creating an ISO 20022 compliant market data model for pricing information and reference data. 6.4. Bank identifier code (BIC) The ISO Bank Identifier Code (BIC) is an international standardised method for identification of financial institutions. The BIC is designed to facilitate automatic processing of telecommunication messages in financial environments. SWIFT is the Registration Authority for ISO 9362 Banking – Banking Telecommunication Messages – BICs. SWIFT in this capacity is responsible for the assignment of these codes and their subsequent publication in the BIC Directory. Each SWIFT User registers a unique 8 character Bank Identifier Code (BIC). Such registration is completed when the organisation applies to become a SWIFT User. An entity may register separate 11 character codes where the last 3 characters represent a branch code, either of a geographical, functional or departmental nature. However, if the branch being registered is considered a separate legal entity, then it must be registered with its own 8 character BIC. 51
  • 7. Industry co-operation SWIFT works with a variety of regulatory bodies, industry groups as well as our customers to help drive standardisation and automated communications forward in the financial industry. 7.1. Board committees and working groups SWIFT is governed and guided by its users (many of whom are shareholders in SWIFT), and by its Board. As our users represent a broad industry base, the Board has six committees with delegated decision powers: audit and finance, banking and payments, compensation, securities, standards, technology and production. The Securities Steering Committee (SSC) is made up of senior industry representatives from leading investment management institutions, custodians, broker / dealers and international central securities depositories. The SSC meet on a quarterly basis to discuss issues affecting the securities industry, and guide SWIFT as to how it is best placed to deal with these issues in the most beneficial manner for the Industry. Additionally, SWIFT has created Working Groups to assist Board Committees on detailed industry matters. As with the SSC, the Working Group is likewise made up of senior representatives from the securities industry, and also meets on a quarterly basis. 7.2. National member group The National Member Group (NMG) consists of all SWIFT shareholders within the same nation. Within each nation shareholders organise themselves in such a manner so that they can effectively advise and assist the Board on specific local matters such as admission of new users, propose Director candidates to the Board, communicate and work with their representative on the Board of Directors. The NMG is consulted in an advisory function at a national level on policy issues affecting members which are due to be discussed in the Board, such as share participation or new categories of SWIFT Users. In doing so, the NMG not only assists the Board, but also serves the interests of its members by co-ordinating their views and formulating a common policy. The NMG ensure that their advice to the Board is objective and competitively neutral, and that the local criteria are drafted to provide fair and open access to SWIFT services to any eligible institution. 52
  • 7.3. National user groups The National user group consists of all SWIFT Users within the same nation who organise themselves to discuss SWIFT matters of an operational nature. They develop a forum to allow for collective planning and co-ordination in their operational activities. The prime functions of the National User Group are: - to enable users to co-operate in establishing their connections to SWIFT - to advise organisational, operational or technical matters affecting the users - to discuss and decide on matters which have to be agreed upon at a national level as they relate to the day-to-day network operation in the country (e.g. sharing of costs) - to assist SWIFT in ensuring an efficient and reliable day-to-day operation of the network The national user group is chaired by the user group chairperson (UGC). To fulfil this role, the UGC should be well versed in operational and technical matters relating to SWIFT's operation and be in close contact with the users on an operational level. The UGC also acts as focal point for training requirements. In most countries the UGC is elected by the National Member Group or by the steering committee of that National Member Group. 7.4. Industry bodies & regulatory authorities SWIFT plays an active role in working with (and / or ensuring compliance with) various industry bodies and regulatory authorities around the world. These include the following: FIX protocol limited (FPL) FPL is an industry organisation created in 1992, which has built successful message standards for communication primarily in the pre-trade / trade area. FPL’s membership is made up of many of the key buy-side and sell-side players in the securities industry, along with a number of key vendors of FIX related services. SWIFT is a member of FPL. As mentioned previously in the standards Convergence section, SWIFT and FPL have developed a set of ISO 20022 compliant pre-trade / trade message models, which are expected to be available in late 2004. Future efforts between SWIFT and FPL will focus on the development of message models in the post trade / pre-settlement space. G30 The Group of Thirty is a private, not-for-profit, international body composed of senior representatives of the private & public sectors and academia. It aims to deepen understanding of international economic and financial issues, to explore the international repercussions of decisions taken in the public and private sectors, and to examine the choices available to market practitioners and policymakers. 53
  • In January 2003 the G30 published a set of 20 recommendations for the securities industry (global clearing and settlement: a plan of action). The G30 have called for comprehensive reform of the cross-border clearing and settlement process. These recommendations are in unison with how SWIFT operates, and the value SWIFT offers to its users. Cross-border clearing and settlement processes have been at the core of SWIFT’s securities offering for more than ten years. “The importance of the clearance and settlement processes as the central nervous system of global finance is clear, and there is a compelling need for all institutions that are engaged to ensure that they contribute to securing the system's health." G30 ISSA The International securities services association (ISSA) is a group of leading global market players, who as a group control a significant share of cross- border investment volume. The associations focus is twofold, firstly to collect and disseminate information on the developments in the rapidly changing international securities markets, and secondly to offer securities operational professionals a forum to exchange ideas and issues of common interest. SWIFT is an active participant of ISSA. ISITC-IOA The international securities association for institutional trade communication – international operations association (ISITC-IOA) is a global working committee of securities operations professionals representing custodian banks, investment managers, brokers and vendors. The group’s mission is to foster alliances and advocate standards that promote straight through processing (STP) of securities transactions. SWIFT is a member of ISITC-IOA. FEFSI The fédération européenne des fonds et sociétés d’investissement (FEFSI) is the pan-European umbrella organisation of the investment funds industry for Austria, Belgium, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Liechtenstein, Luxembourg, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland and the United Kingdom. FEFSI represents through its national member associations more than 900 investment management companies with over 40,000 investment funds. SWIFT are actively involved with FEFSI, specifically as a member of the steering group of the Funds Processing Standardisation Group (FPSG), for which there are two key areas of focus. Firstly, support of ISO 20022 as the basis for European funds messaging standards. Secondly, the harmonisation of processing features (e.g. decimal spaces, cut off times, etc.). 54
  • Giovannini group The Giovannini Group is a group of financial-market participants, under the chairmanship of Alberto Giovannini (chairman - Unifortune Asset Management SGR), which advises the European Commission on financial market issues. The Group has focused its work on identifying inefficiencies in EU financial markets and proposing practical solutions to improve market integration. The Group has issued four reports, the last of which focused on EU cross- border clearing and settlement arrangements. It highlighted the fragmented nature of the EU clearing and settlement infrastructure for cross-border transactions, and made several recommendations for the removal of barriers that would lead to the improvement of the current environment. "The definition of formats and protocols (for standards in financial communications) should build on the work already accomplished by SWIFT and the Securities Market Practice Group with the aim of removing the difficulties caused by proprietary systems and free data fields.” Giovannini Basel II committee The Basel Committee on Banking Supervision is recommending its New Basel Capital Accord (known as Basel II). The New Accord calls for minimum capital requirements along with a supervisory review of capital adequacy. An improved capital adequacy framework is intended to promote a stronger emphasis on risk management, with the main focus being on operational risk. While use of ISO standards facilitate reduced operational risk, through increased automated processing, SWIFT are continuing to develop new solutions required by its users. The SWIFTNet Cash Management solution for instance, allows clients to receive nostro account positions and transactions in real-time through their correspondent banks, thereby improving intra-day exposure monitoring. “Operational risk is the risk resulting from inadequate or failed internal processes, people and systems or from external events.” Basel II 7.5. Sibos – financial services forum Sibos is the world’s premier financial services forum, attracting the industry’s leading figures and firms. Sibos draws over 6,000 participants from the financial industry, and some 200 application and middleware vendors, system integrators and consultants. It takes place annually, typically a week in September or October, at a different venue around the world. Sibos brings to the fore issues that are challenging the financial services industry, now and in the future - new technologies, new processes, new client expectations, new and unexpected alliances and ever-growing pressures for greater efficiency and security. 55
  • One of the key advantages of Sibos is the ample opportunity attendees have to network. Sibos delegates cover the range of financial markets and IT, making them the ideal audience for focused marketing activities. Investment management institutions, broker-dealers, custodians, treasury specialists, banks, and operations professionals, all see Sibos as an excellent investment in time. The securities industry has taken an increasingly high profile role at Sibos. In recent years we have seen a rising number of investment management institutions represented at Sibos, not only in terms of attendance, but also in terms of participation on various panel discussions and as keynote speakers. For up to date details of Sibos, see www.swift.com. 56
  • 8. About SWIFT 8.1. Our vision To be the global financial community’s foremost messaging infrastructure that is lowest risk and highest resilience. To achieve this we will harness what has been called ‘one of the dominant franchises of our network age’ and tap the enormous potential of that franchise for the benefit of our worldwide community of members. 8.2. Our mission SWIFT is a worldwide community of financial institutions whose purpose is to be the leader in communications solutions enabling interoperability between its members, their market infrastructures and their end-user communities. SWIFT will: - Work in partnership with its members to provide low-cost, competitive financial processing and communications services of the highest security and reliability - Contribute significantly to the commercial success of its members through greater automation of the end-to-end financial transaction process, based on its leading expertise in message processing and financial standards setting - Capitalise on its position as an international open forum for the world’s financial institutions to address industry-level threats, issues and opportunities - Employ and recruit the best people, invest in the most beneficial resources, and become a leading global organisation respected for its professionalism, effectiveness, vision and management 8.3. Facts and figures As at the end of 2003, SWIFT is being used more than ever by the global financial community: - More than 7,500 financial institutions, in 200 countries, are using SWIFT - 72 of the top 100 investment management institutions (IMIs) by assets under management are connected to SWIFT - 2003 traffic surpassed two billion messages (35% related to securities transactions) 8.4. SWIFT: history & evolution In 1973, banks communicated via telex - not very secure, minimum standards and little if any automation. So, 239 banks from 15 countries formed a co-operative to automate the telex. They called it the Society for Worldwide Interbank Financial Telecommunication (SWIFT). Their vision was 58
  • to harness emerging computer technology and manoeuvre around the telecommunications monopolies to send standardised financial messages between themselves, securely and reliably. They hoped one day that the daily messages would grow to 300,000 each day. The table below provides some of the highlights of SWIFT’s history over the past 30 years. Year Users Countries Messages Highlights 1973 239 15 0 SWIFT is established 1977 518 22 3.4 million First live message 1978 586 25 21.6 million The first Sibos is held in Brussels 1982 1,017 44 79.9 million Introduction of message text standards for certain interbank securities transactions 1987 2,360 64 222 million Broker/dealers, exchanges, central depositories and clearing institutions allowed to join SWIFT 1990 3,049 83 332 million Securities traffic (the new Category 5 messages) represents 2% of total message traffic 1992 3,582 94 405 million IMIs become eligible to join SWIFT 1994 4,625 126 518 million Bank of England selects SWIFT as one of two network providers for CREST (UK central securities depository) 1996 5,632 151 688 million Electronic trade confirmation providers become eligible to join SWIFT 1997 6,176 164 812 million SWIFT announces the next generation programme, based on a new, highly secure, extremely reliable IP network 59
  • Year Users Countries Messages Highlights 1998 6,557 178 937 million The SWIFT board transforms the securities board task force into the securities steering council (IMIs are invited to join the council) ISO approves the new draft securities message standard – ISO 15022 Proxy voting agencies become eligible to join SWIFT 1999 6,797 189 1.06 billion Securities traffic represents 21% of total message traffic 2001 7,457 196 1.53 billion Insurance companies and government institutions carrying out an IMI role become eligible to join SWIFT 2002 7,601 198 1.82 billion Fund administrators are eligible to join SWIFT 2003 7,725 200 2 billion Migration from ISO 7775 securities message standard to the new ISO 15022 standard is completed SWIFT develops a new XML message based solution for investment funds SWIFT launches the SWIFTNet FIX service 60
  • Section 3: SWIFT’s products & services 1. Securities markets (ISO 15022) - category 5 on FIN 62 1.1. Securities markets - pre-trade / trade 64 1.2. Securities markets - post trade / pre-settlement 65 1.3. Securities markets - clearing & settlement 67 1.4. Securities markets - custody services: securities reporting 73 1.5. Securities markets - custody services: corporate actions / entitlements 77 1.6. Securities markets - custody services: depositary receipts 80 1.7. Securities markets - custody services: securities lending & borrowing 81 1.8. Securities markets - custody services: collateral management 83 2. SWIFTNet FIX 88 2.1. SWIFTNet FIX: pre-trade 90 2.2. SWIFTNet FIX: trade 91 2.3. SWIFTNet FIX: allocation 91 2.4. SWIFTNet FIX: confirmation 93 3. SWIFTNet Funds 94 3.1. SWIFTNet Funds – orders / switches & confirmations 98 3.2. SWIFTNet Funds - reporting & custody: NAV / price reporting 107 3.3. SWIFTNet Funds - reporting & custody: cash flow reporting 109 3.4. SWIFTNet Funds - transfers 111 3.5. SWIFTNet Funds - reporting & custody: account reporting 111 3.6. SWIFTNet Funds - account management 111 3.7. SWIFTNet Funds - reporting & custody: commissions reporting 111 3.8. SWIFTNet Funds - reporting & custody: static data reporting 111 3.9. SWIFTNet Funds - reporting & custody: account reporting 112 3.10. SWIFTNet Funds - reporting & custody: corporate actions 112 4. Payments & cash management 114 4.1. Customer payments 115 4.2. Financial institution transfers 116 4.3. Cash management and customer status 119 5. Treasury Markets: FX, money markets, FX options & derivatives 124 5.1 Foreign exchange (FX) 126 5.2 Money markets 129 5.3 OTC derivatives 131 SWIFT’s Products & Services 6. CLS third party service 136 7. SWIFTNet Accord 138 7.1. Matching 138 7.2. Netting 139 8. SWIFTNet Cash Reporting 142 9. File transfer capabilities 144 10. New initiatives 146 10.1. Market data provider initiative 146
  • 1. Securities markets (ISO 15022) - category 5 on FIN The core of SWIFT’s offering to its Securities users is the ISO 15022 message standards. ISO 15022 message standards cover the equity, fixed income & listed options functions from Trading through to Custody Services. Additional ISO 7775 messages are used to cover Securities Lending & Borrowing functions. The flows shown in this section represent the main use of each message. Full details explaining the use of each message can be found in the SWIFT User Handbook. MT Message name Page Pre-trade / Trade 64 502 Order to buy or sell 64 509 Trade status 64 513 Client advice of execution 65 Post trade / Pre-settlement 65 514 Trade allocation instruction 65 515 Client confirmation of purchase or sale 66 517 Trade confirmation affirmation 66 Clearing & settlement 67 508 Intra-position advice 67 524 Intra-position instruction 67 540 Receive free instruction 68 541 Receive against payment instruction 68 542 Deliver free instruction 69 543 Deliver against payment instruction 69 544 Receive free confirmation 70 545 Receive against payment confirmation 70 546 Deliver free confirmation 71 547 Deliver against payment confirmation 71 548 Settlement status and processing advice 72 578 Settlement allegement 72 62
  • Custody services: Securities reporting 73 535 Statement of holdings 73 536 Statement of transactions 73 537 Statement of pending transactions 74 538 Statement of intra-position advices 74 549 Request for statement / Status advice 75 575 Report of combined activity 75 576 Statement of open orders 76 584 Statement of ETC pending trades 76 586 Statement of settlement allegements 77 Custody services: Corporate actions / Entitlements 77 564 Corporate action notification 77 565 Corporate action instruction 78 566 Corporate action confirmation 78 567 Corporate action status & processing advice 79 568 Corporate action narrative 79 Custody services: Depositary receipts 80 587 Depositary receipt instruction 80 588 Depositary receipt confirmation 80 589 Depositary receipt status & processing advice 81 Custody services: Securities lending & borrowing 81 516 Securities loan confirmation 81 526 General securities lending / Borrowing message 82 581 Collateral adjustment message 82 582 Reimbursement claim or advice 83 Custody services: Collateral management 83 503 Collateral claim 83 504 Collateral proposal 84 505 Collateral substitution 84 506 Collateral and exposure statement 85 507 Collateral status and processing advice 85 527 Tri-party collateral instruction 86 558 Tri-party collateral status and processing advice 86 569 Tri-party collateral and exposure statement 87 63
  • 1.1. Securities markets - pre-trade / trade These messages are typically sent between a client (e.g. investment management institution) and a financial institution (e.g. broker / dealer) to instruct a buy or sale of a security, to provide the status of the trade, and to confirm the trade between the two parties. MT 502 Order to buy or sell - To instruct the purchase or sale of a given quantity of a particular financial instrument. Order to buy or sell Request cancellation of previous order Replace previously sent order Instructing Re-send an order Executing party party Copy to third party Copy to third party MT 509 Trade status - To indicate the status of a particular trade. Advice status of trade Cancel previously sent advise of status Reject previously received message Instructing Executing party party Copy to third party Copy to third party 64
  • MT 513 Client advice of execution - To provide brief and early information to the Instructing Party about a deal executed at its instruction. This advice of execution applies to a deal that cannot yet be fully confirmed (e.g. a block trade which is to be allocated). Advice of execution Re-sent previously sent advice Cancel previously sent advice of execution Instructing Executing party party Copy to third party Copy to third party 1.2. Securities markets - post trade / pre-settlement These messages are typically sent between a client (e.g. investment management institution) and a financial institution (e.g. broker / dealer) or service provider (e.g. electronic trade confirmation provider) to provide early information about a deal, to instruct the allocation of a block trade, to confirm the details of a trade, and to affirm the details of confirmed trade. MT 514 Trade order allocation - To instruct the allocation of a block trade. Each message can only contain one allocation. Settlement details are optional and can be provided where standing instructions do not apply, or are not available. Instruct allocation of block trade Request cancellation of previous allocation instruction Provide pre-allocation details linked to an order Instructing Re-send a previously sent allocation Executing party party Copy to third party Copy to third party 65
  • MT 515 Client confirmation of purchase or sale - To confirm the details of a purchase or sale. It is also used to provide details on the payment side of the transaction. Where legally accepted, this message serves as a binding electronic contract note. Confirm details of purchase or sale Request cancellation of previous client confirmation Re-send a previously sent confirmation Instructing Executing party party Copy to third party Copy to third party MT 517 Trade confirmation affirmation - To positively affirm the details of a previously received confirmation or contract note. The trade confirmation details that are affirmed bind the Sender and Receiver. Positive affirmation of previously received confirmation Instructing Executing party party Copy to third party Copy to third party 66
  • 1.3. Securities markets - clearing & settlement These messages are typically sent between a client (e.g. investment management institution) and a financial institution (e.g. Custodian) or service provider (e.g. Electronic Trade Confirmation Provider) to provide settlement instructions, and confirmations of settlement. MT 508 Intra-position advice - To confirm the increase or decrease in the number of securities of a certain status within a holding (e.g. movements from one sub-balance to another sub-balance within the same account). Intra-position advise Intra-position confirmation Request cancellation of previously sent advice Account Re-send a previously sent advice Account servicer owner Copy to third party Copy to third party MT 524 Intra-position instruction - To instruct the movement of securities within the holding (e.g. re-registration of securities from one sub-balance to another sub-balance). Instruct intra-position movement of securities Request cancellation of a previously sent instruction Re-send a previously sent instruction Account Account servicer owner Copy to third party Copy to third party 67
  • MT 540 Receive free instruction - To instruct the receipt of financial instruments, free of payment, from a specified party. Instruct receipt of securities 'free of payment' Pre-advice of a forthcoming instruction Request cancellation of previously sent instruction Account Re-send a previously sent instruction Account servicer owner Copy to third party Copy to third party MT 541 Receive against payment instruction - To instruct the receipt of financial instruments, against payment, from a specified party. Instruct receipt of securities 'against payment' Pre-advice of a forthcoming instruction Request cancellation of previously sent instruction Account Re-send a previously sent instruction Account servicer owner Copy to third party Copy to third party 68
  • MT 542 Deliver free instruction – To instruct a delivery of financial instruments, free of payment, to a specified party. Instruct delivery of securities 'free of payment' Pre-advice of a forthcoming instruction Request cancellation of previously sent instruction Account Re-send a previously sent instruction Account servicer owner Copy to third party Copy to third party MT 543 Delivery against payment instruction - To instruct a delivery of financial instruments, against payment, to a specified party. Instruct delivery of securities 'against payment' Pre-advice of a forthcoming instruction Request cancellation of previously sent instruction Account Re-send a previously sent instruction Account servicer owner Copy to third party Copy to third party 69
  • MT 544 Receive free confirmation - To confirm a receipt of financial instruments, free of payment, from a specified party. Confirm a receipt of securities 'free of payment' Pre-confirm a receipt of securities 'free of payment' Confirm partial settlement Account Request cancellation of previously sent instruction Account servicer owner Re-send a previously sent confirmation Copy to third party Copy to third party MT 545 Receive against payment confirmation - To confirm the receipt of financial instruments against payment from a specified party. Confirm a receipt of securities 'against payment' Pre-confirm a receipt of securities 'against payment' Confirm partial settlement Account Request cancellation of previously sent confirmation Account servicer owner Re-send a previously sent confirmation Copy to third party Copy to third party 70
  • MT 546 Deliver free confirmation - To confirm a delivery of financial instruments, free of payment, from a specified party. Confirm a delivery of securities 'free of payment' Pre-confirm a delivery of securities 'free of payment' Confirm partial settlement Account Request cancellation of previously sent confirmation Account servicer owner Re-send a previously sent confirmation Copy to third party Copy to third party MT 547 Deliver against payment confirmation - To confirm a delivery of financial instruments against payment to a specified party. Confirm a delivery of securities 'against payment' Pre-confirm a delivery of securities 'against payment' Confirm partial settlement Account Request cancellation of previously sent confirmation Account servicer owner Re-send a previously sent confirmation Copy to third party Copy to third party 71
  • MT 548 Settlement status and processing advice - To advise the status of a settlement instruction, or as a reply to a cancellation request previously sent by the Account Owner. Advise status of a previously received instruction Report on future settlement or forward transaction Request cancellation of previously sent advice Account Re-send a previously sent statement Account servicer owner Copy to third party Copy to third party MT 578 Settlement allegement - To advise the Account Owner that a Counterparty has alleged a settlement instruction against the Account Owner's account with the Account Servicer, and that the Account Servicer could not find the corresponding instruction from the Account Owner. Settlement allegement Request cancellation of a previously sent allegement Re-send a previously sent settlement allegement Account Account servicer owner Copy to third party Copy to third party 72
  • 1.4. Securities markets - custody services: securities reporting These messages are typically sent between a client (e.g. investment management institution) and a financial institution (e.g. custodian) to provide details of account activity and holdings. MT 535 Statement of holdings - To report on the quantity and identification of securities and other holdings which the Account Servicer holds for the Account Owner at a specified moment in time. Statement of holdings Request cancellation of previously sent statement Re-send a previously sent statement Account Account servicer owner Copy to third party Copy to third party MT 536 Statement of transactions - To provide the details of any increases and / or decreases of holdings, which may have occurred over a specified period of time, for all, or a selected quantity of securities in the requested safekeeping account which, the Account Servicer holds for the Account Owner. Statement of transactions Request cancellation of previously sent statement Re-send a previously sent statement Account Account servicer owner Copy to third party Copy to third party 73
  • MT 537 Statement of pending transactions - To provide the Account Owner with the details of pending increases and / or decreases in the quantity of holdings, at a specified moment in time. The message may contain details for all, or a selected quantity of securities for a specified safekeeping account. It may also give all, or a selected number of reasons why the transaction is pending. Statement of pending transactions Request cancellation of previously sent statement Re-send a previously sent statement Account Account servicer owner Copy to third party Copy to third party MT 538 Statement of intra-position advices - To provide the Account Owner with the details of any intra-position transfers (movement of securities within a holding) for a specified period of time, for all, or selected securities in a specified safekeeping account. Statement of intra-position advices Request cancellation of previously sent statement Re-send a previously sent statement Account Account servicer owner Copy to third party Copy to third party 74
  • MT 549 Request for statement / Status advice - To request a statement or status messages (e.g. MT 509, 535, 536, 537, 538, 575, 576, 584, 586, and 589). The request for a statement / status advice can be used as a query message to gather information for one account, at a given date or period of time. Request for statement/status advice Account Account servicer owner Copy to third party Copy to third party MT 575 Report of combined activity - To report on all securities and cash activity for a given combination of safekeeping and cash accounts. This message is intended to provide a summary of all cash and securities activity for a given safekeeping account linked to one (or multiple) cash accounts, or for a given cash account linked to multiple safekeeping accounts. Statement of combined activity Request cancellation of a previously sent statement Re-send a previously sent statement Account Account servicer owner Copy to third party Copy to third party 75
  • MT 576 Statement of open orders - To identify orders which have not yet been fully executed. Send a statement Request cancellation of previously sent statement Re-send of previously sent statement Instructing Executing party party Copy to third party Copy to third party MT 584 Statement of ETC pending trades - To identify transactions which have not yet been matched or affirmed. It provides details for all, or selected securities in all, or selected safekeeping accounts / sub-accounts, giving reasons why the transaction is pending. Client-side Market-side Statement of allocations Statement of not yet matched or confirmed trade confirmations Statement of trade confirmations not yet matched not yet affirmed Instructing Executing Trade party party counterparty Send a statement Electronic Send a statement trade Cancel a confirmation Cancel a previous statement service previous statement provider Copy to third party 76
  • MT 586 Statement of settlement allegements - To provide the details of pending settlement allegements, for all or selected securities in a specified safekeeping account. Statement of pending settlement allegements Re-send a previously sent statement Request cancellation of a previously sent statement Account Account servicer owner Copy to third party Copy to third party 1.5. Securities markets - custody services: corporate actions / entitlements These messages are typically sent between a client (e.g. investment management institution) and a financial institution (e.g. Custodian) to provide details of corporate actions affecting a particular account, and instructions on voluntary events. MT 564 Corporate action notification - To provide an Account Owner with the details of a corporate action event. It may include possible elections or choices available to the Account Owner. The MT 564 can initially be sent as a preliminary advice, and subsequently replaced by another MT 564 with complete or confirmed information. The message will also be used to provide the Account Owner with a calculation of the impact a corporate action event will have on a safekeeping or cash account. Preliminary notification Replace a previously sent notification Request cancellation of previous notification Withdrawal of offer or event Replace previously sent notification with entitlement Reminder of deadline Account Account servicer Re-send a previously sent notification owner Copy to third party 77
  • MT 565 Corporate action instruction - To provide the Account Servicer with instructions on how the Account Owner wishes to proceed with a corporate action event. Instructions include investment decisions regarding the exercise of rights issues, the election of stock, or cash, when the option is available, and decisions on the conversion or tendering of securities. Corporate action instruction Request cancellation of a previous instruction Replace previously sent instruction Re-send previously sent instruction Account Account servicer owner Copy to third party MT 566 Corporate action confirmation - To confirm to the Account Owner that securities and / or cash have been credited / debited to an account, as the result of a corporate action event. Corporate action confirmation Reverse a previously sent confirmation Re-send a previously sent confirmation Account Account Servicer owner Copy to third party 78
  • MT 567 Corporate action status & processing advice - To advise the status, or a change in status, of a corporate-action-related transaction previously instructed by, or executed on behalf of, the Account Owner. Advise status of corporate action Resend a previously sent confirmation advice Account Account servicer owner Copy to third party MT 568 Corporate action narrative - To provide complex instructions or narrative details relating to a corporate action event. Corporate action narrative Cancel a previously sent narrative Re-send a previously sent narrative Account Account servicer owner Copy to third party Copy to third party 79
  • 1.6. Securities markets - custody services: depositary receipts These messages are typically sent between the owners of depository receipts (e.g. investment management institution) and their Custodians, to instruct, confirm and report on the issuance or conversion of depository receipts. MT 587 Depositary receipt instruction - This message is sent by an owner of a depositary receipt to its custodian. It is used to instruct the issuance or release of a depositary receipt from / to ordinary shares, or to instruct the conversion from one type of depositary receipt to another. Depositary receipt instruction Request cancellation of previously sent instruction Re-send previously sent instruction Account Account Servicer Owner Copy to third party MT 588 Depositary receipt confirmation - This message is sent by a custodian to an owner of a depositary receipt. It is used to confirm the issuance or release of a depositary receipt from / to ordinary shares, or to confirm the conversion from one type of depositary receipt to another, and to provide details concerning cash movements associated with the processing of the depository receipt. Depositary receipt confirmation Request cancellation of previously sent confirmation Re-send previously sent confirmation Account Account Servicer Owner Copy to third party 80
  • MT 589 Depositary receipt status and processing advice - This message type is sent by a custodian to the owner of a depositary receipt. It is used to advise the status, or the change in status, of a depositary receipt transaction previously instructed by or executed on behalf of the Receiver. Depositary receipt status and processing advice Reply to request to cancel previously sent instruction Reply to request for status of transaction Account Re-send previously sent advice Account Servicer Owner Copy to third party 1.7. Securities markets - custody services: securities lending & borrowing Contrary to the previously described messages, the MT 516, MT 526, MT 581 and MT 582 are based on the ISO 7775 standard. These messages are typically sent between a client (e.g. investment management institution) and a financial institution (e.g. Custodian) to provide lists of securities available for lending, request the borrowing of a particular security, and confirm the details of a new securities loan. MT 516 Securities loan confirmation - This message is sent from one financial institution to another, both of which are involved in the lending of securities. It is used to confirm the details of a new securities loan, a partial recall of securities previously out on loan, a partial return of securities previously out on loan and the closeout of a securities loan. Confirm details of new loan Partial recall of securities on loan Partial return of securities on loan Lender Borrower Close-out a securities loan 81
  • MT 526 General securities lending / Borrowing message - This message type is sent from one financial institution to another, both of which are involved in the lending of securities. It is used to: - list specified securities available (or no longer available) for lending - request the borrowing of a specified security - notification of a partial or total return of the securities - request the potential lender to hold the specified securities until further notice - confirm that specified securities are being held - request a loan confirmation or cancel a request to hold securities until further notice List securities available / not available for loan Request the borrowing of a security Notification of partial / total return of securities Lender Borrower Request / confirm a hold on securities to be lent Request a confirmation of a loan Cancel a request to hold securities MT 581 Collateral adjustment message - This message is sent from one financial institution to another, both of which are involved in a transaction for which collateral has been provided (e.g. a securities loan). It is used to claim or notify an increase or decrease to the collateral amount resulting from a change in the value of the existing collateral amount relative to the securities on loan. Claim / notify change to collateral amount Lender Borrower 82
  • MT 582 Reimbursement claim or advice - This message is sent by a financial institution to another financial institution, both of which are involved in a securities transaction. It is used to claim reimbursement of funds paid by the Sender on behalf of the Receiver and / or securities received by the Receiver and which are due to the Sender. The message may also be used to advise the Receiver that funds and / or securities have been or will be remitted by the Sender in favour of the Receiver. Claim reimbursement of funds / securities Notification that funds / securities have / will be remitted Lender Borrower 1.8. Securities markets - custody services: collateral management These messages are typically sent between a collateral giver and a collateral taker to provide details of collateral instructions, claims, substitutions of specific securities used as collateral and reporting statements. MT 503 Collateral claim - This message is sent either by the collateral taker to the collateral giver, or vice versa by the collateral giver to the collateral taker. When sent by the taker, it is used to request new collateral at the initiation of an exposure, and / or request additional collateral. When sent by the giver, it is used to request the return of collateral, and / or recall the collateral upon the termination of an underlying exposure. Request new / additional collateral Request return or recall collateral Request cancellation of previously sent collateral claim Collateral Re-send previously sent collateral claim Collateral taker giver Copy to third party Copy to third party 83
  • MT 504 Collateral proposal - This message is sent by the collateral giver to the collateral taker to propose new collateral at the initiation of an exposure, and / or propose additional collateral at variation of exposure. Propose new / additional collateral Request cancellation of previously sent proposal Re-send previously sent proposal Collateral Collateral taker giver Copy to third party MT 505 Collateral substitution - This message is sent by the collateral giver to the collateral taker to propose the substitution of collateral held. This message is also sent by the collateral taker to the collateral giver to request the substitution of collateral held. Propose / request substitution of collateral Request cancellation of previously sent substitution Re-send previously sent substitution Collateral Collateral taker giver Copy to third party Copy to third party 84
  • MT 506 Collateral and exposure statement - This message is sent either by the collateral giver to the collateral taker, or by the collateral taker to the collateral giver. It is used to provide the details of the valuation of both the collateral and the exposure. Statement of collateral and exposure Request cancellation of previously sent statement Re-send previously sent statement Collateral Collateral taker giver Copy to third party Copy to third party MT 507 Collateral status and processing advice - This message is sent by the Receiver of a collateral claim, a collateral proposal or a proposal / request for collateral substitution. It is used to advise the status of the received message. It may also be used to: - reject or accept a claim, proposal, or the proposal / request of a collateral substitution - advise the settlement details of proposed collateral Advise status of collateral claim Reject / accept collateral claim, proposal or substitution Advise settlement details of proposed collateral Collateral Re-send previously sent status / advice Collateral taker giver Copy to third party Copy to third party 85
  • MT 527 Tri-party collateral instruction - This message is sent by a trading party to its tri-party agent as instruction to perform a specific action on a collateral management transaction. Instruction to perform action on collateral transaction Request cancellation of previously sent instruction Re-send previously sent instruction Collateral Tri -party taker or agent giver Copy to third party MT 558 Tri-party collateral status and processing advice - This message is sent by a tri-party agent after the receipt of a collateral instruction from its client. In this message, the Sender is the tri-party agent and the Receiver is either the collateral taker or the collateral giver. This message provides valuation results as well as the status of the collateral instruction and the status of the proposed collateral movements (cash and securities). Status of instruction and collateral movements Request cancellation of previously sent advice Re-send previously sent advice Collateral Tri -party taker or agent giver Copy to third party 86
  • MT 569 Tri-party collateral and exposure statement - This message is sent by a tri-party agent to both the collateral giver and the collateral taker to provide the details of the valuation of both the collateral and the exposure: - after all collateral movements have been affected to show the end (fixed) positions or, - after settlement but taking into account future collateral management instructions (forecasting the mark-to-market). Statement of fixed collateral positions Statement of forecasted mark-to-market positions Re-send previously sent statement Collateral Tri -party taker or agent giver Copy to third party 87
  • 2. SWIFTNet FIX The SWIFTNet FIX service is accessed via the Secure IP Network (SIPN) and the SWIFTNet messaging services and related products. The service supports secure and highly available communications using FIX versions 4.0, 4.1, 4.2, 4.3 and 4.4 over SWIFTNet. SWIFTNet FIX enables sell-side and buy-side firms connected to SWIFTNet to communicate their pre-trade and trade related information with their Trading Partners by means of a single, secure and reliable network connection, and with the use of a single FIX Session. The service has been designed to substantially reduce the costs and the risks associated with managing multiple physical connections and multiple FIX Sessions with separate counterparties. SWIFT’s single window approach to service delivery also enables other SWIFTNet Services to be accessed by means of the same single connection to SWIFTNet. Customers connecting to SWIFTNet for FIX will typically have their own order management system and FIX engine software to create FIX messages. In order to exchange messages over SWIFTNet, SWIFT supplies software called FIXConnector, which works in conjunction with the standard SWIFTNet messaging software – SWIFTNet Link (SNL) as illustrated below: Order management system (OMS) / FIX engine with direct connection SWIFTNet Buy side FIX HUB Sell side 1 OMS/FIX FIX engine server engine server Sell side 2 Fix connector FIX engine server Fix Connector Fix connector Fix connector FIX session 2 FIX session 1 SWIFTNet FIX session 3 SWIFTNet FIX allows users to exchange the full application (business) message set contained in the versions of the FIX protocol supported on the service. FIX protocol includes multiple application messages, but the main messages used are those detailed below (some of which are only available in later versions of FIX). 88
  • Although primarily used for equities transactions, with the advent of FIX 4.4, fixed income trading and trading in other asset classes (e.g. FX, derivatives) is also now supported. The flows shown in this section represent the main use of each message, and are just some of the messages available. For full details explaining the use of each message, please refer to documentation provided by FPL (FIX Protocol Ltd.). Message name Page Pre-trade 90 Indication of interest 90 Quote request 90 Quote 90 Trade 91 New order single or multi-leg 91 Execution report 91 Allocation 91 Allocation instruction 91 Allocation instruction acknowledgement 92 Allocation report 92 Allocation report acknowledgement 92 Confirmation 93 Confirmation 93 Confirmation acknowledgement 93 89
  • 2.1. SWIFTNet FIX: pre-trade Indication of interest Unsolicited list of offerings from the sell-side, sent from the executing party (e.g. broker / dealer) to the investment management institution (IMI). List of offerings from sell-side Cancel previously sent list Replace previously sent list Executing IMI party Quote request Unsolicited inquiry for bids wanted from the buy-side. Unsolicited; can also be used to identify an instrument based on attributes, learn a security identifier or to calculate size pre-trade. It is sent by the IMI to the executing party. Inquiry for bids wanted from the buy-side Executing IMI party Quote This is sent by the executing party back to the IMI in response to a Quote Request. Quote from sell-side Executing IMI party 90
  • 2.2. SWIFTNet FIX: trade New order single or multi-leg This can be sent unsolicited by the IMI to the executing party, or in response to a quote or firm offering. New order (single or multi-leg) Cancel previously sent order Replace previously sent order Executing IMI party Execution report This is sent by the executing party to the IMI immediately in response to new order and each time the state of the order changes. Acknowledgement of new order Notification of partial fills Notification of filled order Acknowledgement of cancelled order Executing IMI party 2.3. SWIFTNet FIX: allocation Allocation instruction This is sent by the IMI to the executing party, and follows up new order before or after the trade is filled. It is used to indicate how a trade is allocated into specific accounts. Instruction to allocate previously sent order across accounts Cancel previously sent instruction Replace previously sent instruction Executing IMI party 91
  • Allocation instruction acknowledgement This is sent by the executing party to the IMI to acknowledge receipt of the allocation instruction, but not yet accepted, or can report errors in the allocation instruction message. Acknowledge receipt of allocation instruction Report errors in allocation instruction Executing IMI party Allocation report This is sent by the executing party to the IMI to accept and confirm the allocation instruction, and conveys data for each sub-account (i.e. net money, accrued interest, etc.). Accept and confirm allocation instructions Cancel previously sent report Replace previously sent report Executing IMI party Allocation report acknowledgement This is sent by the IMI to the executing party to confirm the allocation report and its calculations or to reject the allocation report. Confirm allocation report Reject allocation report Executing IMI party 92
  • 2.4. SWIFTNet FIX: confirmation Confirmation This is sent by the executing party to the IMI to confirm the booking of a trade at the individual account level. Confirm booking of trade at account level Cancel previously sent confirm Replace previously sent confirm Executing IMI party Confirmation acknowledgement This is sent by the IMI to the executing party to affirm or reject the confirmation message. Affirm confirmation of allocation Reject previously sent affirm Executing IMI party 93
  • 3. SWIFTNet Funds The SWIFTNet Funds service enables users active in investment funds distribution to communicate with their counterparties using open, non- proprietary message standards in XML syntax that cover the bulk of their flows. These new XML based standards are recognised by industry leaders and market associations as the de-facto investment funds industry market standards and are part of the new ISO 20022 standard. SWIFT’s initial focus for the investment funds industry is in Europe and Asia / Pacific, where funds processing is largely manual with little, if any, standardisation. It also applies to cross-border flows with the US. SWIFTNet Funds allows for the creation of a common framework for the investment funds distribution industry to automate processing, in order to: - reduce operational costs and associated risks - seamlessly capture volume growth (thanks to minimised volume sensitivity) - improve client service (reduced error rates, improved timeliness of reporting, improved cut-off times for end-investors, etc.) This is a new service on SWIFTNet, which has resulted in the creation of new XML message standards. The majority of these messages are available in 2004, with the remainder becoming available in 2005 and 2006. 94
  • Phase’s A & B – Q4 2004 Orders and Confirmations: - Subscription - Bulk order - Subscription - Bulk order confirmation - Subscription - Bulk order cancellation instruction - Subscription - Multiple order - Subscription - Multiple order confirmation - Subscription - Multiple order cancellation instruction - Redemption - Bulk order - Redemption - Bulk order confirmation - Redemption - Bulk order cancellation instruction - Redemption - Multiple order - Redemption - Multiple confirmation - Redemption - Multiple cancellation instruction - Switch order - Switch order confirmation - Switch cancellation instruction - Order instruction status report - Order cancellation status report - Request for status report - Rejection of request for status report Reporting & custody: - Price report - Price report correction - Price report cancellation - Estimated cash flow report - Confirmed cash flow report - Detailed estimated cash flow report - Detailed confirmed cash flow report 95
  • Phase C – Q2 2005 Transfers - Transfer IN instruction - Transfer IN confirmation - Transfer IN cancellation Instruction - Transfer OUT instruction - Transfer OUT confirmation - Transfer OUT cancellation instruction - Status on transfers Reporting & custody: - Statement of holdings - Statement of executed transactions Phase D – 2005 / 2006 Account management: - Account opening - Account modification - Account confirmation Reporting: - Commissions reporting (trailer and transaction ) - Request for statements / Statuses - Statement of pending transactions - Static data reporting 96
  • Message Name Page Orders / switches & confirmations 98 Subscription – Bulk order 98 Subscription – Bulk order confirmation 98 Subscription – Bulk order cancellation 99 Subscription – Multiple order 99 Subscription – Multiple confirmation 100 Subscription – Multiple cancellation 100 Redemption – Bulk order 101 Redemption – Bulk order confirmation 101 Redemption – Bulk order cancellation 102 Redemption – Multiple order 102 Redemption – Multiple confirmation 103 Redemption – Multiple cancellation 103 Switch – order 104 Switch – confirmation 104 Switch – cancellation 105 Order instruction status report 105 Order cancellation status report 106 Request for status report 106 Rejection of request for status report 107 Reporting & custody: NAV / price reporting 107 Price report 107 Price report correction 108 Price report cancellation 108 Reporting & custody: cash flow reporting 109 Estimated cash flow report 109 Confirmed cash flow report 109 Detailed estimated cash flow report 110 Detailed confirmed cash flow report 110 Transfers 111 TBA – Phase C 111 Reporting & custody: account reporting 111 TBA – Phase C 111 Account management 111 TBA – Phase D 111 Reporting & custody: commissions reporting 111 TBA – Phase D 111 Reporting & custody: static data reporting 111 TBA – Phase D 111 Reporting & custody: account reporting 112 TBA – Phase D 112 Reporting & custody: corporate actions 112 TBA – Phase D 112 97
  • The flows shown in this section represent the main use of each message. Full details explaining the use of each message can be found in the SWIFTNet Funds service description. 3.1. SWIFTNet Funds – orders / switches & confirmations These messages are in Phase A of the modelling process, and are available from Q4 2004. Subscription - Bulk order A bulk message is typically a message containing a series of individual orders from different accounts, for the same financial instrument with the same intermediary details. The order will usually result in a single cash settlement executed via a single payment method. The order is used to subscribe to a given amount / quantity of a specified financial instrument. It is sent by a concentrator, or a party collecting orders and bulking them, to the transfer agent or another intermediary. Subscription – bulk order Re-send previously sent subscription Account Account servicer owner Copy to third party Subscription - Bulk order confirmation This message is sent by a transfer agent to an account owner or its authorised representative. It is used to confirm the details of the execution of a subscription bulk order instruction. Subscription – bulk order confirmation Re-send previously sent confirmation Account Account servicer owner Copy to third party 98
  • Subscription - Bulk order cancellation This message is sent by an account owner or its designated agent to an account servicer. It is sent to cancel a subscription bulk order instruction. Subscription – bulk order cancellation Re-send previously sent cancellation Account Account servicer owner Copy to third party Subscription – Multiple order A ‘multiple’ message is typically a message containing a list of orders (several ISINs) for the same account (different from bulk). Financial advisers or banks that are managing a portfolio for a particular account may send it. This message is sent by an account owner or its authorised representative to a transfer agent, or by an intermediary to another intermediary or transfer agent. It is used to instruct the transfer agent to subscribe to a given amount / quantity of a specified financial instrument. This message may be used for a single financial instrument or multiple financial instruments. Subscription – multiple order Re-send previously sent subscription Account Account servicer owner Copy to third party 99
  • Subscription - Multiple confirmation This message is sent by a transfer agent to an account owner or its authorised representative. It is used to confirm the details of the execution of a subscription (single or multiple order) instruction. A multiple order can be answered by more than one confirmation as the valuation cycle of the products indicated in the orders may be different. Subscription – multiple order confirmation Re-send previously sent confirmation Account Account servicer owner Copy to third party Subscription - Multiple cancellation This message is sent by an account owner or its designated agent to an account servicer. It is sent to cancel a single order subscription instruction. Subscription – multiple order cancellation Re-send previously sent cancellation Account Account servicer owner Copy to third party 100
  • Redemption – Bulk order A bulk message is typically a message containing a series of individual orders from different accounts, for the same financial instrument with the same intermediary details. The order will usually result in a single cash settlement executed via a single method. This order is used to redeem a given amount / quantity / % of the portfolio of a specified financial instrument. It is usually sent by a concentrator, or a party collecting orders and bulking them, to the transfer agent or another intermediary. Redemption – bulk order Re-send previously sent redemption Account Account servicer owner Copy to third party Redemption - Bulk order confirmation This message is sent by a transfer agent to an account owner or its authorized representative. It is used to confirm the details of the execution of a redemption bulk order instruction. Redemption – bulk order confirmation Re-send previously sent confirmation Account Account servicer owner Copy to third party 101
  • Redemption - Bulk order cancellation This message is sent by an account owner or its designated agent to an account servicer. It is sent to cancel a bulk order redemption instruction. Redemption – bulk order cancellation Re-send previously sent cancellation Account Account servicer owner Copy to third party Redemption - Multiple order A ‘multiple’ message is typically a message containing a list of orders (several ISINs) for the same account (different from bulk). Financial advisers or banks that are managing a portfolio for a particular account may send it. This message is sent by an account owner or its authorized representative to a transfer agent, or by an intermediary to another intermediary or transfer agent. It is used to instruct the transfer agent to redeem a given amount / quantity / % of the portfolio of a specified financial instrument. This message may be used for a single financial instrument or multiple financial instruments. Redemption – multiple order Re-send previously sent redemption Account Account servicer owner Copy to third party 102
  • Redemption - Multiple confirmation This message is sent by a transfer agent to an account owner or its authorised representative. It is used to confirm the details of the execution of a redemption (single or multiple order) instruction. A multiple order can be answered by more than one confirmation as the valuation cycle of the products indicated in the orders may be different. Redemption – multiple order confirmation Re-send previously sent confirmation Account Account servicer owner Copy to third party Redemption - Multiple cancellation This message is sent by an account owner or its designated agent to an account servicer. It is sent to cancel a single order subscription instruction. Redemption – multiple order cancellation Re-send previously sent cancellation Account Account servicer owner Copy to third party 103
  • Switch - Order This message is sent by an account owner or its authorized representative to a transfer agent, or by an intermediary to another intermediary or transfer agent. This message is used to instruct a switch from a given amount / quantity / % of the portfolio of a specified financial instrument to a given amount / quantity of a specified financial instrument. Switch order Re-send previously sent switch Account Account servicer owner Copy to third party Switch - Order confirmation This message is sent by a transfer agent to an account owner or its authorized representative, to confirm the details of the execution of a switch instruction. Switch order confirmation Re-send previously sent confirmation Account Account servicer owner Copy to third party 104
  • Switch - Cancellation This message is sent by an account owner or its designated agent to an account servicer, to cancel a switch order instruction. Switch order cancellation Re-send previously sent cancellation Account Account servicer owner Copy to third party Order instruction status report This message is sent by an executing party (intermediary or transfer agent). It informs the instructing party of the status of its order message, either its previous subscription or redemption multiple order, subscription or redemption bulk order or switch order. The status message can be used to indicate that an order is received and good for execution, suspended (plus the reason), or in repair (plus the reason). Status on order instruction Update on previously sent status on order Account Account servicer owner Copy to third party 105
  • Order cancellation status report This message is sent by an executing party to an instructing party. It informs the instructing party of the status of its order cancellation instruction message. Status on order cancellation Update on previously sent status on order cancellation Account Account servicer owner Copy to third party Request for status report This message is sent by an instructing party to an executing party. It is used to request the status of an order message or an order cancellation instruction message. Request for status of order or order cancellation Re-send previously sent request Account Account servicer owner Copy to third party 106
  • Rejection of request for status report This message is sent by the executing party to the instructing party. It is used to reject the request for status message. Reject request for status on order or order cancellation Update on previously sent rejection Account Account servicer owner Copy to third party 3.2. SWIFTNet Funds - reporting & custody: NAV / price reporting These messages are in Phase A of the modelling process, and are available from Q4 2004. Price report This message is sent by the fund accountant calculating the net asset value and other applicable investment fund prices, to the transfer agent and all other relevant parties (e.g. fund management company, market data providers, newspapers, etc.). This message can also be sent to a specified list of distributors / concentrators. It is used to provide price and net asset value information for a fund (or several funds) for a given date and optionally, to quote price variation information. Price and net asset value information Price variation information Fund Transfer accountant agent Copy to third party 107
  • Price report correction This message is sent by the fund accountant to the transfer agent or a market data provider or any other interested party. It is used to correct at least one of the prices for a financial instrument that was quoted in a previously sent price report message. The price information included in the previously sent price report message must be resent in the price report correction, with the relevant the new value. Correct price (s) from previously sent price report Fund Transfer accountant agent Copy to third party Price report cancellation This message is sent by the fund accountant to the transfer agent or a market data provider or any other interested party. It is used to cancel a previously sent price report message. Cancellation of previously sent price report Fund Transfer accountant agent Copy to third party 108
  • 3.3. SWIFTNet Funds - reporting & custody: cash flow reporting These messages are in Phase A of the modelling process, and are available from Q4 2004. Estimated cash flow report This message is sent by the transfer agent, or a designated agent of the fund, to an investment manager or any other interested party. It is used to provide an estimate of the incoming and outgoing cash per investment fund. The message reports the cash flow per financial instrument. The incoming and outgoing cash result from redemptions, subscriptions and switch transactions, including in-specie transactions. In this message, the price/s of the previous trade date is / are used for the forecast. Detailed confirmed report of incoming / outgoing cash Transfer IMI agent Copy to third party Confirmed cash flow report This message is sent by the transfer agent, or a designated agent of the fund, to an investment manager, fund accountant or any other interested party. It is used to provide a confirmed report of the incoming and outgoing cash per investment fund. The message reports the cash flow per financial instrument. The incoming and outgoing cash results from redemptions, subscriptions and switch transactions, including in-specie transactions. In this message, the price/s of the applicable trade date(s) is / are used for the report (main difference with the fund estimated cash flow report, which uses the previous trade date). Confirmed report of incoming / outgoing cash Transfer IMI agent Copy to third party 109
  • Detailed estimated cash flow report This message is sent by the transfer agent, or a designated agent of the fund, to an investment manager or any other interested party. It is used to provide an estimate of the incoming and outgoing cash flows per investment fund. The additional data provided in this message (compared to the Fund Estimated Cash Flow Report) includes the following sorting criteria: country, currency, institution, or user defined criteria. The message reports the cash flow per financial instrument. Detailed estimate of incoming / outgoing cash report Transfer IMI agent Copy to third party Detailed confirmed cash flow report This message is sent by the transfer agent, or a designated agent of the fund, to an investment manager or any other interested party. It is used to provide a confirmed report of the incoming and outgoing cash flows per investment fund. The additional data provided in this message (compared to the Fund Confirmed Cash Flow Report) includes the following sorting criteria: country, currency, institution, or user defined criteria. The message reports the cash flow per financial instrument. Detailed confirmed report of incoming / outgoing cash Transfer IMI agent Copy to third party 110
  • 3.4. SWIFTNet Funds - transfers The functions involving changes in the fund register due to a change of record keeper (with or without changing the beneficial owner). These messages are in Phase C of the modelling process, and are available from Q2 2005. 3.5. SWIFTNet Funds - reporting & custody: account reporting The functions involved in providing statements of executed transactions and holdings across an account. These messages are in Phase C of the modelling process, and are available from Q2 2005. 3.6. SWIFTNet Funds - account management The functions involved in instructing a new account to be opened, and any subsequent modification of an accounts details. These messages are in Phase D of the modelling process, and will be available in late 2005 / early 2006. 3.7. SWIFTNet Funds - reporting & custody: commissions reporting The functions involved in providing details of commissions (trailer or transaction related) to fund distributors. These messages are in Phase D of the modelling process, and will be available in late 2005 / early 2006. 3.8. SWIFTNet Funds - reporting & custody: static data reporting The functions involved in sending out notifications of key features and modifications of an investment fund prospectus. These messages are in Phase D of the modelling process, and will be available in late 2005 / early 2006. 111
  • 3.9. SWIFTNet Funds - reporting & custody: account reporting The functions involved in providing statements of pending transactions and requests for statements / statuses. These messages are in Phase D of the modelling process, and will be available in late 2005 / early 2006. 3.10. SWIFTNet Funds - reporting & custody: corporate actions For corporate actions and entitlement events surrounding investment funds, the MT 56x ISO 15022 corporate action messages on FIN can be used (refer to ISO 15022 messages in Section 1.5). Corporate action messages specifically for investment funds have not been designed in the new XML syntax. 112
  • 4. Payments & cash management This section contains details of the available Customer Payments (Category 1), Financial Institution Transfers (Category 2), and Cash Management & Customer Status (Category 9) messages. The flows shown in this section represent the main use of each message. Full details explaining the use of each message can be found in the SWIFT User Handbook. MT Message name Page Customer payments 115 101 Request for transfer 115 103 Single customer credit transfer 116 Financial institution transfers 116 200 Financial institution transfer for its own account 116 201 Multiple financial institution transfer for its own account 117 202 General financial institution transfer 117 203 Multiple general financial institution transfer 118 205 Financial institution transfer execution 118 210 Notice to receive 119 Cash management & customer status 119 900 Confirmation of debit 119 910 Confirmation of credit 120 920 Request message 120 935 Rate change advice 121 940 Customer statement message 121 941 Balance report 122 942 Interim transaction report 122 950 Statement message 123 114
  • 4.1. Customer payments Customer payments are made using the Category 1 messages. These deal with payments, or information about payments, in which the ordering party or the beneficiary, or both, are not financial institutions. MT 101 Request for transfer - This message is sent by a financial institution on behalf of a non-financial institution account owner (e.g. the ordering customer), to the account servicing financial institution. It is used to move funds from the ordering customer's account(s) serviced at the account servicing institution, or from an account(s) owned by the ordering customer whom the instructing customer has explicit authority to debit (e.g. a subsidiary account). The MT 101 can be used to order the movement of funds between ordering customer accounts, or in favour of a third party, either domestically or internationally. Request for transfer Account Financial servicer institution (on behalf of account owner) 115
  • MT 103 Single customer credit transfer - This message type is sent by or on behalf of the financial institution of the ordering customer, directly or through a correspondent(s), to the financial institution of the beneficiary customer. It is used to convey a funds transfer instruction in which the ordering customer, the beneficiary customer, or both, are non-financial institutions from the perspective of the Sender. Single customer credit transfer Financial Financial institution B institution A 4.2. Financial institution transfers Financial institution transfers are made using the Category 2 messages. These deal with payments, or information about payments, in which all parties in the transaction are financial institutions. The flows shown in this section represent the main use of each message. Full details explaining the use of each message can be found in the SWIFT User Handbook. MT 200 Financial institution transfer for its own account - This message is sent by an account owner to one of its account servicing institutions. It is used to request the movement of funds from an account that the Receiver services for the Sender to an account that the Sender has, in the same currency, with another financial institution. Request movement of funds Account Account servicer owner 116
  • MT 201 Multiple financial institution transfer for its own account - This multiple message is sent by an account owner to one of its account servicing institutions. It is used to request the movement of funds from an account that the Receiver services for the Sender to several accounts that the Sender has, in the same currency, with other financial institutions. Request movement of funds Account Account servicer owner MT 202 General financial institution transfer - This message is sent by or on behalf of the ordering institution directly, or through correspondent(s), to the financial institution of the beneficiary institution. It is used to order the movement of funds to the beneficiary institution. This message may also be sent to a financial institution servicing multiple accounts for the Sender to transfer funds between these accounts. In addition it can be sent to a financial institution to debit an account of the Sender, serviced by the Receiver, and to credit an account, owned by the Sender at a specified institution. Order the movement of funds Account Account servicer owner 117
  • MT 203 Multiple general financial institution transfer - This multiple message is sent by or on behalf of the ordering institution directly, or through correspondent(s), to the financial institution(s) of several beneficiary institutions. The message contains several transactions. It is used to order the movement of funds to each beneficiary institution. This message may also contain order(s) for the movement of the Sender's own funds in favour of itself. This is the case when the Receiver services multiple accounts for the Sender and the funds are to be transferred between these accounts. In addition, it can also be sent to a financial institution to debit an account of the Sender serviced by the Receiver and to credit an account owned by the Sender at a specified institution. Order the movement of funds Account Account servicer owner MT 205 Financial institution transfer execution - This message is sent by the Receiver of a category 2 transfer message (e.g. MT 200, 201, 202, 203 or 205), directly or through correspondent(s), to another financial institution located in the same country as the Sender. It is used to further transmit a funds transfer instruction domestically. Instruction to execute transfer Account Domestic servicer financial institution 118
  • MT 210 Notice to receive - This message type is sent by an account owner to one of its account servicing institutions. It is an advance notice to the account servicing institution that it will receive funds to be credited to the Sender's account. Advance notice to receive funds Account Account servicer owner 4.3. Cash management and customer status Cash management and customer status details are exchanged using the Category 9 messages. These messages are exchanged between financial institutions, either on behalf of themselves, other financial institutions, or customers. The flows shown in this section represent the main use of each message. Full details explaining the use of each message can be found in the SWIFT User Handbook. MT 900 Confirmation of debit - This message is sent by an account servicing institution to an account owner. It is used to notify the account owner of an entry which has been debited from its account. The entry will be further confirmed by statement. Notification of debit to account Account Account servicer owner 119
  • MT 910 Confirmation of credit - This message is sent by an account servicing institution to an account owner. It is used to notify the account owner of an entry which has been credited to its account. The entry will be further confirmed by statement. Notification of credit to account Account Account servicer owner MT 920 Request message - This multiple message is sent by an account owner, or financial institution (concentrating institution) acting on behalf of an account owner, to an account servicing institution. It is used to request the account servicing institution to transmit one or more MT 940 Customer Statement(s), MT 941 Balance Report(s), MT 942 Interim Transaction Report(s), or MT 950 Statement Message(s), containing the latest information available for the account(s) identified in the message. Request for MT 940 - 942, 950 Account Account servicer owner 120
  • MT 935 Rate change advice - This multiple message is used by the Sender to advise interest rate change(s) to the Receiver. Interest rate change(s) that can be advised by this message type include: Notice, Call, Prime, Commercial, Base, Current and Deposit. Advice of interest rate change(s) Account Account servicer owner MT 940 Customer statement message - This message is sent by an account servicing institution to a financial institution which has been authorised by the account owner to receive it. It is used to transmit detailed information about all entries booked to the account, and is commonly used for automated reconciliations. Statement of detailed entries booked to account Account Financial servicer institution (behalf of account owner) 121
  • MT 941 Balance report - This message is sent by an account servicing institution to a financial institution which has been authorised by the account owner to receive it. It is used to transmit balance information, reflecting the situation as at an identified time. Report of balance information on account Account Financial servicer institution (behalf of account owner) MT 942 Interim transaction report - This message is sent by an account servicing institution to a financial institution which has been authorised by the account owner to receive it. It is used to transmit detailed and / or summary information about entries debited or credited to the account since the last statement or balance report, or the last interim transaction report. Report of transaction information on account Account Financial servicer institution (behalf of account owner) 122
  • MT 950 Statement message - This message is sent by an account servicing institution to an account owner. It is used to transmit detailed information about all entries booked to an account, and is commonly used for automated reconciliations. Statement of detailed entries booked to account Account Account Servicer Owner 123
  • 5. Treasury markets: FX, money markets, FX options & derivatives SWIFT offers a range of standards that cover different treasury market segments: - Foreign exchange (FX) - Money markets - OTC derivatives Many of the treasury messages are specifically aimed at investment management institutions, allowing them to instruct and confirm FX and money market deals with broker / dealers and custodians. The flows shown in this section represent the main use of each message. Full details explaining the use of each message can be found in the SWIFT User Handbook. 124
  • MT Message name Page Foreign exchange 126 300 Foreign exchange confirmation 126 303 Forex / Currency option allocation instruction 126 304 Advice / Instruction of a third party deal 127 307 Advice / Instruction of a third party FX deal 127 308 Instruction for gross / Net settlement of third party FX deals 127 380 Foreign exchange order 128 381 Foreign exchange order confirmation 128 Money markets 129 320 Fixed loan / Deposit confirmation 129 321 Instruction to settle a third party loan / Deposit 129 330 Call / Notice loan / Deposit confirmation 130 350 Advice of loan / Deposit interest payment 130 OTC derivatives 131 303 Forex / Currency option allocation instruction 131 305 Foreign currency option confirmation 131 306 Foreign currency option confirmation 132 340 Forward rate agreement confirmation 132 341 Forward rate agreement settlement confirmation 133 360 Single currency interest rate derivative confirmation 133 361 Cross currency interest rate derivative confirmation 134 362 Interest rate swap reset / Advice of payment 134 364 Single currency interest rate derivative termination / Recouponing confirmation 135 365 Cross currency interest rate swap termination / Recouponing confirmation 135 125
  • 5.1. Foreign exchange (FX) MT 300 Foreign exchange confirmation - This message is exchanged by or on behalf of the institutions who have agreed to a foreign exchange contract. This message may also be sent by a money broker to the two parties for which the broker arranged the deal. The message is also used when confirming deals settling through CLS. The MT 300 is used to: - confirm the details of a new contract between the parties - confirm an exercised foreign currency option - confirm the details of an amendment to a previously sent confirmation - cancel a previously sent confirmation. Confirm details of a new contract Confirm an exercised foreign currency option Confirm an amendment to a previously sent confirmation Instructing Executing Cancel a previously sent confirmation party (or party (or CLS) CLS) MT 303 Forex / Currency option allocation instruction - This message is sent by an instructing party, such as an investment management institution (IMI), to an executing broker to instruct the allocation of either a block foreign exchange trade or a block currency option. It contains both the terms of the block trade and the individual allocations. Instruct the allocation of a deal Cancel / amend block trade and set of allocations Amend a number of individual allocations Instructing Executing party party 126
  • MT 304 Advice / Instruction of a third party deal - This message is sent by an IMI to a custodian bank (or CLS) as an advice of / instruction to settle a third party foreign exchange deal. It is also used for deals settling through CLS. Advice / instruction to settle third party FX deal Amend a previously sent advice / instruction Cancel a previously sent advice / instruction IMI Custodian (or CLS) MT 307 Advice / Instruction of a third party FX deal - This message is sent by an IMI to a custodian bank as an advice of / instruction to settle a third party foreign exchange deal. It is a newer, ISO 15022 version, of the MT 304 message. Advice of details of a new deal Instruction to settle a deal Cancel a previously sent advice / instruction IMI Custodian MT 308 Instruction for gross / Net settlement of third party FX deals - This message is sent by an IMI to a custodian (or CLS) just before value date, to inform which deals done on behalf of a third party are to be settled gross and which ones netted. The definition of third party must be agreed up front between the IMI and the custodian relative to deals executed by the custodian’s treasury area on behalf of the IMI. instruction for gross / net settlement of 3rd party FX deal Amend a previously sent advice / instruction Cancel a previously sent advice / instruction IMI Custodian (or CLS) 127
  • MT 380 Foreign exchange order - This message type is sent by an IMI to a custodian bank as an order to purchase or sell a specific amount of a certain currency. Order to buy / sell specific amount of foreign currency Copy an order sent by other means (e.g. fax) IMI Custodian Copy to third party MT 381 Foreign exchange order confirmation - This message type is sent by a custodian bank to an IMI to confirm the execution of an MT 380 previously sent by the fund manager. Confirm execution of foreign exchange order Cancel a previously sent confirmation Copy a confirmation sent by other means (e.g. fax) IMI Custodian Copy to third party 128
  • 5.2. Money markets MT 320 Fixed loan / Deposit confirmation - This message is exchanged to confirm a fixed term loan / deposit contract. This message is exchanged by or on behalf of the institutions who have agreed to a fixed term loan / deposit contract. A money broker may also send this message to the two parties for which he arranged the deal. Confirm / notify details of a contract Amend a previously agreed contract Cancel a previously sent confirmation Instructing Confirm / notify a rolled over / renewed contract Executing party party Confirm / notify the maturity of a contract MT 321 Instruction to settle a third party loan / Deposit - This message is sent by an IMI to the fund's custodian to advise the trade details and instruct the settlement of a fixed term loan / deposit done with a third party financial institution. Notify / instruct to settle a new contract Notify of a rollover / renovation of a contract Notify the maturity of a contract IMI Cancel a previously sent instruction Custodian 129
  • MT 330 Call / Notice loan / Deposit confirmation - This message is exchanged to confirm a call / notice loan / deposit contract. It is sent by or on behalf of the institutions that have agreed to a call / notice loan / deposit contract. Confirm / notify details of a contract Amend / cancel a previously agreed contract Increase / decrease in account balance of a contract Instructing Notify changes in interest rate / period of notice Executing party party Notify the closing of a contract (final redemption) MT 350 Advice of loan / Deposit interest payment - It is used to inform that an interest amount has been paid to the account of the beneficiary with the receiving agent mentioned in the message. It is sent by or on behalf of the institution who has borrowed cash from another institution. Notification of interest payment Amend a previously sent advice Cancel a previously sent advice Account Account servicer owner 130
  • 5.3 OTC derivatives MT 303 Forex / Currency option allocation instruction - This message is sent by an instructing party to an executing broker to instruct the allocation of either a block foreign exchange trade or a block currency option. The MT 303 contains both the terms of the block trade and the individual allocations. Instruct the allocation of a deal Cancel / amend block trade and set of allocations Amend a number of individual allocations Instructing Executing party party MT 305 Foreign currency option confirmation - This message is exchanged between the financial institutions that have agreed to a foreign currency option contract. It is used to confirm the details of a new contract, an amendment to a previously agreed contract, the cancellation of a confirmation, or the surrender of an option by the buyer (holder) to the seller (grantor) for compensation. Confirm details of a new contract Surrender of an option for compensation Confirm an amendment to a previously sent confirmation Instructing Cancel a previously sent confirmation Executing party party 131
  • MT 306 Foreign currency option confirmation - This message is exchanged by or on behalf of the institutions who have agreed to a foreign currency option contract. A money broker may also send this message to the two parties for which he arranged the deal. The confirmed transaction is covered by an ICOM, ISDA, Deutsche Rahmenvertrag, IFEMA, FEOMA or AFB Master Agreement. These agreements are either signed or under negotiation. The message also caters for deals not covered by the above agreements. The message is used to confirm / notify details of a new contract, an amendment to a previously agreed contract, the cancellation of a confirmation, a trigger event (e.g. knock-in / knock-out of an option, hitting of a trigger level) or the close out of an option. Confirm / notify details of a contract Amend a previously agreed contract Cancel a previously sent confirmation Instructing Trigger event: knock-in, knock-out, hitting trigger level Executing party party Close out an option MT 340 Forward rate agreement confirmation - This message is exchanged by or on behalf of the institutions or corporates, who have agreed to a forward rate agreement (FRA). The confirmed transaction is covered by an ISDA, Deutscher Rahmenvertrag für Finanztermingeschäfte, FRABBA or AFB Master Agreement. These agreements are either signed or under negotiation. A money broker may also send this message to the two parties for which he arranged the deal. The message is used to confirm / notify details of a new contract, an amendment to a previously agreed contract or the cancellation of a confirmation. Confirm / notify details of a new contract Amend a previously agreed contract Cancel a previously sent confirmation Instructing Executing party party 132
  • MT 341 Forward rate agreement settlement confirmation - This message is exchanged by or on behalf of the institutions that have agreed to a forward rate agreement (FRA). It is used to confirm the settlement details of the forward rate agreement when the settlement rate has been fixed on the fixing date. Confirm settlement details of a new contract Amend a previously agreed settlement message Cancel a previously sent settlement message Instructing Executing party party MT 360 Single currency interest rate derivative confirmation - This message is exchanged by or on behalf of the institutions that have agreed to a single currency interest rate swap, a cap, a collar or a floor. The confirmed transaction is covered by a BBAIRS, ISDA, Deutscher Rahmenvertrag für Finanztermingeschäfte or AFB Master Agreement. The message also covers deals which are not part of the above agreements, in which case, the two parties must have another bilateral agreement in place. It may also be sent by a money broker to the two parties for which the broker arranged the deal. It is used to confirm the details of a new transaction between the parties. Confirm details of a new transaction Amend a previously sent confirmation Cancel a previously sent confirmation Instructing Executing party party 133
  • MT 361 Cross currency interest rate swap confirmation - This message is exchanged by or on behalf of the institutions who have agreed to a cross currency interest rate swap covered by a BBAIRS, Deutscher Rahmenvertrag für Finanztermingeschäfte or an ISDA Master Agreement. The message also covers deals which are not part of the above agreements, in which case, the two parties must have another bilateral agreement in place, except under AFB Master (until the AFB defines the interbank confirmation for cross currency swaps, the MT 361 cannot be used to confirm such transactions). This message may also be sent by a money broker to the two parties for which the broker arranged the deal. The message is used to confirm the details of a new transaction between the parties. Confirm details of a new transaction Amend a previously sent confirmation Cancel a previously sent confirmation Instructing Executing party party MT 362 Interest rate reset / Advice of payment - This message is exchanged by or on behalf of the financial institutions who have agreed to a single or cross currency interest rate derivative transaction, including caps, collars and floors. This message may be used to advise the details of the determination of the floating interest rate(s), or advise the details of the payment of interest at the end of an interest period Advise details of the determination of floating rate interest Advise details of payment of interest at end of interest period Cancel / amend a previously sent reset / advice Instructing Executing party party 134
  • MT 364 Single currency interest rate derivative termination / Recouponing confirmation - This message is exchanged by or on behalf of the institutions who have agreed to the termination, partial termination or recouponing of a single currency interest rate swap, a cap, a collar or a floor. The terminated / recouponed transaction is covered by a BBAIRS, ISDA or AFB or another bilateral agreement. This message may be used to confirm the details of the partial or full termination of an existing transaction, or confirm the details of the recouponing of an existing transaction. Confirm details of partial / full termination of transaction Confirm details of recouponing of transaction Cancel / amend a previously sent termination / recouponing Instructing Executing party party MT 365 Cross currency interest rate swap termination / Recouponing confirmation - This message is exchanged by or on behalf of the institutions who have agreed to the termination, partial termination or recouponing of a cross currency interest rate swap. The terminated / recouponed transaction is covered by a BBAIRS, ISDA or another bilateral agreement. The message may be used to confirm the details of the partial or full termination of an existing transaction, or the details of the recouponing of an existing transaction. Confirm details of partial / full termination of transaction Confirm details of recouponing of transaction Cancel / amend a previously sent termination / recouponing Instructing Executing party party 135
  • 6. CLS third party service CLS Third party service For CLS to achieve a significant reduction in settlement exposure, they require a critical mass of settlement value. Therefore, CLS members need to settle trades not only between themselves, but also with non-CLS members (e.g. third parties). CLS members can offer services to third parties whereby they input and settle cross-currency trades on behalf of their third party customer with the CLS Bank. Likewise, third parties will need to communicate their cross-currency trades to their CLS settlement members. SWIFT provides a comprehensive solution to support this communication flow, using its existing messaging network. Who is eligible as a third party? - Financial institutions who are not CLS members - Any other SWIFT-eligible institution involved in cross-currency trading SWIFT’s standard service SWIFT delivers copies of cross-currency confirmations (such as the MT 300 message) sent between third parties and their counterparties, to the third parties’ chosen CLS Member. SWIFT’s enhanced service SWIFT provides the matching status to CLS members of their third parties’ MT 300 confirmation messages. By subscribing to Accord, third parties are also able to view the matching status of their confirmations to be settled by the CLS Bank. Operational information CLS members need to communicate with their third parties to provide operation information (status of the trade within the CLS Bank) and cash reporting (pre-funding and associated reporting) of trades. SWIFT provides messaging services for this operational information, including the MT9xx Cash Management messages, and the SWIFTNet Cash Reporting service. 136
  • CLS Third party service flows Third party Counterparty (MT 300) (MT 300) Operational information (using FIN and FIN standards) SWIFTNet MT 970 services MT 971 SWIFT MT 900 Copy of third party MT 901 MT 300 service MT 950 Cash reporting MT 396 M (using SWIFTNet MT 398 and XML standards) Transaction input Notifications M Matching result CLS member CLS bank Enhanced service 137
  • 7. SWIFTNet Accord Deal Confirmations: (MT300,305,320, 330,340, 341, 360,361,362, 392) SWIFTNet Accord SWIFTNet Accord subscribers SWIFT subscriber or non- subscriber Real-time, interactive reporting & exception Copies of MT 3xx handling confirmations SWIFTNet Accord Accord Confirmation matching and bilateral netting 7.1. Matching SWIFTNet Accord is a fail-safe matching and exception handling solution for foreign exchange, money market and derivatives confirmations. It provides real-time matching of confirmations, along with real-time exception handling, between two counterparties (even if only one of the counterparties is a SWIFTNet Accord subscriber). SWIFTNet Accord is unique in that it allows you to have a single window for all your treasury and derivative deals, independent of: - Settlement method: bilaterally-netted, gross, CLS or SwapClear - Financial instrument: SWIFTNet Accord matches confirmations for foreign exchange, money market and derivative deals - Counterparty: SWIFTNet Accord does not require your counterparties to be SWIFTNet Accord subscribers as well; it can handle all your confirmations sent and received over the SWIFT network. SWIFTNet Accord can also process messages that were not exchanged via the SWIFT network, such as affirmations of brokers. How does it work? When a foreign exchange, money market or derivatives deal has been agreed, both parties confirm this deal by sending the appropriate SWIFT confirmation message. If either or both parties are SWIFTNet Accord subscribers, SWIFT copies these messages to the central SWIFTNet Accord matching service. SWIFTNet Accord matches all confirmations in real-time. As confirmations, corrections and cancellations are received, SWIFTNet Accord automatically updates the matching status in real-time. 138
  • Reduce risk Reduction in operational risk is a key factor in the organisation of a foreign exchange, money market or derivatives back office. Increased regulatory scrutiny has also suggested not only that operational risk be measured, and kept to a minimum, but also that specific amounts of regulatory capital be put aside to mitigate it. SWIFTNet Accord subscribers significantly reduce operational risk through their reliance on a central matching system. SWIFTNet Accord safeguards all confirmations, and maintains a historical trace of all matching results. When both parties to a deal are subscribers to SWIFTNet Accord, there is 100% certainty that the matching results will be identical for both parties. Reduce cost By subscribing to SWIFTNet Accord rather than using a local matching system, investment management institutions can save on the resources normally required to keep a local matching system operational, maintain message standard changes, and provide the support it would require internally. A central matching solution also means that your usage of it is scalable between a few hundred confirmations per month and several thousand per day. 7.2. Netting The SWIFTNet Accord bilateral advisory netting service allows investment management institutions to net foreign exchange deals (MT300 messages). By not being restricted to any currency, or currency pair, SWIFTNet Accord enables users to reduce foreign exchange settlement risk where CLS cannot be used. Conducting multiple deals with a counterparty might carry a high level of exposure on your books at the end of each trading day. As trading activity grows, you may run the risk of equally increased capital adequacy requirements. Netting is a means by which such problems can be mitigated. Netting foreign exchange deals requires only one payment instruction per counterparty, for all deals in the same currency and with the same value date. This therefore reduces both nostro costs, and the costs associated with the workload in the foreign exchange back-office. Additionally, with a legally enforceable bilateral netting contract in place, investment management institutions can also benefit from reduced settlement and credit risk. If a netting process is not fully automated, operational costs and possible payment delays could erode profit margins. To fully benefit from netting, it is imperative that both counterparties receive identical information from a single, reliable source that is guaranteed. 139
  • By using SWIFTNet Accord netting service to net foreign exchange deals, investment management institutions benefit from: - End-to-end financial liability: you can net foreign exchange deals using a single supplier that takes financial responsibility for subsequent stages of the value chain. - Low-cost integration: instead of deploying and operating a dedicated solution for netted deals, you can benefit from utilising your existing foreign exchange back-office environment. 140
  • 8. SWIFTNet Cash Reporting Today, many financial institutions provide their customers with real-time information on account balances and transactions. This information, however, is limited to accounts and transactions that are administered and processed by the servicing institution. Real-time today nostro EUR nostro USD Investment Financial management institution institution nostro JPY End to end with real-time nostro With access to real-time nostro account information this limitation is removed. A financial institution can provide true end-to-end information in real-time to its customers for transactions as they are posted to nostro accounts in remote locations. This gives the customer a consolidated and instantaneous view of its positions in all currencies. Benefits to investment management institutions For investment management institutions (IMIs), the benefits are threefold: - Liquidity management – Real-time provision of information relating to incoming and outgoing funds enhances the ability of an IMI to manage its intraday liquidity position. - Reconciliation – Continuous and instantaneous information enables early identification and resolution of exceptions. - Risk management – By integrating positions from multiple business areas, across multiple currencies, it is possible to present a complete overview of exposure in real-time. 142
  • 9. File transfer capabilities SWIFTNet FileAct supports the exchange of files between two customers within a closed user group (CUG). Transferred files may be in either a free format or a structured format. The structured format may be either a proprietary-defined format or a SWIFT-defined format. SWIFTNet FileAct features - support for any type of file content and for the file to be of a size up to 250 Mbytes - concurrent file transfers and cancelling a file transfer that is in progress - assurance of the data authenticity and integrity - confidentiality of data during file transfers - delivery notification that confirms the file receipt by a receiver - support for non-repudiation of file transfers SWIFTNet file transfer modes Send (i.e.: put) a file: requestor (initiates file transfer) wants to send a file and requests responder to be ready to receive the file. When this request is accepted, the file is transferred from requestor to responder. Retrieve (i.e.: get) a file: Requestor (initiates file transfer) wants to retrieve a file and requests responder to send a file. When the request is accepted, the file is transferred from responder to requestor. File SNL SWIFTNet SNL put request FileAct put File Responder Requestor File Delivery notification (optional) File SNL SWIFTNet SNL get request FileAct get File Responder Requestor File Delivery notification (optional) 144
  • 10. New initiatives SWIFT are continually working with the securities industry to bring new products and services to our existing, as well as potentially new users. SWIFT’s latest initiative for our securities users, is around market data providers. 10.1. Market data provider initiative Many financial institutions currently subscribe to multiple Market Data Provider corporate action services, all of which are provided in a proprietary format, over proprietary communications. In consultation with the SWIFT community, SWIFT created an opportunity for Market Data Providers to take part in a pilot programme that enables them to send Corporate Action information in the industry standard ISO 15022 format, using SWIFTNet FileAct as the cost-effective mechanism for communication. During the pilot, SWIFT also analysed the benefit of providers being able to distribute other securities-related information, such as Intra-day and Official Closing Prices, as well as reference data. The successful outcome of this pilot programme, which ran from late 2003 through to mid-2004, saw the creation of a new category of SWIFT user in June 2004, thereby allowing Market Data Providers to join the SWIFT network. 146
  • Further information To obtain further information about SWIFT or on any of the SWIFT services and products please contact your SWIFT representative. Alternatively visit SWIFT’s web site at www.swift.com where you can find detailed overviews of SWIFTSolutions under the Products & Services tab. SWIFT offices worldwide Headquarters - Belgium Hong Kong Spain Avenue Adèle 1 31/F, One International Edificio Cuzco IV B-1310 La Hulpe Finance Centre Paseo de la Castellana Tel: +32 2 655 31 11 1 Harbour View Street 141, 22A Central 28046 Madrid Hong Kong Tel: +34 91 425 1300 Australia Tel: +852 2107 8700 Level 29 The Chifley Tower Switzerland 2 Chifley Square Italy S.W.I.F.T. Switzerland Sydney, NSW 2000 Corso G. Matteotti, 10 GmbH Tel: +61 2 93 75 2201 20121 Milano Freigutstrasse 20 Tel: +39 02 7742 5000 8002 Zurich Tel: +41 43 344 3490 China Unit 1106-7 Japan Corporate Square 2nd floor - AIG Building United Kingdom No. 35 Financial Street 1-3 Marunouchi 1-chome 7th floor, The Corn Xicheng District, Beijing Chiyoda-ku, Tokyo 100 Exchange 100032 Tel: +81 3 5223 7400 55 Mark Lane Tel: +86 10 8809 3400 London EC3R 7NE Tel: +44 20 7762 2000 Singapore France Unit 16-02, 80 Robinson 6th Floor, 4 rue Auber Road United States of America 75009 Paris Singapore 068898 200 Park Avenue Tel: +33 1 53 43 23 00 Tel: +65 6347 8000 38th Floor New York, NY 10166 Tel: +1 212 455 18 00 Germany South Africa 20th Floor, City-Haus I S.W.I.F.T. SA (Pty) Ltd Friedrich-Ebert-Anlage 2- Building II (B Block) 14 101 Central Street 60325 Frankfurt am Main Houghton 2194, Gauteng Tel: +49 69 7541 2200 Tel: +2711 483 4512
  • www.swift.com Copyright © S.W.I.F.T. SCRL (“SWIFT”) 2005 All rights reserved. Reproduction is however authorised with acknowledgement of the source, reference and date of publication, and all notices set out here. This publication is supplied for information purposes only, and shall not be binding nor shall it be construed as constituting any obligation, representation or warranty on the part of SWIFT. SWIFT, S.W.I.F.T., the SWIFT logo, Sibos, SWIFTNet, SWIFTAlliance, SWIFTStandards, SWIFTReady and Accord are trademarks of S.W.I.F.T. SCRL. Other SWIFT-derived product and service names, such as but not limited to SWIFTSolutions and SWIFTSupport, are tradenames of S.W.I.F.T. SCRL. SWIFT is the trading name of S.W.I.F.T. SCRL. Patent pending: SWIFTNet. All photographs in SWIFT brochures feature SWIFT employees, customers or business partners. 51146-APR05