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Coexistence FAQ

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Coexistence FAQ

  1. 1. CoexistenceFrequently Asked QuestionsDecember 2011Legal NoticesCopyrightCopyright © S.W.I.F.T. SCRL (“SWIFT”), Avenue Adèle 1, B-1310 La Hulpe, Belgium, 2011. All rightsreserved.The recipient is, however, authorised to copy or reproduce this document within its own organisation asmay be reasonably necessary for the purpose for which it is supplied. Any such copy or reproduction mustinclude all notices set out on this page.DisclaimerSWIFT supplies this publication for information purposes only. The information in this publication maychange from time to time.ConfidentialityThis document may contain proprietary and/or confidential information of SWIFT and/or its suppliers. Therecipient should not disclose this document or the information it contains to third parties without the priorwritten consent of SWIFT.TrademarksSWIFT, S.W.I.F.T., the SWIFT logo, Sibos and SWIFT-derived product and service names - such as butnot limited to SWIFTNet, SWIFTAlliance and SWIFTStandards - are trademarks of S.W.I.F.T. SCRL.SWIFT is the trading name of S.W.I.F.T. SCRL.All other product or company names that may be mentioned in this document are trademarks or registeredtrademarks of their respective owners. Coexistence - Frequently Asked Questions December 2011 - Page 1
  2. 2. Q1: What is coexistence?Coexistence means that more than one message syntax is used at the same time as another in thecommunication flow of a same business process. At SWIFT, when we talk about Coexistence, we areusually referring to the coexistence of MT (including ISO15022) and MX/ISO 20022 messages.Q2: How has coexistence come about?Coexistence is not new; it has always existed. Financial institutions around the world have always had todeal with different customers in different markets, and so manage multiple standards (for exampleproprietary/domestic, ISO, MT, FpML, TWIST and FIX).Q3: What are the main benefits of ISO 20022?ISO 20022 is a common methodology to develop message standards for use between financialinstitutions, market infrastructures and customers. One of the key elements of the ISO 20022 valueproposition is its Business Model, a central dictionary that allows financial services terms to be definedconsistently across messages covering the various financial business processes. The methodology istargeted to all organisations involved in the development of financial messages, whichever syntax is usedto represent the message elements. The common dictionary ensures easy mapping from one syntax toanother, and simplifies the processing of business applications. It also provides a master reference formapping with other non ISO 20022 compliant standards (not just external standards but also internalproprietary formats), thereby facilitating interoperability and convergence.Q4: Why not migrate everything to ISO 20022?Although the ISO 20022 standard offers some benefits when compared to other standards, in many casesthese are not sufficient on their own to outweigh the migration cost. Migration to ISO 20022 thereforeneeds to be looked at on a case by case basis.Q5: What has the community recommended SWIFT do?Feedback from our community has made it clear that there is no single response that is appropriate for allmarkets and business scenarios. SWIFT works with those members of the community affected by eachcoexistence scenario to determine the best way forward. In some cases – where there is a clear businesscase that is recognized by the market - this may lead to a managed migration from MT to MX with adefined end date, with SWIFT providing dedicated tools and services to assist with the implementation ofMX. To date, the only business area where this has been deemed appropriate is Investment Funds, wherethe deadline for migration from MT to MX has been set for 2015.Q6: What business areas use ISO 20022 today?Market infrastructures are the main driver of adoption in all three regions of the world.In the Payments world, the initial push came in 2007 when TARGET2 went live using ISO 20022 for cashmanagement. Since then European Banks have joined SEPA, where ISO 20022 messages are therecommended format for all cross-border transactions. The momentum continues as we see a growingnumber of initiatives in countries such as Japan, Switzerland, Canada and Australia to abandon domesticstandards in favour of ISO 20022.The Securities world has also clearly started to adopt ISO 20022. TARGET2-Securities (T2S) will be usingISO 20022 when they go live, and have also been involved in the creation of new standards to completesome gaps. The adoption of ISO 20022 in the securities space is extending beyond Europe to Asia andthe US. JASDEC has concrete plans to offer ISO 20022 in addition to their proprietary standard in a short-term, and DTCC is live using ISO 20022 for corporate actions.Another clear indication of the success of the new standard is that, for the first time, many standardisationbodies are working together towards a common goal that will enable ISO 20022 to become a global cross-syntax standard. Coexistence - Frequently Asked Questions December 2011 - Page 2
  3. 3. Q7: Will ISO 15022 be removed?ISO 15022 will only be removed from the SWIFT network when there is a clear business case to do so,that is supported by the SWIFT community. There are no fixed removal dates for ISO 15022 and anydates will be agreed in consultation with the industry.Q8: What is SWIFT doing to support ISO 20022?SWIFT has developed 259 messages in ISO 20022, in close collaboration with their customers and insome cases, jointly with other standardisation bodies.At ISO level, SWIFT operates the Registration Authority (RA) for ISO 20022 and is an active member ofthe governing body for the ISO 20022 standard, the Registration Management Group (RMG). SWIFT alsoparticipates, on behalf of its community, in the Standards Evaluation Groups (SEG) that are responsiblefor reviewing new messages and maintenance requests from a business perspective.In addition, SWIFT has just completed a comprehensive overhaul of the content of the ISO 20022Business Model, in close cooperation with the community. This model(http://www.iso20022.org/FIBIM.page) was published at the end of November; it will facilitate end-to-endintegration of internal business processes and reduce the cost of message implementation.Q9: What is SWIFT doing to create awareness and promote ISO 20022?SWIFT actively promotes the ISO 20022 standard at events such as Standards Forum at Sibos and in theregions (Paris Dec 7 2011), Middle East Regional Conference (27-28 March 2012 in Abu Dhabi), London(May 2012), African Regional Conference (May 2012), Quebec (June 2012), Osaka (Sibos 2012). Theregional conferences offer interested parties an opportunity to learn more about ISO 20022 (e.g. througheducation sessions) as well as to listen or take part in panel discussions around relevant issues (e.g. LEI,impact of regulation on adoption of ISO 20022).SWIFT publishes case studies and articles both for internal (e.g. swift.com), and external publication (e.g.the ISO 20022 RMG newsletter). SWIFT also creates videos and presentations to promote ISO 20022(e.g. the ISO 20022 for Dummies has been published as an introduction to ISO 20022).Q10: What are MX-, subsets, variants?An MX- is a MX message that has been restricted in some way, often through agreed upon MarketPractices, usually to make interoperability more straightforward and implementation less costly. The termsof subsets or variants are more commonly used that MX-, with the same meaning.To illustrate the value of subsets, the Settlement and Reconciliation (S&R) and the Corporate Actions (CA)reverse-engineering projects are very helpful. To facilitate the coexistence of MT and MX in these areas,we have restricted the maximum field length of the reference field in the MX messages to the same lengthas the equivalent field in the MT5xx series. Same restriction has been applied to character sets. The goalis to ensure that data can be converted without loss between MX and MT. It is these ISO 15022 subsetsthat we plan to provision on SWIFTNet, to ensure that users have an easier upgrade path, whether theyopt to translate to and from MT, or integrate MX directly with their applications.MX- can be implemented in many flexible ways depending on the community’s needs (e.g. SEPAimplementation guidelines, T2S subsets). Each implementation creates different types of opportunities,and it is important to choose the right one, depending on the specific requirements of the coexistencescenario. SWIFT Standards can provide advice and guidance in this matter.Q11: What is SWIFT recommending/doing to support ISO 15022 communities that wish to remainwith ISO 15022 and will need to interoperate with ISO 20022 users?Our recommendation is that communities should migrate to ISO 20022 as and when there is a businessneed to do so. There are a number of things we are doing to support the coexistence of the MT and MXStandards: Coexistence - Frequently Asked Questions December 2011 - Page 3
  4. 4.  For ISO 20022 CA messages and S&R messages, SWIFT has created compliant subsets of the ISO 20022 messages that are fully interoperable with their MT equivalents (see also Q10). In other areas, like high-value payments, we will publish MX implementation guidelines to accommodate the restrictions of the MT messages for players active in the cross-border space. The maintenance of the two standards is completely aligned, time wise and content wise (see Q12).. In some cases, a change to an ISO 20022 message can be accommodated in the ISO 15022 world using a workaround that does not change the ISO 15022 definition. The joint working group attempts to do this where practical, to minimise the impact on ISO 15022 users. SWIFT offers several tools to support coexistence. SWIFT Standards has created and published references to facilitate the creation of executable translation rules and the Standards Developer Kit is available to support message implementation. We are also developing MyStandards, a web based tool that will facilitate the management and analysis of different protocols and market practices (Clearstream is one of our pilots). SWIFT also offers consultancy services to help entities that are considering a migration from a proprietary or ISO 15022 standard to ISO 20022.Q12: Do changes in ISO 20022 impact ISO 15022?Changes to ISO 20022 messages are always approved by the relevant ISO 20022 SEG.These changes will only impact ISO 15022 if they are also approved by the SWIFT community, followingthe normal maintenance process. However, in order to facilitate the coexistence of the two standards, itmakes sense that decisions around changes are agreed for the two Standards at the same time. That iswhy a joint maintenance working group (the ISO 20022 SEG and the MT Maintenance Working Groups)meet at the same time to discuss potential changes.Q13: T2S is adopting ISO 20022. What impact? To whom?The adoption of ISO 20022 by T2S will impact anyone that wants to use the T2S service when it goes live(currently planned for 2015). To ease the message implementation for their community, T2S will take asimilar approach to SWIFT (see Q10) and deliver subsets of ISO 20022 messages, restricted to the T2Sservice requirements. This aims at reducing the impact of the coexistence between T2S users on ISO20022 and the ISO 15022 (non-T2S) users.Q14: What is the balance between flexibility to support new initiatives and maintenance of legacy?Where two standards are expected to coexist for a long time, we make efforts to ensure that thecoexistence is manageable; in the most extreme case guaranteeing full compatibility between old and new- see the reverse engineering example explored above (Q10). However, ultimately, if ISO 20022 is todeliver real value it needs to diverge from the legacy standard it replaces. The challenge is to ensure thatearly adopters can make full use of the new standard, while continuing to interoperate with users on MT orlegacy standards.One way is to define market-specific subsets of the MX message. Some are fully backward compatiblewith the legacy standard; others break this compatibility to enable the use of new features. MX users canthen target their use of the standard according to the capabilities of their counterparts. The MyStandardsinitiative allows these subsets to be defined, shared and compared, to enable just this kind of two-speedapproach.Another angle on the question is to consider how to cater for highly market-specific requirements, withoutbreaking backward compatibility with legacy standards or existing implementations. It is the case with T2Sas explained earlier (see Q13) by reusing the ISO 15022 subset. It can also be done with the ISO 20022extension mechanism that allows MX messages to include local or market-specific information withoutchanging the base definition. In the case of DTCC, MX Corporate Actions messages include DTCC-specific information in extensions, which means that the compatibility between the base MX andequivalent MT is preserved for users in other markets. Coexistence - Frequently Asked Questions December 2011 - Page 4
  5. 5. Q15: How can extensions help STP?Extensions facilitate STP, because extensions are better than having the information in (unpublished) freeformat fields in the core message.Next to that, ISO 20022 allows the registration of extensions. This fosters reuse of extension componentsand ensures all extensions are designed in a uniform way.But there is more. Usage of extensions is always decided by the user community, even after registrationby the ISO 20022 Registration Authority. So, if a user receives an ISO20022 Message that contains anunexpected extension, it can ignore that extension and only process the core part of the message.SWIFTNet InterAct goes one step further by enforcing this. Users can define what the allowed extensions(if any) are for a given Closed User Group (CUG). SWIFT will reject any messages that use otherextensions.The DTCC for example, has set up a CUG that supports 7 extension messages for the ISO 20022Corporate Action messages. If in that CUG, a Corporate Action message uses another extensionmessage, that message would be rejected. Coexistence - Frequently Asked Questions December 2011 - Page 5

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