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A Single Protocol for Clearing and Settlement

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A Single Protocol for Clearing and Settlement

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    1. AECSD_20051005 John Falk Securities Market Infrastructures SWIFT A Single Protocol for Clearing and Settlement

    2. AECSD_20051005 Recommendations, Barriers or Regulations What is meant by a Single Protocol for Clearing and Settlement?

    3. AECSD_20051005 Recommendations, Barriers or Regulations 2001 CPSS-IOSCO Recommendation 16: “Securities Settlement Systems should use or accommodate relevant international communication procedures & standards…” 2003 G30, Recommendation 2 “Harmonise message standards & communication protocols” 2003 Giovannini, Barrier 1 “Define EU wide protocol to eliminate national differences in IT & interfaces used by Clearing & Settlement providers” 2004 ESCB-CESR, Standard 16 (draft) “Entities providing securities clearing and settlement services, and participants in their systems should use or accommodate relevant international communication procedures and messaging and reference data standards………” Other recommendations Creating a strengthened, interoperable global network Eliminate paper and automate communication, data capture and enrichment Develop and implement reference data standards Automate and standardize asset servicing processes Mitigating risk Ensure effective business continuity and disaster recovery planning Improving governance Promote fair access to securities clearing and settlement networks Other recommendations Creating a strengthened, interoperable global network Eliminate paper and automate communication, data capture and enrichment Develop and implement reference data standards Automate and standardize asset servicing processes Mitigating risk Ensure effective business continuity and disaster recovery planning Improving governance Promote fair access to securities clearing and settlement networks

    4. AECSD_20051005 G30 Global Clearing and Settlement: A Plan of Action - Recommendation 2 Harmonise messaging standards & communication protocols “All market participants should adopt ISO15022 as the global standard for straight-through securities messaging across the entire securities life cycle” “XML should become the language to describe standardised messages” “Market participants should support and use communication networks that adopt open, standardised, IP-based protocols for securities transactions”

    5. AECSD_20051005 SWIFT meeting the challenge Present and future Communication network SWIFTNet (IP based service) Market Practice Standards worldwide Securities Market Practice Group (SMPG) Data Standards ISO15022 SWIFT ISO XML Standards UNIFI (ISO20022 - Standards convergence)

    6. AECSD_20051005 UNIFI (ISO 20022) Overview of existing initiatives Why do we need standards convergence? There are numerous message development initiatives addressing financial information flows, driven from both inside and outside the financial industry itself. This trend is unavoidable and is not likely to change over time, with different constituencies facing different standardization challenges and priorities. The inner circle shows the « de jure » international standards setters, which are leading the global standardisation, such as ISO and UN/CEFACT, and guide the industry towards the standard use of methodologies and tools, such as XML (W3C) or UML (OMG). They are directly responsible for global standards convergence. Why do we need standards convergence? There are numerous message development initiatives addressing financial information flows, driven from both inside and outside the financial industry itself. This trend is unavoidable and is not likely to change over time, with different constituencies facing different standardization challenges and priorities. The inner circle shows the « de jure » international standards setters, which are leading the global standardisation, such as ISO and UN/CEFACT, and guide the industry towards the standard use of methodologies and tools, such as XML (W3C) or UML (OMG). They are directly responsible for global standards convergence.

    7. AECSD_20051005 A Single Protocol for Clearing and Settlement What is being proposed?

    8. AECSD_20051005 Protocol framework Proposed recommendation Original framework has network and messaging/interfaces as separate layers. Advisory group believes that this is an unnecessary complication and it is sufficient to discuss about the data later and the transfer layer, i.e. the mechanism for moving the data. The transfer layer obviously contains both network and messaging/interface elements.Original framework has network and messaging/interfaces as separate layers. Advisory group believes that this is an unnecessary complication and it is sufficient to discuss about the data later and the transfer layer, i.e. the mechanism for moving the data. The transfer layer obviously contains both network and messaging/interface elements.

    9. AECSD_20051005 Protocol scope - Proposed Short term scope is clearing and settlement space plus asset servicing for Equities, Fixed Income, Listed Funds and potentially Exchange Traded Derivatives Long term scope for a single protocol is the entire lifecycle for all tradable instruments It is also useful to note that the final recommendation is likely to include domestic as well as cross border clearing and settlementShort term scope is clearing and settlement space plus asset servicing for Equities, Fixed Income, Listed Funds and potentially Exchange Traded Derivatives Long term scope for a single protocol is the entire lifecycle for all tradable instruments It is also useful to note that the final recommendation is likely to include domestic as well as cross border clearing and settlement

    10. AECSD_20051005 Focus on the Data Layer: How far from common data standards are we? This represents the results of a survey of CSD’s in 2003/2004. At that point, the EU only comprised 15 States so the survey was of 15 CSD’s plus the 2 ICSD’s. The results represent the answers provided by 12 of the 17 organisations surveyed. Whilst use of common standards is more prevalent in the cross border environment than in the domestic environment, it is still apparent that we are a long way from a harmonised approach. Since this survey, the EU has been enlarged by the inclusion of the 10 Accession states. It is unikely that this extension of the EU will have contributed to improving the situation. A further review will be conducted in 2005 to identify the current positionThis represents the results of a survey of CSD’s in 2003/2004. At that point, the EU only comprised 15 States so the survey was of 15 CSD’s plus the 2 ICSD’s. The results represent the answers provided by 12 of the 17 organisations surveyed. Whilst use of common standards is more prevalent in the cross border environment than in the domestic environment, it is still apparent that we are a long way from a harmonised approach. Since this survey, the EU has been enlarged by the inclusion of the 10 Accession states. It is unikely that this extension of the EU will have contributed to improving the situation. A further review will be conducted in 2005 to identify the current position

    11. AECSD_20051005 Common Data Standards - AECSD

    12. AECSD_20051005 Securities Market Infrastructures on SWIFT

    13. AECSD_20051005 Communicating with Securities Market Infrastructures using SWIFT

    14. AECSD_20051005

    15. AECSD_20051005 John Falk Securities Market Infrastructures SWIFT A Single Protocol for Clearing and Settlement?

    16. AECSD_20051005 Securities Market Infrastructures - FIN

    17. AECSD_20051005 Communicating with Securities Market Infrastructures using SWIFT

    18. AECSD_20051005 Proposed protocol: Still to do… Present draft recommendation: 17 October 2005 – SMPG 18 October 2005 – SWIFT Board 24 October 2005 – CESAME monitoring group Pre-publication of protocol for industry consultation October 2005 Close of consultation January 2006 Expected final publication March 2006

    19. AECSD_20051005 What Can and Does SWIFT bring to the Securities Markets? Standards Security, Reliability and Risk Resilience Co-Operation Services Provides VALUE to the whole market SWIFT has done it before

    20. AECSD_20051005 Other G30 Recommendations Creating a strengthened, interoperable global network Eliminate paper and automate communication, data capture and enrichment Develop and implement reference data standards Automate and standardize asset servicing processes Mitigating risk Ensure effective business continuity and disaster recovery planning Improving governance Promote fair access to securities clearing and settlement networks

    21. AECSD_20051005 SWIFTStandards This slide shows the evolution of the relationship between SWIFTStandards messages and the ISO message schemes. SWIFT started by defining its own series of messages in « traditional » FIN syntax. Several of them were thereafter contributed to ISO The first securities messages, implemented on the network in 1984, were the result of a joint SWIFT-ISO development: it gave birth to an ISO (7775) standard using the traditional SWIFT FIN syntax. ISO 15022 can be considered as a first step towards a more formal and business-centric message development approach using a unique and unambiguous list of business elements listed in a central Data Field Dictionary. With UNIFI, SWIFT will use the same methodology for all new developments whichever the market, aiming to a progressive cross-market convergence, at the pace of the community. This slide shows the evolution of the relationship between SWIFTStandards messages and the ISO message schemes. SWIFT started by defining its own series of messages in « traditional » FIN syntax. Several of them were thereafter contributed to ISO The first securities messages, implemented on the network in 1984, were the result of a joint SWIFT-ISO development: it gave birth to an ISO (7775) standard using the traditional SWIFT FIN syntax. ISO 15022 can be considered as a first step towards a more formal and business-centric message development approach using a unique and unambiguous list of business elements listed in a central Data Field Dictionary. With UNIFI, SWIFT will use the same methodology for all new developments whichever the market, aiming to a progressive cross-market convergence, at the pace of the community.

    22. AECSD_20051005 Communicating with Securities Market Infrastructures using SWIFT

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