introduction to swift

FIRMA Conference

Introduction to SWIFT

Dennis GoodenoughSenior Business Manager, SWIFT

18 April 2011

Agenda

• Overview– History– Governance– Membership– Organization– Oversight– Products– Figures– Standards

• Securities

• Payments and cash management

• Q & A

Introduction to SWIFT - FIRMA - 18 April 2011 2

SWIFT history

1973SWIFT

founded

FirstOperating Centre

opens

1976

1977SWIFTgoesLive

First Sibos

1978

1979North

America

Asia

1980

1986Value-Added

services

Securities

1987SWIFTNet live

2001

2004SWIFTNetmigrationcomplete

1996Volumes

exceed 3M messages/

day

1970s 1990s1980s 2000+

First corporates join SWIFT

1996


SWIFT - Governance

National Bank of Belgium and G-10 Central Banks

Oversight

GovernanceBoard

Board committees

National member groups

National user groups

SWIFT members

SWIFT community

4Introduction to SWIFT - FIRMA - 18 April 2011

Oversight: Co-operating central banks from the G-10 countries

• Bank of Canada

• Deutsche Bundesbank

• European Central Bank

• Banque de France

• Banca d' Italia

• Bank of Japan

• De Nederlandsche Bank

• Sveriges Riksbank

• Swiss National Bank

• Bank of England

• The Federal Reserve System (USA), represented by the Federal Reserve Bank of New York and the Board of Governors of the Federal Reserve System

Lead overseer: National Bank of Belgium


SWIFT - User categories

SWIFTCommunity

Non-Supervised Entitiesactive in

the financial industry

Supervised Financial

Institutions

Closed User

Groups/Corporates


SWIFT – A customer-centric user community

Banks

IMI's

Corporates

InsuranceCompanies

Payments MI's

GovernmentInstitutions

Trustees

Broker-Dealers

Payment Systems

Clearing & SettlementSystems

Depositories

Stock Exchanges Securities MI’s

Customer


• Eligible shareholders:– Banks– Broker/dealers– Investment Management Institutions

• Non-shareholding member – threshold of five shares

• Upon joining, the organisation can buy one share or opt out until the next re-allocation of shares

SWIFT – Members (shareholders)


Countries’ organisation

• National Member Groups– All SWIFT shareholders within same country– Advisory role for membership matters: local admission criteria

and new users– Nominate Directors who are then appointed by the

shareholders

• National User Groups– All SWIFT users within same nation– Advisory role for operational and technical matters


SWIFT – Board of Directors

Board of Directors

Audit& FinanceCommittee

Human Resources Committee

StandardsCommittee

Securities Steering

Committee

Banking & Payments Committee

Technology and

production Committee

Community input


Oversight

• SAS 70 report

• Self assessment of performance against the overseers’ High Level Expectations for SWIFT


Data Protection

• Data Privacy Working Group– SWIFT group

– 12 experts in data privacy from EU, US, Australia, Canada

– Review policies

• Contractual Policies – Commitment to the confidentiality and protection of users data

– Data retrieval policy, Personal Data Protection Policy

– Available on swift.com

– Audited

– SAS70


Data Retrieval Policy

• Principles – Traffic data: limited usage permitted, for billing, pricing,

market and service analysis– Message data: strictly confidential, usage and disclosure

must be permitted by customers or required for problem investigation

• Exceptions– Collective request: request of message data by, for example,

a market infrastructure, for statistical purpose– Mandatory request: legally enforceable request by a judicial,

administrative, governmental or other competent authority


Secure, reliable and resilient platform

Platform – the SWIFT product stack

Directories&

Informationservices

Secure IP Network (SIPN)

Interfaces

Messaging services

StandardsRules

SWIFT Solutions

TestingServices

& ProfSvcs

Payments Treasury Securities Trade


SWIFT in figures


SWIFT in figures (January 2011 YTD)

• > 4.0 billion messages per year• 9,693 customers• 210 countries and territories• ~ 2,000 employees• Average daily traffic 17.2 million messages• Peak day of 18.9 million messages – 1 March 2011

• Note: SWIFT does not ‘own’ the data contained in messages it transports


SWIFT standards

• SWIFT sets standards because a common language for international financial transactions:– Improves automation– Ensures human understanding of the data– Reduces errors– Helps save costs

• SWIFT message standards are recognised by the International Organisation for Standardisation (ISO)

• SWIFT works with the financial community to coordinate standards convergence worldwide and avoid unnecessary duplication


FIN message categories

• Category 1 – Customer Payments & Cheques (16 messages)

• Category 2 – Financial Institution Transfers (16 messages)

• Category 3 – Treasury Markets – Foreign Exchange, Money Markets & Derivatives (26 messages)

• Category 4 – Collections & Cash Letters (18 messages)

• Category 5 – Securities (67 messages)

• Category 6 – Treasury Markets – Metals & Syndications (19 messages)

• Category 7 – Documentary Credits & Guarantees (29 messages)

• Category 8 – Travellers Cheques (11 messages)

• Category 9 – Cash Management & Customer Status (21 messages)

• Category 0 – Service and System Messages (66 messages)

4 ISO

15022

53 ISO

15022

18Name of Presentation – Confidentiality: External

Payments, Cash and Trade (111 messages)

Securities, FX and Derivatives (112 messages)- including 57 ISO 15022 messages

Service & System Messages (66)

Payments, Cash, Trade and Cards

StandardsThe current and future message landscape

Name of Presentation – Confidentiality: External 19

Securities, FX and Derivatives


Securities, FX and Derivatives (160 messages)

287 completed messages


Securities, FX and Derivatives (173 messages)

> 300 messages in progress

346 live messages

ISO 20022 messages


• Payments and Cash Management– Account Management

• Change/Verify Account Identification (3)• Bank Account Management (15)

– Payments Initiation• Initiation (4)• Mandate (4)• Creditor Payment Activation Request (2)

– Payment Clearing and Settlement (6)– Cash Management

• Bank-to-Customer Cash Management (3)• Notification to Receive and Account Reporting Request (4)• Exceptions and Investigations (17)

• Trade – Trade Services Initiation

• Invoice Financing Request (3)• Financial Invoice (1)

– Trade Services Management (50)

• Cards and Related Retail Financial Transactions– Acceptor to Acquirer Card Transactions (15)


• Settlement & Reconciliation (29)• Corporate Actions (13)• Investment Funds

– Securities Trade (30) and Settlement (16)– Reference Data (3) and Acct Mgmt (5)– Securities Management (7)– Cash Management (6)– Funds Processing Passport (2)

• Other Securities– Securities Transaction Regulatory Reporting (4)– Proxy Voting (8)– Issuers’ Agents Communication (22)

• Foreign exchange and OTC Derivatives– Non-Deliverable Forwards (7)– Currency Options (4)– Generic (4)

127 messages 160 messages



ISO 20022: The standards community

• Registration Management Group, RMG– Overall governance, court of appeal

– Approve business justifications for new standards

– Create Standard Evaluation Groups (SEGs)

• Standards Evaluation Groups, SEGs– Represent future users in specific financial areas

– Validate candidate message standards

• Registration Authority, RA– Ensure compliance with the standard

– Maintain and publish ISO 20022 Repository

• Technical Support Group, TSG– Assist RMG, SEGs, RA and submitting organizations

68 financial professionals

from 21 countries and 12

liaison organizations


ISO 20022 messages


• Payments and Cash Management– Account Management

• Change/Verify Account Identification (3)• Bank Account Management (15)

– Payments Initiation• Initiation (4)• Mandate (4)• Creditor Payment Activation Request (2)

– Payment Clearing and Settlement (6)

– Cash Management • Bank-to-Customer Cash Management (3)• Notification to Receive and Account Reporting Request (4)• Exceptions and Investigations (17)

• Trade – Trade Services Initiation

• Invoice Financing Request (3)• Financial Invoice (1)

– Trade Services Management (50)

• Cards and Related Retail Financial Transactions– Acceptor to Acquirer Card Transactions (15)


• Settlement & Reconciliation (29)• Corporate Actions (13)• Investment Funds

– Securities Trade (30) and Settlement (16)– Reference Data (3) and Acct Mgmt (5)– Securities Management (7)– Cash Management (6)– Funds Processing Passport (2)

• Other Securities– Securities Transaction Regulatory Reporting (4)– Proxy Voting (8)– Issuers’ Agents Communication (22)

• Foreign exchange and OTC Derivatives– Non-Deliverable Forwards (7)– Currency Options (4)– Generic (4)

127 messages 160 messages



Introduction to SWIFT - FIRMA - 18 April 2011

SWIFT in Securities

23

Securities standards on FIN (MTs)

• There are 67 category 5 securities messages, covering the following business areas:– Pre-Trade / Trade (trade initiation and confirmation)– Settlement & Reconciliation (settlement instructions,

confirmations and statements)– Corporate actions (asset servicing)– Securities lending and borrowing– Collateral

• Securities industry players also widely use payments, cash management (categories 1 and 2) and foreign exchange messages (category 3)


Securities settlement – a typical scenario

Investment manager

Brokerdealer

Client 1= 300 shares

Custodian

MT 541 Receive Against Payment

CSD

MT 543 Deliver Against Payment

MT 541 Receive Against PaymentMATCH

PEFIGB22 BDAPGBPP

GLOBGB22 CRSTGB22

MT 514 Allocation (1) 300

MT 515 Confirmation (1) 300

MT 502 block Order

MT 513 Advice of Execution

MT 509 Status (optional, to DK)


Broker a/cCustodian a/c

$$$$

Investment manager

Brokerdealer


Custodian


CSD



PEFIGB22 BDAPGBPP

GLOBGB22 CRSTGB22MT 545 Confirmation Receipt

MT 544 Confirmation Delivery

Shares



MT 502 block Order


MT 509 Status (optional, to DK)



Custodian a/cClient 1 a/c

Shares$$$$

+-

Broker a/c

Investment manager

Brokerdealer


Custodian


CSD



PEFIGB22 BDAPGBPP

GLOBGB22 CRSTGB22MT 545 Confirmation Receipt

MT 544 Confirmation Delivery

$$$$

Shares

MT 545 Confirmation Receipt

5a5b

6

7

8a

8a9



MT 502 block Order


1

2

3

4



Trade matching

on Accord

MT 3xx messages

FX & currency options

Loans and deposits

+ 450 customers

Independent of counterparty

OTC derivatives

Acc

ord

for

Tre

asur

y

OTC Equity & Fixed Income Transactions

Community driven

Live since May 2009

For Prime & Executing Brokers and Custodians

Acc

ord

for

Sec

uriti

es

NEW

Accord for Securities – Prime/Executing BrokerSolution for hedge fund transactions

Hedge Fund Executing Broker

Prime Broker

Daily Trade report

1. Automated pre-matching,

4. Settlement OK

MT515

MT515

MT 998

MT 998

Custodian

Custodian

Agent AgentCSD (PSET)

2. Real time status updates + exception handling on GUI + full

reporting in MT 998

2. Real time status updates + exception handling on GUI + full

reporting in MT 998

3 . PSET agents’ local code is x-ref to a BIC

in Accord

Accord

FAIL!Introduction to SWIFT - FIRMA - 18 April 2011 31

Accord for TreasurySingle-slide overview

Accord Subscribers (>475 in 70 countries) • Banks• Brokers • Custodians• Fund mgrs • Corporates(strong growth)

Accordsubscriber ornon- subscriber

• Real-time reporting & exception handling• Integration available for various Back-Office Systems

DealConfirmations:

(MT 300,305,306,320, 330,340,341,360,

361,362,392, MT 600)

Accord• Real-time Confirmation Matching Service • Availability of >99.97% last 5 years• >90K msgs/hour observed matching capacity• Common matching rules + user-defined rules• Financial Liability for Matching results

Copies ofconfirmations

Copies of non-SWIFT data: fax, e-mail, e-FX portals, Broker feeds, Reuters, etc.

SWIFT

FX, FX Options, Money markets,OTC Derivatives,

Commodities



SWIFT in Payments and Cash Management

Common Payments Messages

• MT 103 Scope– 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 or the beneficiary customer, or both, are non-financial institutions from the perspective of the sender.

• MT 202 Scope– 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.


Payments and cash management processes

Customer-to-Bank Bank-to-CustomerInterbank

Customer Credit TransferInitiation

Payment Status Report

Customer Direct DebitInitiation

I N I T I A T I O N

C L E A R I N G&

S E T T L E M E N T

A C C O U N T R E P O R T I N G

B2C Account Report

B2C DebitCreditNotification

B2C Account Statement

A C C O U N T R E P O R T I N G

B2C Account Report

B2C DebitCreditNotification

B2C Account Statement


Payment Payment InitiationInitiation

High level message flow (Wire transfers)

SETTLEMENTSETTLEMENT

Originator Beneficiary

SWIFT MESSAGINGSWIFT MESSAGING

Fed

IBK # 1 Community Bank IBK # 2 Beneficiary’s Bank

Settlement path can change based on information exchanged using SWIFT messages


Mr. JonesLondo

n

Mr. UedaTokyo

Bank ALondon

Bank DTokyo

Bank BNew York

Bank CNew York

Pay $1000

It’s only 03:00 ET!

It’s 22:01!

103

09:00 CET

103 09:00 ET

It’s only 03:00ET!

Here it’s 16:00

103

Mr. JonesLondo

n

Mr. UedaTokyo

Bank ALondon

Bank DTokyo

Bank BNew York

Bank CNew York

Pay $1000

Cover payments – Timing aspects

103

09:01 ET

202

09:00 CET

09:00 CET

202 09:00 ET

910

09:01 ET


Mr. JonesLondo

n

Mr. UedaTokyo

Bank ALondon

Bank DTokyo

Bank BNew York

Bank CNew York

Pay $1000

Charges $20

Charges $15

Charges $10

103

$1000

Mr. Ueda

$955

103$980

103

$965

No customer charges

Charges $10

103

$1000

Mr. Ueda$99

0

No customer charges

Mr. JonesLondo

n

Mr. UedaTokyo

Bank ALondon

Bank DTokyo

Bank BNew York

Bank CNew York

Pay $1000

Cover payments – Cost aspect

202

$1000

202 $1000

910

$1000


Q&A

?Introduction to SWIFT - FIRMA - 18 April 2011 39

Thank you


introduction to swift

Documents

swift firma

swift introduction

swift user categories

swift board of directorsboard

firma conferenceintroduction

eligible shareholders

nationadvisory role

countryadvisory role