securities initiatives work session

Securities Initiatives A view from 35,000 feet

Malene McMahon

Fabian Banchiero

3 March 2015

SWIFT’s common shared infrastructure for

the securities industry

SWIFT Business Forum New York - 3 March 2015 2

FIN MT Traffic 2014

SWIFT Business Forum New York - 3 March 2015

Securities Business Areas YTD

2013 YTD

2014 growth

contribution

to growth

Settlement Status (MT548) 2,487,760 2,914,608 17.2% 19%

Reconciliation (MT535, 536, 537,…) 1,997,459 2,338,833 17.1% 15%

Settlement Instructions (MT540-543, 580) 1,800,195 2,020,417 12.2% 10%

Settlement Confirmations (MT644-547, 572) 1,489,873 1,668,600 12.0% 8%

Foreign exchange (MT300, 304, 380, 381) 944,208 968,443 2.6% 1%

Corporate Actions (MT564-568) 457,446 553,183 20.9% 4%

Trading (MT502, 513-519) 217,214 232,290 6.9% 1%

Settlement Allegement (MT578) 175,748 215,993 22.9% 2%

FIN 2014 Growth = 11% Securities Traffic Growth = 15%

3

Focus for today’s session


Latin America

Market

Infrastructures

(eg, DTCC)

Corporate

Actions

(ISO 20022)

Collateral

Management

4


Collateral Management

Commercial

banks Repo

Central banks

Reserve

management

Open-market

operations Repo, SecLending

Collateral

CCP Margin Margin

Corporate

treasurers

Repo,

SecLending

Repo

Margin

Margin (quad-party)

Investment

banks

Commercial

banks

Buy-Side

Agent/ Custodians

The new collateral landscape


Solutions

Messages

Processes Upstream

(Margining & negotiation)

Downstream

(Settlement &

Reconciliation)

Bilateral

Collateral Management

(MXs and MTs)

Tri-Party

Collateral

Management

(MTs)

Settlement &

Reconciliation

(MTs)

Margin Call

colr.003

Cancellation

colr.005

Dispute

colr.009

Substitution

colr.010

Interest pmnt colr.013

Claim MT503

Proposal MT504

Substitution MT505

Statement MT506

Status MT507

Collateral inx MT527

Status & advice MT558

Exposure MT569

Settlement MT54X

MT53X

Cash inx MT202

MT9XX

SWIFT offering

7 SWIFT Business Forum New York - 3 March 2015 7

Some SWIFT collateral ‘facts’

Tri party

messages:

+25% MX

messages:

Ramp up in

2014

17 Clearing

Members

willing to use

MX

4 CCPs ready

to offer MX

messages

(80% of

addressable

market)

14.2 % of

S&R traffic is

collateral

related

10 times

more margin

calls due to

regulations

Need for

automation

Need for

Standards

Need for

monitoring

390 BICs

sending/rec

tri party

4 BICs

connected to

MX

messaging


DTCC’s Margin Transit Utility

Acadiasoft

(Margining and

matching of agreed

margin calls)

Collateral

Processing Utility

(CPU) at DTCC

Matched margin calls

(Pledge accepted)

Broker/Dealer Investment Manager

Custodian

or

(I)CSD

MT 202/210

MT 900/910

MT 540/2

MT 544/6

C

a

s

h

S

e

c

u

r

i

t

i

e

s

Up

str

ea

m

Pro

ce

sses

Do

wn

str

ea

m

Pro

ce

sses

Broker/Dealer

MT 548

MT 940/942/950

MT 535

Fund Admin

MT 202/210

MT 900/910

MT 540/2

MT 544/6

C

a

s

h

S

e

c

u

r

i

t

i

e

s

MT 548

MT 940/942/950

MT 535


Initiation of

underlying deal

Margin Call

Initiation Deal

Closing

Collateral

Negotiation

Dispute

Notification

Collateral

Substitution Reporting

Interest

Processing

Collateral Management Process

Bilateral messages

Margin Call Collateral Proposal Dispute Substitution Reconciliation Interest Processing

Margin Call

Request

Margin Call

Response

Collateral Proposal

Collateral Proposal

Response

Margin Call

Dispute

Notification

Collateral Substitution

Request


Response


Confirmation

Collateral

Valuation

Report

Interest Payment

Request

Interest Payment

Response

Interest Payment

Statement

SWIFT Messages

Generic messages : Collateral Management Cancellation Request, Collateral Management Cancellation Status


Matching &

Collateralisation

Status

Initiation of

underlying deal

Margin Call

Initiation &

Status

Deal

Closing

Exposure and

Collateral

Mark-To-

Markets

Reporting Claim

Return

Collateral Management Process

Tri party messages

Margin Call &

Status

MTM & Collateral

Valuation

Status update Reporting Claim

MT527:

Tri party Collateral

Instruction

MT569:

Tri party Collateral and

Exposure Statement

MT558:


Status Advice

MT569:


and Exposure

Statement

MT527:


Instruction

MT558:


Status Advice

SWIFT Messages

• Life-cycle of a Tri party transaction: From matching to settlement

• Complies with Regulatory requirements (US Fed)

• Provides real time instruction, status and collateral position reporting

• Implemented by more than 150 institutions globally, facilitates single-window approach through

Standards and SWIFT Network


12

Corporate Actions (ISO 20022 and DTCC)


© DTCC DTCC Non-Confidential (White)

CA Transformation – Project Milestones / Timeline

2

Phase 2 (2011 – 2012) – ALL ANNOUNCEMENTS ISO 20022 client adoption is voluntary until CCF files are retired after 12/31/15

CA Web browser displays announcements for all event types – Distributions, Redemptions and Reorganizations

ISO 20022 • Only Distributions event types

• Cash/Stock Dividend • Principal & Interest

• Processing lifecycle for entitlements, instructions (first time ever), allocations & adjustments

CA Web – New Browser • User migration to new browser in June

2014, introduce new Distributions browser features

• Retire PTS / PBS Functions BOOK, DUEB, TAXI in Oct 2014; SDAR (D), DIVA, DAWN, DPAL, EDS, PIAR, ADJI in Q1 2015

Phase 3 (2012 – 2015) Distributions Lifecycle

ISO 20022 • Adding Redemptions event types

• Full/Partial Call • Maturity

• Processing lifecycle for entitlements, allocations, adjustments + lottery events

CA Web – New Browser • Mandated conversion to new browser in

2016 • Introduce new browser features for

redemption events • Retire redemptions PTS / PBS functions

(components of RIPS, SDAR and ADJI)

Phase 4 (2014 – 2016) Redemptions Lifecycle

ISO 20022 • Adding Reorganizations event types

• Voluntary (Tender, etc.) • Mandatory (Merger / Exchange)

• Processing lifecycle for entitlements, instructions, allocations & adjustments

CA Web – New Browser • Mandated conversion to new browser • Introduce new browser features for

reorganization events • Retire reorg PTS / PBS functions

Phase 5 (2016 – 2017) Reorganization Lifecycle

Phase 1 (2010) – Introduce New Data Model (DTCC internal system update)

Corporate Actions Transformation ISO 20022 and CA Web

Ongoing effort – Onboard to ISO 20022 and retire CCF files (retire announcement files by 12/31/15)

DTCC Non-Confidential (WHITE)

DTCC Non-Confidential (WHITE)

DTCC ISO 20022 Message Inventory (SR 2014)

MX Identifier ISO 20022 Message Names Extension (SD)

Short Equivalent Equivalent DTCC Processes

(2014 version) Name ISO 15022

seev.031.002.05 CA Notification supl.001.001.05 CANO MT 564 Announcements

seev.039.002.05 CA Cancellation Advice supl.006.001.04 CACN MT 564 Announcement Cancellations

seev.031.002.05 CA Notification with Eligible Balance supl.007.001.03 CANO-E MT 564 Record Date Entitlements

seev.035.002.05 CA Movement Preliminary Advice supl.009.001.02 CAPA MT 564 Projected Payments

seev.044.002.05 CA Movement Preliminary Advice Cancellation

Advice n/a CAPC MT 564 NEW

seev.036.002.05 CA Movement Confirmation supl.011.001.02 CACO MT 566 Allocations / Payments

seev.037.002.05 CA Movement Reversal Advice supl.025.001.01 CARE MT 566 NEW

seev.032.002.04 CA Event Processing Status Advice supl.010.001.02 CAPS MT 567 Unallocated Positions

seev.033.002.05 CA Instruction supl.008.001.02 CAIN MT 565 Instructions / Elections

seev.034.002.05 CA Instruction Status Advice n/a CAIS MT 567 Instruction Reply

seev.040.002.05 CA Instruction Cancellation Request n/a CAIC MT 565 Instruction Withdrawal

seev.041.002.04 CA Instruction Cancellation Request Status Advice n/a CACS MT 567 Withdrawal Reply

seev.042.002.04 Corporate Actions Instruction Statement Report n/a CAST n/a NEW

seev.001.001.04 Meeting Notification n/a MNOT MT 564* Announcements (AC 80)

seev.002.001.04 Meeting Cancellation n/a MCAN MT 564* Announcements (AC 80)

Cancellations

*Limited. Not backwards compatible

14

ISO 20022 Message Availability

ISO 20022 Message Group Distributions Redemptions Reorganization

Announcements* In Production

(Nov 2011) In Production

(Nov 2011) In Production

(Nov 2011)

Entitlements & Allocations In Production

(Feb 2013) Q3 2015

Target: 2016 - 2017

Instructions Available in Test since Nov 2013

N/A Target:

2016 - 2017

* Announcements CCF files will be retired on December 31, 2015

15 DTCC Non-Confidential (WHITE)

MyStandards – a collaborative web platform

16

MyStandards

A repository of standards

information

A way to share information with

your clients/ participants

A testing tool for your clients /participants



Connecting Market Infrastructures

SWIFT’s common shared infrastructure for

the securities industry


Market infrastructures

• More than 100 CCP’s,

(I)CSD’s and domestic

CSD’s rely on SWIFT to

connect them to their

participants

• These communities form the

foundation of the lion’s share

of SWIFT’s securities traffic

(especially related to ISO

20022 and the shift toward

MX from MT)


ISO 20022 Adoption ‘mApp’ for iPad

22 SWIFT Business Forum New York - 3 March 2015

74 ISO 20022 initiatives in total A quick view

23

Region Number

Africa 8

Asia 12

Europe 52

North America 10

Oceania 6

South America 3

Payments Securities

5 1

4 6

27 20

4 3

3 2 (AU)

3 0

Live 34

Planned 28

Testing/Roll-out 7

Under discussion 4

Corporate-to-Bank 8

Cards 1

Foreign Exchange 1

Trade Finance 3

SEPA-related 15

T2S-related 12



Securities Initiatives in Latin America

FIN Growth Significant Latin America growth

25

Total

Focus Countries

Colombia Mexico Brazil Chile Peru

Payments 17.0% 49.5% 2.2% 51.6% 15.5% 10.9%

Securities 84% 74.1% -9.7% 159% 43.1% -57.7%

Total 26% 47.1% .5% 89.8% 17.8% 8.7%

FIN Average Daily volumes

Actual growth Year to Year 2013-2014

The Latam Landscape

26

Need Upgrade

<SWIFT (Not just payments)

<Standards(ISO 20022)

>Manual Post-trade

>Systems (Domestic vs. International)

>Community Collaboration

< Local Presence


Major Trends

1. Regionalization – MI space

– MILA – integrating 4 key securities markets

– Latinclear – looking to do the same for Central America

– C. American RTGS created discussions around LATAM

RTGS

2. Securities markets looking for efficiencies

– Larger markets looking to implement best practices in post-trade

– Movement by MIs to ISO 20022

– Regulators creating the “compelling event” – i.e. Colombian Decree

1498

– Custodian expansion and new CSD entrants creating opportunity


Securities post trade landscape The current landscape is fragmented and complex

28

Clearer/ Settlement

agent/Custodian

Broker

Asset Manager Central

depository

Asset Controller/Fund administrator/Liability

controller

1

2

Fax, phone, internet,

proprietary lines

Files, emails,

spreadsheets

Proprietary

network

and

proprietary

standards

Proprietary

network

and

proprietary

standards

Central Bank


MILA (Latin American Integrated Market)


What is MILA? What are the opportunities?

• A program that integrates the stock exchange markets of Chile,

Colombia, Mexico, and Peru.

• Aims to develop the capital market of each participant country through

integration in order to give investors a greater supply of securities,

issuers and larger sources of liquidity/funding.

• Agreement signed September 2009, began operating on May 30th,

2011

• Mexico officially started 1 December 2014

• Opportunities:

– Establishment of standards and best practices among participant MI’s (CSDs

and Stock Exchanges)

– Automation and connectivity among participant MI’s and players in MILA

market (IM’s and B/D’s)


Q&A

?


Please provide us with your feedback!

• Kindly complete the survey form and submit upon exiting

32 SWIFT Business Forum New York ~ 3 March 2015

What’s next: Product Showcases



Lunch

Courtesy of:

Thank you


securities initiatives work session

Economy & Finance

icsd mt

fin mt traffic

agreed margin

fund admin mt

substitution colr

mx messages

securities business

dispute colr