Securities in Focus - Alex Kech

Securities stream

Securities Services under pressure

Alexandre Kech, Head of Securities & FX Markets, Asia Pacific

TRENDS

Sydney Business Forum Securities Session

Asia Pacific

Securities

challenges,

trends &

opportunities

Securities

Market

Infrastructures

Post-Trade

System refresh

Business

diversification Regulation

Aging technology

New technology

(distributed ledger)

Regional vision

ISO 20022

CA golden copy

Funds hub

Collateral mgmt

Off-shore CNY

OTC clearing

ISO 20022

CPMI-IOSCO

T+2

OTC derivatives

Regulatory reporting

Cyber

AEC, ABMF, AFSF,

APFF, CSIF, etc.

CN-HK connects

ISO 20022

MP harmonisation

Regionalisation

Domestic projects fed by regional initiatives and vice versa

3 Sydney Business Forum Securities Session

Asia Pacific

Securities

challenges,

trends &

opportunities

Asset Managers

Regulation Do more

with less

Technology

disruption

Local and global (eg,

Volcker Rule)

KYC

Cost of compliance

Margin reduction

Staff reduction

Cost of compliance

But need for new

product offering

Non-financial run

on-line platforms

Need to rethink IT

and upgrade

Outsourcing

ASEAN, ARFP, PRC-

HK

Vietnam, Indonesia,

China, Thailand, etc

Funds

passports

Focus on

high-growth

Increasing competition and costs leading to new products, systems and automation


Asia Pacific

Securities

challenges,

trends &

opportunities

Custodians

Growing

Competition

Operational

efficiency

Automation

& STP

SMIs

Global vs local custodian

ICSDs

Global broker/dealers

Outsourcers

Margin reduction

Staff reduction

Cost of compliance

But need for new

service offering

Growing complexity

Big data

exploitation

Challenges with

highly manual

processes

ISO 20022 adoption

T+2

Moving target

Domestic vs.

regional/global priorities

MI projects

How to increase margins with reduced staff, budgets in an ever increasing competitive

landscape and with a ever increasing number of regulatory and MI projects to deal with


Asia Pacific

Securities

challenges,

trends &

opportunities

Brokers

Regulation

Collateral

Liquidity

Management

Evolving

Post-trade

Environment

Local and global

Advisory vs Execution

T+2

Cost of compliance

Better CM needed

Better LM needed

Automation

Outsourcing

Post-trade infra

renewals

T+2

Domestic brokers vs

international brokers

Access to regional-

international players

Bespoke technology

(domestic brokers)

Levelling the

playing field

For international brokers, how to handle regulatory pressure while remaining profitable

For local brokers, how to compete with international in drastically evolving domestic markets


A fragmented region but working on harmonisation and standardisation



SWIFT SECURITITIES & FX


Securities & FX focus

Increasing footprint

Increasing traffic

Leveraging trends

Countries

AM

CSD

FX Funds

FinTech

Efficiency

gains

System

refresh

IN CN HK SG ID PH MY AU

Asia Pacific

Securities

Market

Infrastructures

challenges,

trends &

opportunities

SWIFT’s

activities

Post-Trade

System refresh

Business

diversification Regulation

SGX, ASX, KSEI, BM,

HKEx, CCDC, etc.

Impact analysis

ISO 20022 adoption

DLT

Connectivity

SGX, ASX, KSEI, BSE,

TSD, VSD, HKMA,

HKEx, ShC, JSCC…

Corporate action

Collateral management

Clearing

ISO 20022

Connectivity

SFC, ASIC, SGX,

MAS, BNM, etc.

Regulatory reporting

ISO 20022

DLT

ABMF, AFSF

CSIF, CN-HK

Cross-border DVP

ISO 20022 adoption

MP harmonisation

Connectivity

MyStandards/Readiness

Portal

Regionalisation

Supporting domestic and regional infrastructure modernisation projects


Asia Pacific

Securities

challenges,

trends &

opportunities

Asset Managers

SWIFT’s

activities

Regulation Do more

with less

Technology

disruption

KYC for funds

Operational efficiency

through automation

Regulatory advocacy

for standardised

reporting

Reach through

SWIFTNet reuse

Thought leadership

Automation support

Thought leadership

DLT POC

Integration

Funds strategy

Cross-border

automation

Domestic

standardisation

Funds

passports

Focus on

high-growth

Enabling automation and reach for the AM community


Asia Pacific

Securities

challenges,

trends &

opportunities

Custodians

SWIFT’s

activities

Growing

Competition

Operational

efficiency

Automation

& STP

AM campaign

FX, C&S, CA, CM,

Funds standardisation

SWIFTNet reuse

ISO 20022 adoption support

MyStandards/RP

MI project roadmap info

Integration

MI projects

Increasing operational efficiency, decreasing operational risk, reducing cost through

thought leadership, standardisation, harmonisation, automation and STP

12

BI

Thought leadership

Co-building of SWIFT

strategy to support

business

Reach

Automation & STP

Compliance utility

Post-Trade Risk Alerting


Asia Pacific

Securities

challenges,

trends &

opportunities

Brokers

SWIFT’s

activities

Regulation

Collateral

Liquidity

Management

Evolving

Post-trade

Environment

Regulatory advocacy for

standardised reporting Collateral

management

standardisation

Connectivity to TCM,

CCP and bilateral

Automation & STP

SWIFTNet reuse

ISO 20022 adoption

support

MyStandards/RP

MI project roadmap info

Integration

Broker connectivity model

International expertise

Standardisation

Single platform

Integration capabilities

Reach

(domestic brokers)

Levelling the

playing field

Increasing operational efficiency, decreasing operational risk, reducing cost through thought leadership,

standardisation, harmonisation, automation and STP


Applying DLTs in the financial services industry: requirements

Strong governance – Governance models with clearly defined

roles and responsibilities of parties, business and operating rules.

Data Controls – Controlled data access and availability to

preserve data confidentiality.

Compliance with regulatory requirements – Ability to comply

with regulatory requirements (e.g. Sanctions, KYC, etc.).

Standardisation – Standardisation at all levels to guarantee

straight-through processing (STP), interoperability and backward

compatibility.

Identity framework – Ability to identify parties involved to ensure

accountability and non-repudiation of financial transactions.

Security and cyber defense – Ability to detect, prevent and

resist cyberattacks growing in number and sophistication.

Reliability – Readiness to support mission-critical financial

services.

Scalability – Readiness to scale to support services which

process hundreds or thousands of transactions per second.


Reference Data

ISO 17442 Legal Entity Identifier

ISO 9162 Business Identifier Code

ISO 4217 Currency code

Etc.

Data Exchange

ISO 20022

Universal financial

industry messaging

scheme


Linux Foundation

Hyperledger Project

ISO/TC 307

Blockchain and

electronic distributed

ledger technologies

Technical standards Business standards


On the importance of standards

ISO 9162 Business Identifier Code (BIC)

ISO 17442 Legal Entity Identifier (LEI)

ISO 4217 Currency Code

ISO 3166 Country Code

ISO 10383 Market Identifier Code (MIC)

ISO 6166 International Securities

Identification Numbers (ISIN)

ISO 20022

DLT Sandbox

DLT

Sandbox

User Interface

Integration

capabilities

RMA

SWIFT value add features

PKI

CUG RBAC

Supporting multiple use cases Multiple

connectivity

options

Fast

deployment Support for community

testing

Up to 50 nodes Up to 100 TPS The DLT sandbox enables customers to experiment use cases with SWIFT

and demonstrate our financial cooperative value proposition

Nostro account

reconciliation

Securities

use case being

defined


“The FX market is one of the largest in the

world but as a decentralized market it is very

difficult to compile accurate amalgamated

metrics. There isn't one "exchange" where

every trade is recorded – but there is one

network!”

Sam Romilly, Head of FX Markets, SWIFT

Custodian Insourcers

CLS 3rd Parties

CLS Members

CLS Bank

63 members

263 BIC8s

CLS BANK

CLS INPUT CHANNELS

Other FX Players FX Platforms

Investment ManagersInvestment Managers

& Corporates

G16

Banks

OTC FX Market

SWIFT in a unique position


Most FX players

exchange FX

confirmations over

SWIFT, or submit to

CLS (over SWIFT)

all FX OTC Market

countable

transactions on

SWIFT

8,000+ users of FX

confirmations include

global and regional

banks, central banks,

sovereign wealth

funds, and over 2,000

investment managers

and corporates

Each day, one million

(MT 300) FX

confirmations are

sent over SWIFT to

confirm FX Spot and

Forward trades

SWIFT also de facto

network for FX Option

confirmations with

over 1,000

institutions confirming

over SWIFT

FX Performance Insights – 12 monthly reports are then delivered to the G16 broker

19

CPD Primary BIC Sep-16 Oct-16 Difference Growth Sep-16 Oct-16

G16Peer1 8.31 29.52 21.22 255.45% 13 1 12

G16BROKER 28.02 29.50 1.49 5.31% 4 2 2

G16Peer3 29.95 28.86 -1.09 -3.65% 1 3 -2

G16Peer4 1.24 27.98 26.75 2159.83% 16 4 12

G16Peer5 4.03 27.27 23.24 576.83% 15 5 10

G16Peer6 11.67 25.75 14.08 120.67% 10 6 4

G16Peer7 12.62 24.99 12.36 97.94% 9 7 2

G16Peer8 9.88 24.64 14.76 149.39% 12 8 4

G16Peer9 5.49 19.90 14.41 262.67% 14 9 5

G16Peer10 14.06 14.22 0.17 1.19% 8 10 -2

G16Peer11 28.38 13.53 -14.85 -52.33% 3 11 -8

G16Peer12 28.57 11.15 -17.42 -60.97% 2 12 -10

G16Peer13 19.65 10.12 -9.53 -48.51% 5 13 -8

G16Peer14 14.77 8.84 -5.93 -40.15% 7 14 -7

G16Peer15 17.32 6.34 -10.99 -63.42% 6 15 -9

G16Peer16 11.35 3.58 -7.77 -68.46% 11 16 -5

Grand Total 245.30 306.20 60.90 24.83%

ValueNet Amount in Billion (conv. USD) Ranking

October 2016 vs September 2016

Example of

one of the 4

views in a

Peer

Benchmark

Report


Kick-off meeting 20

Post-Trade Risk Alerting service (PtRA)

Guiding Principles

• Live traffic

• Incoming and outgoing

• Real-time alerts

• MT and MX

• No traffic interruption

• Zero technical investment

• No network effect required

API

Portal

IN CONCLUSION


Securities Services VAP

Customer

Channels

Front-end

Back-end

Infrastructure

Channels

DISTRIBUTION PRODUCTION

Market Infrastructures Customers &

Markets

DISTRIBUTION |

INVESTMENT OPERATIONS

CHANGING SECURITIES LANDSCAPE MI | ISO20022 | DLT | REGIONALISATION

COMPLIANCE & Other Regulations

Cyber | Sanctions | AML | KYC |

AIFMD

Ma

rke

t

Co

nn

ectivity

Clie

nt

Co

nn

ectivity

OPERATIONAL EFFICIENCY Messaging Hub | Standards | Ref Data

ANALYTICS Business Intelligence | Intraday Liquidity Reporting

SECURITIES SERVICES

Regulatory compliance and

reporting

Cyber resilience is now an

industry challenge

MI new (sometimes

competing) service offering

MI renewals with a focus on

ISO20022 and T+2

New Technologies (DLT)

1

2

3

4

5

Asset Managers &

Investment Funds

distribution

Need for automation &

Changes driven by

competition, innovation and

regionalisation

Brokers / Hedge Funds

Compliance and new

regulations at play. New

business vs efficiency

balance & eroding margins,

new technologies, MI

renewals transforming the

business and connectivity

models

A

B



Our major product families are very relevant for securities post-trade

• Fulfil new customers

needs (grow business,

competitiveness)

• Managing security and

cyber threats

• Control regulatory &

compliance risks

• Improve operational

efficiency

• Remain innovative

Post-Trade Risk Alerting Service*

MI renewals

CSP

Compliance Services

ISO for Reg reporting

Peer to Peer comparison

FX Performance insights

ILR

Market Analytics

Client Connectivity

Market Connectivity

ISO 20022

Interfaces (e.g. AMH)

Ref Data

MyStandards & Readiness Portal

PROBLEM STATEMENTS OUR SOLUTIONS ARE INTER-LINKED

1

2

3

4

5

Compliance &

Regulations

Changing

Securities

Landscape

Operational

efficiency Connectivity

Analytics


Our role with MIs helps custodian banks and brokers also …

Simplified Connectivity

Standardisation of securities processing

Standardisation of operational compliance

Cost reduction

Securities in Focus - Alex Kech

Presentations & Public Speaking