Securities Initiatives A view from 35,000 feet Malene McMahon Fabian Banchiero 3 March 2015
Jul 14, 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
SWIFT Business Forum New York - 3 March 2015
Latin America
Market
Infrastructures
(eg, DTCC)
Corporate
Actions
(ISO 20022)
Collateral
Management
4
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
SWIFT Business Forum New York - 3 March 2015 6
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
SWIFT Business Forum New York - 3 March 2015 8
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
SWIFT Business Forum New York - 3 March 2015 9
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
Collateral Substitution
Response
Collateral Substitution
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
SWIFT Business Forum New York - 3 March 2015 10
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:
Tri party Collateral
Status Advice
MT569:
Tri party Collateral
and Exposure
Statement
MT527:
Tri party Collateral
Instruction
MT558:
Tri party Collateral
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
SWIFT Business Forum New York - 3 March 2015 11
© 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
SWIFT Business Forum New York - 3 March 2015
SWIFT’s common shared infrastructure for
the securities industry
SWIFT Business Forum New York - 3 March 2015 20
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)
SWIFT Business Forum New York - 3 March 2015 21
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
SWIFT Business Forum New York - 3 March 2015
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
SWIFT Business Forum New York - 3 March 2015
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
27 SWIFT Business Forum New York - 3 March 2015
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
SWIFT Business Forum New York - 3 March 2015
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)
SWIFT Business Forum New York - 3 March 2015 30
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• Kindly complete the survey form and submit upon exiting
32 SWIFT Business Forum New York ~ 3 March 2015