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SWIFT and
TARGET2
Name of speaker
Title
Institution
TARGET2_implementation_2006_v9.ppt
Slide 1
Agenda
Concept of TARGET2
A comprehensive set of SWIFTNet services &
interfaces
TARGET2 Directory
SWIFT traffic pricing
SWIFT help & education
2
Why TARGET2 ?

Rationale for TARGET2:
Strategic move to overcome drawbacks of TARGET1
and to be prepared for the future

User’s requests:
– A more harmonised service level
– Cost recovery problem
– Adaptability problem
– EU enlargement
– Credibility of the Eurosystem
3
TARGET2 features and functionalities
«
one single system »
 More
robust and resilient system
 Harmonised
interfaces to connect users
 Same
core service for all TARGET2
participants irrespective of their location
 Single
price structure for core service
 Flexible
liquidity management
4
Concept of TARGET2







“Single platform” system
Concentration of domestic
euro RTGSs
Direct & indirect participants
Full set of SWIFTNet
services and Interfaces
MT, MX and XML standards
Automated or manual
access
Live November 2007
TARGET2 Indirect
Participant
SWIFTNet Services
TARGET2
Direct
Participant
NCBs
TARGET2
Direct
Participant
Ancillary Systems 5
Direct and indirect participation
Feature
Direct participant
Indirect participant
Submit/receive payments
• using own SWIFT interface
via direct participant
directly from SSP
• via a service bureau
Own RTGS account in PM
yes
no
Liquidity provisioning
on its RTGS account
by direct participant
Liquidity control
by itself
by direct participant
Access to ICM
yes
no
Addressability
directly
by direct participant
BIC
8 or 11-digit published SWIFT
BIC
8 or 11-digit published
SWIFT or nonSWIFT BIC
Publication in BIC/ TARGET2
as direct participant (TGT)
as indirect participant
(TG+) directory
6
Ancillary systems

Ancillary systems
– Retail payment systems
– Large value payment
systems
– Foreign exchange
systems
– Money market systems
– Clearing houses (CCP)
– Securities Settlement
systems (SSS)

SSP provides services to AS
via:
– Ancillary system
interface (ASI)
– Participant Interface (PI)
– Proprietary Home
Account (PHA)
(4 years transition
period)
– Information & control
Module (ICM)
7
Central Banks
Responsibilities

In general
All contacts and provision of any kind of support to their participants (credit institutions
and ancillary systems)

During migration
Responsible for planning and structuring the domestic migration process

In operation
–
–
–
Inclusion and exclusion of participants
Monitoring the activity of participants
Provision of intraday liquidity necessary for the smooth running of the
system
– Initiating payments on behalf of their own or on behalf of their participants
– Billing to their participants
– Handling of local contingency
Current role of Central Banks in TARGET remains in general terms unchanged.
Each CB will remain fully responsible for the business relations vis-à-vis its
participants.
8
Migration windows
Group 1
Group 2
Group 3
Austria
Belgium
Denmark
Cyprus
Finland
Estonia
Germany
France
ECB
Latvia
Ireland
Greece
Lithuania
Netherlands
Italy
Luxembourg
Portugal
Poland
Malta
Spain
Group 4
Reserved
For
contingency
Slovenia
2006
Developments
2007
2012
2008
Testing
1 2 3 4
15/09/2008
19/11/2007
18/02/2008
19/05/2008
Migration
phase
Transition
phase
9
Country migration models
National Big Bang













Cyprus
Denmark
Estonia
ECB
Finland
France
Greece
Italy Portugal
Ireland
Latvia
Luxembourg
Netherlands
Slovenia
Phased Approach
Austria
Belgium
Germany
Spain
Lithuania
Malta
Poland
10
Agenda
Concept of TARGET2
A comprehensive set of SWIFTNet services &
interfaces
TARGET2 Directory
SWIFT traffic pricing
SWIFT help & education
11
Single Shared Platform and its modules
SSP
Optional Services for Central Banks
Payments Module (PM)
Payments processing
TARGET
Interlinking
Participant
Interface
Y-copy
Ancillary
systems
interface
(Storage,
Archiving ,
Files for
billing
calculation )
Standard
Interfaces
Standing
Facilities (SF)
Static Data
Management
(SD)
Home
Accounting
Module (HAM)
Monitoring
Reserve
Management
(RM)
Contingency
Module
(CM)
Information and Control Module
PAPSS
For all
CRSS
For NCB
(ICM)
Mandatory
NCBs
Internal accounting,
Collateral management,
Proprietary home accounts etc.
Credit
Ancillary
institutions
systems
• PAPSS (Payment and Accounting Processing Services Systems)
• CRSS (Customer Related Services System)
Optional
12
Full set of core SWIFT messaging services
TARGET2 Indirect Participants
connected via TARGET2 direct
participant
Non EU
Bank
SWIFTNet FIN
payment message
Branch
Indirect
TARGET2
Direct
Participant
settlement
request
TARGET
Direct
Participant
authorisation/
refusal
EU Bank
SWIFTNet FileAct
Real-time
Store & Forward
SWIFTNet InterAct
SWIFTNet
FIN Copy
SWIFTNet Browse
On-line visualisation
of information
Real-time
Ancillary
systems
NCBs
13
Full set of core SWIFT messaging services
SWIFTNet
FIN
SWIFTNet
Browse
SWIFTNet
messaging
SWIFTNet
InterAct
SWIFTNet
FileAct
SWIFT's core store-and-forward
messaging service.
A secure, reliable, resilient, access
controlled, structured store-andforward messaging service.
Secure browsing with standard
internet technologies. Appropriate for
data exchange in thin-client browserbased financial solutions.
To be used with SWIFTNet InterAct
and FileAct.
Secure, reliable, and STP-oriented.
Appropriate for exchange of
individual structured financial
messages and short reports.
Secure, reliable, and flexible.
Appropriate for exchange of files and
batches of structured financial
messages and large reports
14
SWIFTNet FIN & FIN-Copy: payment processing
Payment
order
1
2
3
4
5
Payment Instruction
MT103, 103+,
202,204*)
SWIFTNet FIN
Y
1
Bank A
Settlement request
(MT096)
4
- Copy
Bank B
2
5
3
5
Settlement response
(MT097)
Approved/Settled
Payment Instruction received
Sender / receiver
notification and reporting
(Optional MT012,
MT019,MT900, MT910,
MT940, MT950 )
SWIFT
Interface
Settlement
Application
15
FIN Interbank transfers - between HAM accounts
Bank A
Bank B
Internal
payment system
Internal
payment system
SWIFTNet FIN
SWIFT interface
SWIFT interface
1
4
3
1
MT202 “simplified”
2
Booking
3
MT202 “simplified”
4
HAM
Participant interface
2
4
MT900 to sender
MT910 to receiver
Payment processing
Optional messages
16
SWIFTNet Browse overview
Service user
Service provider
SWIFTNet
Workstation
(running SWIFTAlliance
WebStation and a standard
Browser)
Web Server and
SWIFTNet Link*
SWIFTNet Browse enables secure browser-based access (over SIPN)
from an operator using a standard browser and SWIFTAlliance
WebStation to a service provider’s web server
* Typically used in conjunction with SWIFTAlliance Gateway
17
SWIFTNet Browse overview
SWIFTNet Browse transparently combines two communication mechanisms
Service user
HTTP-S channel
only authenticates
the system of the
end user
Service provider
Using non-managed Web certificates
HTTP-S
SWIFTNet
InterAct/FileAct
Workstation
Using managed SWIFTNet PKI certificates
Web
Server
+SNL
InterAct / FileAct
channel authenticates
the end user
SWIFTNet Browse allows to initiate InterAct or FileAct exchanges via a secure browser link.
By doing so sensitive data can be exchanged with all the security and reliability inherent to
the SWIFTNet platform, while preserving the benefits of a browser-based environment.
18
Key characteristics of SWIFTNet Browse
(when used with SWIFTNet InterAct/FileAct)

Highly secure
& reliable



Standard
technologies
Thin client
Single
Window
Integration with SWIFTNet InterAct / FileAct for
security sensitive data
HTTP-S exchanges secured with web-certificates for
non-sensitive / un-structured exchanges
Closed User Group control
SIPN


Client uses standard browser to navigate
HTTP-S for screens and InterAct for transactions or
FileAct for file transfers

Service provider does not install software at
client side

Re-utilisation of existing SWIFTNet
infrastructure
19
SWIFTNet InterAct is used in real-time mode query &
response
Real-time
query &
response



Used either in the context
of person-to-application
solutions (with SAB) or
application-to-application
(with SAG)
SWIFTNet InterAct Q& R: real-time exchange of information
XML messages for SWIFTNet InterAct: Cash Management Standards
Access to the SSP (mandatory and optional modules) through
SWIFTNet InterAct:
– Payments queue management
– Liquidity management
– Management of reservation and limits
– etc…
20
Key characteristics of SWIFTNet InterAct
Highly
secure







Secured with SWIFTNet PKI (managed certificates)
Encryption, authentication and integrity control
Non-repudiation
Closed user group control
SIPN
Highly available operations
Store-and-forward (not planned in
TARGET2)
Delivery notification (not planned in
TARGET2)
Highly
reliable

STP
oriented


Message validation (not planned in TARGET2)
XML-based
Other




Short messages (max 100 K; recommended < 20 K for RT)
Higher priority vs. SWIFTNet FileAct
Flexible central routing
Real-time messaging requires 64K lines minimum
21
The SWIFT XML Cash Management standards
Advice
Statement
GetAccount
GetTransaction
ModifyTransaction
CancelTransaction
GetLimit
ModifyLimit
DeleteLimit
GetReservation
ModifyReservation
DeleteReservation
GetMember
ModifyMember
GetBusinessDayInformation
GetCurrencyExchangeRate
GetGeneralBusinessInformation
LiquidityCreditTransfer
LiquidityDebitTransfer
BackUpPayment
ModifyStandingOrder
Receipt
&
&
ReturnAccount
ReturnTransaction
&
Return Limit
&
ReturnReservation
&
ReturnMember
&
&
&
ReturnBusinessDayInformation
ReturnCurrencyExchangeRate
ReturnGeneralBusinessInformation
22
SWIFTNet FileAct:
real-time and store-and-forward

FileAct RT and SnF used for:
– Reporting
– Directory distribution
Store-andforward file
transfer
Store
Real-time
file download
Used
Typically used to reach
a large number of
counterparties
& Forward: TARGET2 sender of files (TARGET2 Directory updates)
Typically used in the
context of person-toapplication solutions
(with SWIFTNet Browse)
by TARGET2 participants to pull TARGET2 directory
23
Key characteristics of SWIFTNet FileAct
Highly
secure





Secured with SWIFTNet PKI (managed certificates)
Encryption, authentication and integrity control
Non-repudiation
Closed user group control
SIPN
Highly
reliable




Highly available operations
Store-and-forward
Delivery notification
Highly reliable file transfer protocol
Flexible


Any file content (structure and character set)
Files size up to 250 Mb
Other



Lower priority vs. SWIFTNet InterAct / SWIFTNet FIN
Flexible central routing
Real-time file transfer requires 64K lines minimum
24
Two different technical modes for accessing the
Information and Control module (ICM)
User-to-Application
SWIFTNet InterAct
SWIFTNet Browse
(SWIFTNet FileAct)
 Allows
direct communication
between a participant’s users
and ICM.
 access to data of the current
business day only, which are
available through "pull mode".
 The information is displayed
in a browser running on a PC
system (SWIFTAlliance
Webstation)
 Participants do not need to
develop a special application.
Application-toApplication
SWIFTNet
InterAct
SWIFTNet FileAct
Information
and messages are transferred between the SSP and participants’
internal application
A2A interface for the management of XML message flows
Therefore the participant must:
– Develop own application
– Adapt existing application or
– Purchase an appropriate solution
25
Accessing TARGET2
ICM access
mode
User-to-Application
ICM
user profile
Any user *
SAA/E
users
SWIFTAlliance
WebStation
or
SWIFTAlliance Gateway
WebStation concentration
Application-toApplication
SWIFTAlliance
Gateway
Single Window
SWIFTAlliance Starter
Set
* It is assumed user is already a SWIFTNet FIN user
26
SWIFTAlliance Gateway – Licensing & pricing
‘An easy step approach’
16,000$
6,500$
Profile 1 :
“WebStation
Concentration”
SWIFTAlliance
Starter Set
Benefits :
-FileAct out-of-the
box
-1 concurrent user
Profile 2 :
“Automated “
Benefits :
-Flexible SAB
deployment
-From 5 till 320
concurrent users
Benefits :
-Off-the-shelf application
integration using Agents
(FTA or TDA for < 200
InterAct or FileAct per
day)
-Flexible SAB deployment
-From 1 till 320 concurrent
users
Price :
Starts at 7,500$ (5
users)
Price :
Starts at 14,000$ (1 User,
1 Agent)
Profile 3:
“Single Window”
Benefits :
-Can reside in DMZ
-Scalability & resource
optimisation
-Resilience
-Off-the-shelf application
integration using Agents
(FTA or TDA)
-Flexible SAB deployment
-From 5 till 320 concurrent
users
Price:
Starts at 30,000$ (5 Users,
1 Agent, 1 Host Adapter)
+
Traffic licence
27
Agenda
Concept of TARGET2
A comprehensive set of SWIFTNet services &
interfaces
TARGET2 Directory
SWIFT traffic pricing
SWIFT help & education
28
TARGET2 directory contents

Contents
– Overall view of all institutions able to receive
payments via the PM directly or indirectly
– Main purpose: information for automating and
routing of payments
– Weekly updates based on the content of the up-todate BIC directory (BIC directory updated monthly)
– During migration, the TARGET2 directory also
contains routing information on non-migrated
participants. Current TARGET Directory will exist
until end of migration, mid 2008
29
TARGET2 Directory
•Distribution
•provided electronically in a structured form via FileAct
•set up in addition to SWIFT’s BIC directory to support
the specific needs of the SSP and its users
30
Distribution
Only via FileAct. No other
distribution or publication allowed
 Only to direct members
– Push mode: each Thursday
after close of operational
day, SSP sends to all
registered users a file
containing changes vs.
previous version of the
directory
– Pull mode: at any time during
service hours full content of
the last version can be
downloaded
 Registration
– Form available from the User
Helpdesk at the responsible
national central bank

Payment
Order
Payment Processing
Chain
BIC
address
Beneficiary
Bank
Name or
BIC or
National Code
TARGET2
Directory
Regular
Updates
31
Agenda
Concept of TARGET2
A comprehensive set of SWIFTNet services &
interfaces
TARGET2 Directory
SWIFT traffic pricing
SWIFT help & education
32
SWIFT Traffic Pricing for TARGET2
FIN User-to-user pricing

Global tier of sender

Sender pays (standard billing)

Non reporting / reporting

Domestic / International
FIN Copy pricing

T-copy, Y-copy

Volume of daily copies of MI

Decentralized (billed to participants)
SWIFTNet InterAct or FileAct



SN Browse


Number of service end-users
Centralized or decentralized billing
Global tier of sender
Domestic / International
Standard, centralized or decentralized billing
FIN from and to Market Infrastructure



Fee independent from global tier
Non reporting / reporting
Standard, centralized or decentralized billing
33
Agenda
Concept of TARGET2
A comprehensive set of SWIFTNet services &
interfaces
TARGET2 Directory
SWIFT traffic pricing
SWIFT help & education
34
Where to find help ?
https://target2.ecb.int
National Central Bank
www.swift.com
• Contact details of Network
Providers and Business
Partners
• SWIFT on-line support and
FAQ’s
• Updates on vendor
initiatives, activities and status
35
SWIFT Training solutions

Two different modules
specific to your role and
requirements:
– Overview of SWIFT in
TARGET2
– SWIFT infrastructure
for TARGET2

Technical training courses
on the SWIFTAlliance
interfaces
Different training modules
about the business and
technical implications of this
new payment clearing
system in relation to SWIFT
See www.swift.com/training
36
uestions
& Answers
37