Transcript Asset Servicing Solutions

Asset Servicing Strategy
for the CSD Community
AMEDA
Lut Buntinx
Marrakech, 21-23 October 2009
Contents
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SWIFT’s Asset Servicing Strategy
Corporate Actions
STaQS for Corporate Actions
ISO 20022 for Corporate Actions
Data Distribution
Proxy Voting
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Developing an Asset
Servicing Strategy
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Standardising and automating asset
servicing: drivers, challenges and solutions
• Why standardise and automate asset servicing?
– Meet increased requirement for better corporate governance and
operational risk management
– Address staffing challenges
– Align with clearing and settlement harmonisation efforts
• What are the challenges?
– Inconsistent data quality leads to interpretation risk
– Lack of automation, manual processing dependency create
operational risk
– Complexity of cross-border processing adds costs and risks
• What are the solutions?
– Standards, market practices and tools supporting automation
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SWIFT’s new asset servicing strategy – targeting
the major painpoints
• Our asset servicing customers feel the most pain in the areas of
corporate actions and corporate actions related reference data.
• There is also a need for efficiency improvements in the area of
meeting services (proxy voting) and tax services
• Consultation with our members has convinced us that we are
ideally positioned to take the lead and drive resolution of these
issues
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SWIFT’s new asset servicing strategy – key goals
• We aim to:
• Replace text with data standards
• Enforce and support market practices
• Increase automation and use of standards
• We will:
– Work with issuers and agents to standardize and automate the
announcement process
– Work jointly with large infrastructures to move from proprietary to ISO
standards, including ISO 20022
– Support the adoption of a Corporate Actions unique identifier
– Support ISO 20022 implementation and coexistence with ISO 15022.
– Develop easy access to SWIFT for smaller cients (e.g., LITE)
– Standardise tax processes and engage tax authorities
– Improve transparency and efficiency of shareholders meeting services
and proxy voting processes
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SWIFT’s new asset servicing strategy – plan
of action
• Identify key milestones for each
action to facilitate progress review
• Prepare detailed roll-out plans:
action, deliverables, milestones,
community, involvement of industry
groups (SMPG, ISMAG, ISSA)
• Complete roadmap by December
2009
• Start executing!
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Corporate Actions
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Adoption continues to grow for CA messages
Monthly Traffic Evolution – MT 56x messages sent
9,000,000
Scalability to
handle peak flow is
a growing concern
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
YEAR
msg %change
2008
2007
2006
2005
2004
2003
2002
2001
74M 14.3%
65M 21%
53M 18%
45M 26%
35M 18%
30M 22%
25M 36%
18M
ec
D
ov
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ct
O
Ju
l
A
ug
Se
p
Ju
n
Ja
n
Fe
b
M
ar
A
pr
M
ay
0
2009 traffic growth YTD is about 7%
in spite of flat or negative growth in other messaging
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The risks associated with corporate
actions are very high and although this is
not a new issue for the industry, more and
more participants are realising the
need to address these risks as a matter of
urgency.
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A corporate action transaction can last for
months, with significant risks
Host System not
Updated
No Notification
from counterpart
Positions not
protected
Pre-Decision Processing
(Pre) Notification
Record Date? or this Record Date?
Research
Trading shares not
available
Missed Deadlines
Ex Date
Post-Decision Processing
Instruction Deadline
Decision Deadline
Acceptance
Registration
Stock Available
Unconditional
Pari Passu
Decision Processing
Incorrect
Information
No Diary Entry
Positions Disagree
Position Taken
Late
Host system(s) not
updated/updated
incorrectly
Trading shares not
Incorrect decision
owned
applied
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Courtesy Checkfree & Celent
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SWIFT is working with the industry to
address their needs for Corporate Actions
Challenges
• Significant shortfall in message
quality and market practice
compliance
Drivers
• Minimise risks/ reduce losses
• Limitations of software vendor
solutions
• Comply with regulatory
requirements
• Difficult business case –
management buy-in for
improvement projects
• Improve customer service
• Standards
• Enhance operational efficiency
• Reduce costs
• Maximise portfolio performance
• Achieve scalability
The Drive for STP
• Market practice and tools
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• Best practices
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Working with partners to help ensure quality
software capability for corporate actions
“As firms seek to reduce risk from corporate actions, expect to see more
emphasis and funding given to solutions that are able to increase
productivity and reduce risk.”
~Phillip R. Silitschanu, Aite Group
• Four SWIFTReady applications products demonstrated
compliance with market practices and got rewarded in 2009:
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STaQS for Corporate Actions
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STaQS for Corporate Actions
• Simulation Testing and
Qualification Service (STaQS)
• Tests MT 564 Notification and
MT 566 Confirmation messages
for compliance to market practice
… a health check for Corporate
Actions messages
• What can you do with this
service?
–
–
–
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Measure conformance
Identify improvement areas
Benchmark progress
Improve counterparty automation
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Benefits & status – STaQS for CA
• Benefits of STaQS for Corporate Actions
– Addresses biggest community-wide issue: formatting of notifications
and compliance to market practice
– Improves consistency, boosts STP via ad hoc testing, self-policing
– Consistency in market practice prepares for the process of migration
to, and translation with, ISO 20022 messages for CA
• Version 2.3 features
– EIG 2009; DvE data element test ahead of SR 2010 enforcement
– New detailed Error Report, support for multi-listed securities
• Pricing
– Parent BIC level annual subscription, 2 to 16 KEUR per traffic tier
• Future – alignment with SMPG, easier use, instruction testing
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ISO 20022 for
Corporate Actions
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What is driving the move to ISO 20022?
• New initiatives
– Global harmonisation
– Giovannini (barrier one) and
SEPA in Europe
– Market infrastructures
– Automation in the ‘funds’ market
• New players
– Corporates, fund managers
• New technology
– XML, SOA, web services
• www.iso20022.org
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Advantages of ISO 20022 over ISO 15022
• Builds on the ISO 15022 data dictionary concept and
registration infrastructure, but strengthens the monitoring by the
industry
• Uses a more robust, syntax independent development
methodology based on UML modelling of business processes
and transactions (business modelling)
• Uses XML as the syntax for the actual physical messages
(Many current ISO 15022 users are requesting ISO 20022
XML equivalent messages because their communication
interface is already XML based.)
• Has a wider scope than ISO 15022 which is for securities
only
• Allows for extension mechanism to include market specifics
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Data Distribution
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The Event Notification Dilemma
• Different data formats,
communication means & Data
Providers’ release schedules
• Operational Staff to maintain
systems and software
• Headcount for data discrepancies
resolution
• Manual checking of inconsistencies
• Risk of misinterpretation or misskeying
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The Market Data Provider Landscape
Quality securities reference data
• Data Distribution Solution
– FIN or FileAct
– Securities Market Data Providers (SMDP)
• Interactive Data, Telekurs, and WM Datenservice, Fidelity ActionsXchange
• London Stock Exchange, Singapore Stock Exchange, Australian Stock
Exchange, Canadian Depository, KSEI (Indonesia), Bombay Stock
Exchange and DTCC Global Corporate Actions Validation Service (GCA
VS)
– Types of information
• Corporate Actions (ISO 15022), Pricing, Reference Data, Indices, Foreign
Exchange, Proxy voting material, Tax rates, Prospectus
– Market Data Provider User Group (MDPUG)
– Providers agree to compliance with MDPUG principals and SMPG
guidelines
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SWIFT Data Distribution
How can the subscribers benefit?
• Enables STP through ISO15022 standards
• Centralises maintenance of data feeds
• Minimises risk and compliance concerns; secure, reliable
delivery
• Defines mandatory roles & responsibilities; SWIFT Service
Description
• Enables flexibility in obtaining feeds from different providers
• Reduces manual data normalisation
• Simplifies resolution of any data issues
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SWIFT Proxy V oting
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ISO 20022 Proxy Messages
Providing a higher level of automation and efficiency
• ISO 20022 Proxy Voting messages will standardise and automate
the proxy voting process, reducing risk, increasing voting levels,
and strengthening regulatory compliance capabilities.
• Minimise risks associated with
errors
• Reduce costs and errors due
to less manual intervention
• Streamline and standardise
deadlines
• Help eliminate ‘under’/’over’
voting with increased precision
in vote execution
• Accommodate funds voting
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Maintain audit trails
Provide transparency
Increase voting levels
Comply with regulatory
requirements
• Integrate new customers/agents
rapidly
• Standardise with ISO 20022
messaging
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Current Status of SWIFT Proxy Voting
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Available in Live & Test/Pilot environments
New Release 1.1 available for testing 24 July, Live Nov. 2009
Smart Test Messages available
Strong Proxy Agent support
Encouraging global cross-border and local market adoption
Will support emerging regulatory attention in EU, UK, US and
corporate governance concerns in Asia Pacific
Third-party application vendors/partners demonstrating
readiness to handle the ISO 20022 proxy voting messages
No competing standard
Allows for audit trail of all activity
Promoting implementation with seasonal awareness
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Thank you