FIRMA Conference Introduction to SWIFT Dennis Goodenough Senior Business Manager, SWIFT 18 April...
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Transcript of FIRMA Conference Introduction to SWIFT Dennis Goodenough Senior Business Manager, SWIFT 18 April...
FIRMA Conference
Introduction to SWIFT
Dennis GoodenoughSenior Business Manager, SWIFT
18 April 2011
Agenda
• Overview– History– Governance– Membership– Organization– Oversight– Products– Figures– Standards
• Securities• Payments and cash
management• Q & A
Introduction to SWIFT - FIRMA - 18 April 2011 2
SWIFT history
1973SWIFT
founded
FirstOperating Centre
opens
1976
1977SWIFTgoesLive
First Sibos
1978
1979North
America
Asia
1980
1986Value-Added
services
Securities
1987SWIFTNet live
2001
2004SWIFTNetmigrationcomplete
1996Volumes
exceed 3M messages/
day
1970s 1990s1980s 2000+
First corporates join SWIFT
1996
Introduction to SWIFT - FIRMA - 18 April 2011 3
SWIFT - Governance
National Bank of Belgium and G-10 Central Banks
Oversight
GovernanceBoard
Board committees
National member groups
National user groups
SWIFT members
SWIFT community
4Introduction to SWIFT - FIRMA - 18 April 2011
Oversight: Co-operating central banks from the G-10 countries
• Bank of Canada
• Deutsche Bundesbank
• European Central Bank
• Banque de France
• Banca d' Italia
• Bank of Japan
• De Nederlandsche Bank
• Sveriges Riksbank
• Swiss National Bank
• Bank of England
• The Federal Reserve System (USA), represented by the Federal Reserve Bank of New York and the Board of Governors of the Federal Reserve System
Lead overseer: National Bank of Belgium
Introduction to SWIFT - FIRMA - 18 April 2011 5
SWIFT - User categories
Supervised Financial
Institutions
Closed User
Groups/Corporates
Introduction to SWIFT - FIRMA - 18 April 2011 6
SWIFT – A customer-centric user community
Banks
IMI's
Corporates
InsuranceCompanies
Payments MI's
GovernmentInstitutions
Trustees
Broker-Dealers
Payment Systems
Clearing & SettlementSystems
Depositories
Stock Exchanges Securities MI’s
Customer
Introduction to SWIFT - FIRMA - 18 April 2011 7
• Eligible shareholders:– Banks– Broker/dealers– Investment Management Institutions
• Non-shareholding member – threshold of five shares
• Upon joining, the organisation can buy one share or opt out until the next re-allocation of shares
SWIFT – Members (shareholders)
Introduction to SWIFT - FIRMA - 18 April 2011 8
Countries’ organisation
• National Member Groups– All SWIFT shareholders within same country– Advisory role for membership matters: local admission criteria
and new users– Nominate Directors who are then appointed by the
shareholders
• National User Groups– All SWIFT users within same nation– Advisory role for operational and technical matters
Introduction to SWIFT - FIRMA - 18 April 2011 9
SWIFT – Board of Directors
Board of Directors
Audit& FinanceCommittee
Human Resources Committee
StandardsCommittee
Securities Steering
Committee
Banking & Payments Committee
Technology and
production Committee
Community input
Introduction to SWIFT - FIRMA - 18 April 2011 10
Oversight
• SAS 70 report
• Self assessment of performance against the overseers’ High Level Expectations for SWIFT
Introduction to SWIFT - FIRMA - 18 April 2011 11
Data Protection
• Data Privacy Working Group– SWIFT group– 12 experts in data privacy from EU, US, Australia, Canada – Review policies
• Contractual Policies – Commitment to the confidentiality and protection of users data– Data retrieval policy, Personal Data Protection Policy– Available on swift.com– Audited– SAS70
Introduction to SWIFT - FIRMA - 18 April 2011 12
Data Retrieval Policy
• Principles – Traffic data: limited usage permitted, for billing, pricing,
market and service analysis– Message data: strictly confidential, usage and disclosure
must be permitted by customers or required for problem investigation
• Exceptions– Collective request: request of message data by, for example,
a market infrastructure, for statistical purpose– Mandatory request: legally enforceable request by a judicial,
administrative, governmental or other competent authority
Introduction to SWIFT - FIRMA - 18 April 2011 13
Secure, reliable and resilient platform
Platform – the SWIFT product stack
Directories&
Informationservices
Secure IP Network (SIPN)
Interfaces
Messaging services
StandardsRules
SWIFT Solutions
TestingServices
& ProfSvcs
Payments Treasury Securities Trade
Introduction to SWIFT - FIRMA - 18 April 2011 14
SWIFT in figures
Introduction to SWIFT - FIRMA - 18 April 2011 15
SWIFT in figures (January 2011 YTD)
• > 4.0 billion messages per year• 9,693 customers• 210 countries and territories• ~ 2,000 employees• Average daily traffic 17.2 million messages• Peak day of 18.9 million messages – 1 March 2011
• Note: SWIFT does not ‘own’ the data contained in messages it transports
Introduction to SWIFT - FIRMA - 18 April 2011 16
SWIFT standards
• SWIFT sets standards because a common language for international financial transactions:– Improves automation– Ensures human understanding of the data– Reduces errors– Helps save costs
• SWIFT message standards are recognised by the International Organisation for Standardisation (ISO)
• SWIFT works with the financial community to coordinate standards convergence worldwide and avoid unnecessary duplication
Introduction to SWIFT - FIRMA - 18 April 2011 17
Name of Presentation – Confidentiality: External 18
FIN message categories
• Category 1 – Customer Payments & Cheques (16 messages)• Category 2 – Financial Institution Transfers (16 messages)• Category 3 – Treasury Markets – Foreign Exchange,
Money Markets & Derivatives (26 messages)• Category 4 – Collections & Cash Letters (18 messages)• Category 5 – Securities (67 messages)• Category 6 – Treasury Markets – Metals & Syndications
(19 messages)• Category 7 – Documentary Credits & Guarantees (29 messages)• Category 8 – Travellers Cheques (11 messages)• Category 9 – Cash Management & Customer Status (21 messages)• Category 0 – Service and System Messages (66 messages)
4 ISO
15022
53 ISO
15022
Name of Presentation – Confidentiality: External 19
Payments, Cash and Trade (111 messages)
Securities, FX and Derivatives (112 messages)- including 57 ISO 15022 messages
Service & System Messages (66)
Payments, Cash, Trade and Cards
StandardsThe current and future message landscape
Current ISO
20022
Future ISO 20022
FIN
& ISO 15022(MTs)
Securities, FX and Derivatives
Payments, Cash and Trade (127 messages)
Securities, FX and Derivatives (160 messages)
287 completed messages
Payments, Cash and Trade (132 messages)
Securities, FX and Derivatives (173 messages)
> 300 messages in progress
346 live messages
Name of Presentation – Confidentiality: External 20
ISO 20022 messages
Payments, Cash, Trade and Cards
• Payments and Cash Management– Account Management
• Change/Verify Account Identification (3)• Bank Account Management (15)
– Payments Initiation• Initiation (4)• Mandate (4)• Creditor Payment Activation Request (2)
– Payment Clearing and Settlement (6)– Cash Management
• Bank-to-Customer Cash Management (3)• Notification to Receive and Account Reporting Request (4)• Exceptions and Investigations (17)
• Trade – Trade Services Initiation
• Invoice Financing Request (3)• Financial Invoice (1)
– Trade Services Management (50)• Cards and Related Retail Financial Transactions
– Acceptor to Acquirer Card Transactions (15)
Securities, FX and Derivatives
• Settlement & Reconciliation (29)• Corporate Actions (13)• Investment Funds
– Securities Trade (30) and Settlement (16)– Reference Data (3) and Acct Mgmt (5)– Securities Management (7)– Cash Management (6)– Funds Processing Passport (2)
• Other Securities– Securities Transaction Regulatory Reporting (4)– Proxy Voting (8)– Issuers’ Agents Communication (22)
• Foreign exchange and OTC Derivatives– Non-Deliverable Forwards (7)– Currency Options (4)– Generic (4)
127 messages 160 messages
287 completed messages
Introduction to SWIFT - FIRMA - 18 April 2011 21
ISO 20022: The standards community
• Registration Management Group, RMG– Overall governance, court of appeal– Approve business justifications for new standards– Create Standard Evaluation Groups (SEGs)
• Standards Evaluation Groups, SEGs– Represent future users in specific financial areas– Validate candidate message standards
• Registration Authority, RA– Ensure compliance with the standard – Maintain and publish ISO 20022 Repository
• Technical Support Group, TSG– Assist RMG, SEGs, RA and submitting organizations
68 financial professionals
from 21 countries and 12
liaison organizations
Name of Presentation – Confidentiality: External 22
ISO 20022 messages
Payments, Cash, Trade and Cards
• Payments and Cash Management– Account Management
• Change/Verify Account Identification (3)• Bank Account Management (15)
– Payments Initiation• Initiation (4)• Mandate (4)• Creditor Payment Activation Request (2)
– Payment Clearing and Settlement (6)– Cash Management
• Bank-to-Customer Cash Management (3)• Notification to Receive and Account Reporting Request (4)• Exceptions and Investigations (17)
• Trade – Trade Services Initiation
• Invoice Financing Request (3)• Financial Invoice (1)
– Trade Services Management (50)• Cards and Related Retail Financial Transactions
– Acceptor to Acquirer Card Transactions (15)
Securities, FX and Derivatives
• Settlement & Reconciliation (29)• Corporate Actions (13)• Investment Funds
– Securities Trade (30) and Settlement (16)– Reference Data (3) and Acct Mgmt (5)– Securities Management (7)– Cash Management (6)– Funds Processing Passport (2)
• Other Securities– Securities Transaction Regulatory Reporting (4)– Proxy Voting (8)– Issuers’ Agents Communication (22)
• Foreign exchange and OTC Derivatives– Non-Deliverable Forwards (7)– Currency Options (4)– Generic (4)
127 messages 160 messages
287 completed messages
Introduction to SWIFT - FIRMA - 18 April 2011 23
SWIFT in Securities
Introduction to SWIFT - FIRMA - 18 April 2011 24
Securities standards on FIN (MTs)
• There are 67 category 5 securities messages, covering the following business areas:– Pre-Trade / Trade (trade initiation and confirmation)– Settlement & Reconciliation (settlement instructions,
confirmations and statements)– Corporate actions (asset servicing)– Securities lending and borrowing– Collateral
• Securities industry players also widely use payments, cash management (categories 1 and 2) and foreign exchange messages (category 3)
Introduction to SWIFT - FIRMA - 18 April 2011 27
Securities settlement – a typical scenario
Investment manager
Brokerdealer
Client 1= 300 shares
Custodian
MT 541 Receive Against Payment
CSD
MT 543 Deliver Against Payment
MT 541 Receive Against PaymentMATCH
PEFIGB22 BDAPGBPP
GLOBGB22 CRSTGB22
MT 514 Allocation (1) 300
MT 515 Confirmation (1) 300
MT 502 block Order
MT 513 Advice of Execution
MT 509 Status (optional, to DK)
Introduction to SWIFT - FIRMA - 18 April 2011 28
Broker a/cCustodian a/c
$$$$
Investment manager
Brokerdealer
Client 1= 300 shares
Custodian
MT 541 Receive Against Payment
CSD
MT 543 Deliver Against Payment
MT 541 Receive Against PaymentMATCH
PEFIGB22 BDAPGBPP
GLOBGB22 CRSTGB22MT 545 Confirmation Receipt
MT 544 Confirmation Delivery
Shares
MT 514 Allocation (1) 300
MT 515 Confirmation (1) 300
MT 502 block Order
MT 513 Advice of Execution
MT 509 Status (optional, to DK)
Securities settlement – a typical scenario
Introduction to SWIFT - FIRMA - 18 April 2011 29
Custodian a/cClient 1 a/c
Shares$$$$
+-
Broker a/c
Investment manager
Brokerdealer
Client 1= 300 shares
Custodian
MT 541 Receive Against Payment
CSD
MT 543 Deliver Against Payment
MT 541 Receive Against PaymentMATCH
PEFIGB22 BDAPGBPP
GLOBGB22 CRSTGB22MT 545 Confirmation Receipt
MT 544 Confirmation Delivery
$$$$
Shares
MT 545 Confirmation Receipt
5a5b
6
7
8a
8a9
MT 514 Allocation (1) 300
MT 515 Confirmation (1) 300
MT 502 block Order
MT 513 Advice of Execution
1
2
3
4
Securities settlement – a typical scenario
Trade matching
on Accord
MT 3xx messages
FX & currency options
Loans and deposits
+ 450 customers
Independent of counterparty
OTC derivatives
Acc
ord
for
Tre
asur
y
OTC Equity & Fixed Income Transactions
Community driven
Live since May 2009
For Prime & Executing Brokers and Custodians
Acc
ord
for
Sec
uriti
es
NEW
Introduction to SWIFT - FIRMA - 18 April 2011 31
Accord for Securities – Prime/Executing BrokerSolution for hedge fund transactions
Hedge Fund Executing Broker
Prime Broker
Daily Trade report
1. Automated pre-matching,
4. Settlement OK
MT515
MT515
MT 998
MT 998
Custodian
Custodian
Agent AgentCSD (PSET)
2. Real time status updates + exception handling on GUI + full
reporting in MT 998
2. Real time status updates + exception handling on GUI + full
reporting in MT 998
3 . PSET agents’ local code is x-ref to a BIC
in Accord
Accord
FAIL!
Introduction to SWIFT - FIRMA - 18 April 2011 32
Accord for TreasurySingle-slide overview
Accord Subscribers (>475 in 70 countries) • Banks• Brokers • Custodians• Fund mgrs • Corporates
(strong growth)
Accordsubscriber ornon- subscriber
• Real-time reporting & exception handling
• Integration available for various Back-Office Systems
DealConfirmations:
(MT 300,305,306,320, 330,340,341,360,
361,362,392, MT 600)
Accord• Real-time Confirmation Matching Service • Availability of >99.97% last 5 years• >90K msgs/hour observed matching capacity• Common matching rules + user-defined rules• Financial Liability for Matching results
Copies ofconfirmations
Copies of non-SWIFT data: fax, e-mail, e-FX portals, Broker feeds, Reuters, etc.
SWIFT
FX, FX Options, Money markets,OTC Derivatives,
Commodities
Introduction to SWIFT - FIRMA - 18 April 2011 33
SWIFT in Payments and Cash Management
Introduction to SWIFT - FIRMA - 18 April 2011 34
Common Payments Messages
• MT 103 Scope– This message type is sent by or on behalf of the financial institution
of the ordering customer, directly or through (a) correspondent(s), to the financial institution of the beneficiary customer.
– It is used to convey a funds transfer instruction in which the ordering customer or the beneficiary customer, or both, are non-financial institutions from the perspective of the sender.
• MT 202 Scope– This message is sent by or on behalf of the ordering institution
directly, or through correspondent(s), to the financial institution of the beneficiary institution.
– It is used to order the movement of funds to the beneficiary institution.
Introduction to SWIFT - FIRMA - 18 April 2011 35
Payments and cash management processes
Customer-to-Bank Bank-to-CustomerInterbank
Customer Credit Transfer
Initiation
Payment Status Report
Customer Direct DebitInitiation
I N I T I A T I O N
C L E A R I N G&
S E T T L E M E N T
A C C O U N T R E P O R T I N G
B2C Account Report
B2C DebitCreditNotification
B2C Account Statement
A C C O U N T R E P O R T I N G
B2C Account Report
B2C DebitCreditNotification
B2C Account Statement
Introduction to SWIFT - FIRMA - 18 April 2011 36
Payment Initiation
High level message flow (Wire transfers)
SETTLEMENT
Originator Beneficiary
SWIFT MESSAGING
Fed
IBK # 1 Community Bank IBK # 2 Beneficiary’s Bank
Settlement path can change based on information exchanged using SWIFT messages
Introduction to SWIFT - FIRMA - 18 April 2011 37
Mr. JonesLondo
n
Mr. UedaTokyo
Bank ALondon
Bank DTokyo
Bank BNew York
Bank CNew York
Pay $1000
It’s only 03:00 ET!
It’s 22:01!
103
09:00 CET
103 09:00 ET
It’s only 03:00ET!
Here it’s 16:00
103
Mr. JonesLondo
n
Mr. UedaTokyo
Bank ALondon
Bank DTokyo
Bank BNew York
Bank CNew York
Pay $1000
Cover payments – Timing aspects
103
09:01 ET
202
09:00 CET
09:00 CET
202 09:00 ET
910
09:01 ET
Introduction to SWIFT - FIRMA - 18 April 2011 38
Mr. JonesLondo
n
Mr. UedaTokyo
Bank ALondon
Bank DTokyo
Bank BNew York
Bank CNew York
Pay $1000
Charges $20
Charges $15
Charges $10
103
$1000
Mr. Ueda
$955
103$980
103
$965
No customer charges
Charges $10
103
$1000
Mr. Ueda$99
0
No customer charges
Mr. JonesLondo
n
Mr. UedaTokyo
Bank ALondon
Bank DTokyo
Bank BNew York
Bank CNew York
Pay $1000
Cover payments – Cost aspect
202
$1000
202 $1000
910
$1000
Introduction to SWIFT - FIRMA - 18 April 2011 39
Q&A
?
Introduction to SWIFT - FIRMA - 18 April 2011 40
Thank you