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Transcript of Standards SWIFT
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A year inStandardsOctober 2012
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Going beyondstandardsThe past few years have seen a surge in interest in standards across the financial services sector as efficiency and cost pressures haveincreased. In the first of a regular series of features on the topic, David Bannister says that 2012 is likely to see this trend accelerate
as different organisations start to collaborate more closely.
Embracing my inner geek, I have become involved in a
number of standards-related events and conferences over
the past few years, generally around the Standards Forum
activities of Swift.
But that has rekindled a passing interest that goes back
to my days as a reporter on Electronics Weekly in the late
1970s, where the annual mil-spec report was pored overby everyone in the UK defence technology sector not
standard? no sale ...
As what we now call IT started to take shape as a
completely separate industry, standards were also where the
news was the announcement by Digital Equipment, Intel
and Xerox of a standard called Ethernet has had a profound
and lasting effect on the world we live in.
Similarly, when the FIX Protocol was first announced
in London, I toddled along with a sharp pencil and was
rewarded by walking into a room containing 200 bank
technologists all wanting to talk about this new thing.
And I have to admit that some of the most interesting
and fun things Ive been involved in since joining Banking
Technology have revolved around standards.
Looking back, I see that all of those have involved
collaboration between organisations that might otherwise
have been competitors, and that is what I see most at the
moment: Swift, DTCC, Sifma, and others, working through
the Legal Entity Identifier specification, for instance.
Over the rest of this year, therefore, we plan to carry a
regular series of features tracking activities and issues in this
area, reporting on the many initiatives that are starting to
bear fruit and on new ideas bubbling under the surface.
Along the way, well be introducing the many characters
that inhabit the world of standards development
importantly, we will also be looking at how standards are
deployed in the real world, and how they are of practical
importance in improving the way the industry operates.
Of these, one of the first on the radar will be the Legal Entity
Identifier. This, says Tim Lind, global head of strategy, enterprise
content, at Thomson Reuters, has the potential to create new
Standards: the inventoryOne of the most common things said of the standards world is we love standards
thats why we have so many of them. This is true, but inevitable as different processes
and operations require different definitions.
A short guide to the alphabet soup of the standards world would probably
include the following though purists will argue that some of these, like FIX, arent
standards in the true sense, and there are some omissions that others might want to
have included.
AMQP Advanced Message Queuing Protocol: an open middleware approach that
allows applications to send and receive messages, but also to intelligently handle
messages through dynamically altering parameters such as performance and
security. Deutsche Brse uses AMPQ as the transport mechanism for its FIXML
messages in the Eurex system. JPMorgan sends 1 billion AMQP messages every day.
BIAN Banking Industry Architecture Network: A collaboration between vendors
and banks to set a common framework for banking interoperability using a ServiceOriented Architecture approach. It is working with the Object Management Group
and the International Financial eXchange Forum and, most recently, The Open Group.
FIBO Financial Industry Business Ontology: a standardisation, by the OMG, of the
content of the Enterprise Data Management Council Semantics Repository, which is
a repository of ontologies of financial instruments primarily securities instruments.
The goal is to standardise the terms and definitions of all reference data attributes
stored in the master files of financial institutions and passed among supply chain
partners.
FIX Protocol Financial Information eXchange Protocol: a messaging standard
developed for the real-time exchange of securities information, widely used in
trading systems. It has spawned a number of offshoots, including the FAST Protocol
FIX Adapted for Streaming used to support high-throughput, low-latency data
communications between financial institutions, particularly for the transport of high-
volume market data feeds and ultra low latency applications.
We know how standards can practically contribute to not only enablingautomation and reducing costs but also fostering innovation, by doing
things in a simpler and more efficient way.Juliette Kennel, head of standards, Swift
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opportunities, as well as increase operational efficiencies.
But first there are some details to be sorted out.
The priorities follow the original objective, which it
to increase transparency of Credit Default and Interest
Rate Swaps trades, therefore it makes sense to use the
DTCC Trade Information Warehouse, which is where that is
collected. Many of the entities are actually funds, and a fund
is really a relationship between a trustee and a trustor, so the
SIFMA working groups are bringing clarity in how funds will
be identified, says Lind, adding that the fact that the work is
being done in Europe and the US is a delaying factor. SIFMA
is working on the concerns, and the Financial Stability Board
is working on it in Europe, but the bottom line is that there is
no formal mechanism to co-ordinate across the Atlantic, sothe LEI is a microcosm of that challenge and highlights the
need for communication and patience.
Does this mean that the project is on hold in some way?
Not at all, he says: In terms of the ISO 17442, without formal
FSB endorsement it might be imprudent to formally ratify
the standard until the FSB draws its own conclusion, but we
are moving forward with LEI as though it were a foregone
conclusion. For Thomson Reuters, LEI is a key that we use
to not just identify an entity but link it with value-added
information, so it will be much more precise to map and join
data sets instead of relying on textual descriptions.
Also making headway is the Banking Industry
Architecture Network, which recently announced a
partnership with The Open Group to integrate their
individual industry frameworks for specific use in the
banking industry. Mapping together these frameworks will
accelerate project delivery, while dramatically reducing IT
integration costs.
The pair have collaborated to produce a white paper, in
which the core elements of the two individual frameworks
have been projected onto each other.
Hans Tesselaar, executive director of BIAN, said: The Open
Group is a serious heavyweight in architectural standards.
With its project approach and ability to deliver not to
mention its reputation as the anchor point of the standardsindustry The Open Group adds much value to the BIAN
open standards mission. We expect banks, which have
already adopted TOGAF, will also adopt the BIAN standard,
and the banking industry can take another step towards
interoperability.
BIAN originally started as a vendor group you could
argue that it really started as a SAP project, though it now
has a number of bank people in key positions ( Tesselaar
works for ING).
On the bank front, BIAN has ABN Amro, Banco Galicia,
Commonwealth Bank of Australia, Credit Suisse, Deutsche
Bank, Deutsche Postbank, ING, Kutxa, Rabobank, Scotiabank
Group, Standard Bank of South Africa, UniCredit Group, and
Zrcher Kantonalbank as members. On the supplier side, it
currently lists Callata & Wouters, Capital Banking Solutions,
CGI, Coretransform, Fernbach, HCL Axon, IBM, IFB group,
IKOR, Infosys, Innobis, Microsoft, SAB, SAP, SunGard, Swift,
and Temenos.
One vendor that isnt a member of BIAN is Misys. Barry
Kislingbury, global solutions manager for payments and
messaging at the vendor, says that Misys is indeed interested
and monitors progress Ive been to a few BIAN meetings,
he says but membership is not inexpensive and to gain
the full benefits considerable time needs to be committed.
Kislingbury also questions where the boundaries are to
be drawn in the competition/collaboration debate.
Swift is a great standards body: the Standards Developers
Kit is extremely good and we completely support what they
are trying to do with it, but in many areas now Swift are actively
competing with their partners, he says.Swift itself has a broad range of Standards related
announcements up its sleeve, which we will be returning
to in the next issue and following in the run-up to Sibos in
October.
As an organisation that both develops and deploys
standards, we know how they can practically contribute to
not only enabling automation and reducing costs but also
fostering innovation, by doing things in a simpler and more
efficient way, says Juliette Kennel, head of standards at Swift.
I am convinced that standards and innovation go hand
in hand, so am looking forward to reading the articles that
Banking Technology has planned in future issues.
FPmL Financial products Markup Language: Managed by ISDA, FpML was developedfor the OTC derivatives market by JP Morgan. Like FIX, it is a very widely used de facto
standard.
ISO 20022As the ISO puts it: A universal financial industry message scheme is the
international standard that defines the ISO platform for the development of financial
message standards. Its business modelling approach allows users and developers
to represent financial business processes and underlying transactions in a formal
but syntax-independent notation. These business transaction models are the real
business standards. They can be converted into physical messages in the desired
syntax. At the time ISO 20022 was developed, XML (eXtensible Mark-up Language)
was already the preferred syntax for e-communication. Therefore, the first edition of
ISO 20022 proposes a standardized XML-based syntax for messages.
LEI Legal Entity Identifier: Under post-crisis pressure from regulators, international
industry bodies including Swift, Sifma, the DTCC and others are working to create a
useable standard to identify parties in trades. It is expected that this will become an
ISO standard ISO 17442, in fact.MDDL Market Data Definition Language: is an XML-based messaging format for
exchanging information related to Financial Instruments, corporate actions and
market-related data. MDDL was developed by the Financial Information Services
Division of the Software & Information Industry Association.
XBRL eXtensible Business Reporting Language: an XML-based standard that tags
information in business documents such as annual reports in such a way that they
can be processed automatically.
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Why standards matterAt the Swift Standards Forum event in Paris at the end of last year, Banking Technologycaught up with John Murphy,
managing director of Trace Financial, to discuss why the company was involved in the event and what issues it is
addressing through the use of standards.
Q.Why do standards matter to you as a supplier?
Our business is built on implementing message standards.
This means applying message standards to solve a business
problem. Since a message standard only has meaning when
implemented, and only delivers value when part of an
integrated flow, then a given published standard has to beintegrated with client systems and that area causes pain for
most organisations.
Q.Why? Where are the pain points?
Traditionally this integration has been viewed as a technical
task and wrapped up with general middleware issues such as
protocols, connectivity and monitoring. This means purchasing
decisions for solutions that work with standards have been
taken by staff whose primary focus is technical and who, in
many cases, are unaware of the challenges presented by
implementing standards.
This has resulted in many organisations evolving evermore complex infrastructures that have become difficult to
change and difficult to test. We have spent many years assisting
customers with their messaging. Connectivity has become more
and more a standard commodity (FTP, MQ, TCP and so forth) and
subject to infrequent change; whereas message standards have
become more complex and ubiquitous.
More business services rely on messaging and involve
more and more parties. As the needs of more parties are
accommodated then the complexity of the standard and
hence implementation gets more involved. Add in year-on-year
change driven by business needs, regulatory requirement or
standards revisions, and organisations start to struggle with their
complex infrastructures. This is the problem space we address.Historically the move to middleware and associated
messaging mushroomed in the mid-1990s. Before that
payments had been automated but securities automation
lagged behind. In the UK the Crest initiative (lets ignore the
scarring experience of Taurus) forced messaging as a settlement
method and moved financial institutions to consider the general
issue of middleware solutions.
The technology was already addressed in the US healthcare
market where the need was established to link up giving
someone an aspirin with sending an invoice and making an
insurance claim. Hence many of these solutions were migrated
from the US healthcare market to the finance industry.
Q.How do standards help you address the needs of your
clients?
For our clients agreeing to use a particular standard is akin to
agreeing which language to use; it enables communication
and standards become the language of business. Markets have
become international and the adoption of standards facilitatestrading and settling any instrument, in any market anywhere.
Of course, this also means things can get out of control more
quickly, as in the recent scenario with sub-prime debt being
packaged and sold and leaving organisations unsure of precise
exposure. There again, it is standards that will be the tool used
by regulators to establish central reporting and monitoring of
trading activities.
It doesnt matter whether our clients are looking to
trade internationally, seamlessly and quickly or comply with
regulatory authorities; all these functions require a language
and communication and hence a standard. The challenge for
the client is fluency how quickly can it adapt, implement and
integrate standards? An organisation with a high level of fluency
will be able to support new services with minimum effort;
integrate them with existing processes and systems as well as
deal with on-going change as standards and processes evolve.
Q.Quite a complex relationship, then?
As time passes no standard gets simpler. They involve more
messages, each message involves more data and the data
items get more complex. Compare, for example, the number of
messages in FIX 4.1 with FIX 4.4; look at the number of parties
on, say, the Notice of Execution message in each version and
finally compare the complexity of definition of a party. At
every level complexity has increased as the needs of moreand more parties are accommodated. This helps clients with a
more functionally complete, and viable, solution but presents a
challenge in coping with the complexity. It results in a love-hate
relationship between clients and standards but it is not one that
is going away.
Q.Are there particular standards or issues around
standards that are currently of concern?
Every standard has its issues but they vary greatly from one to
the next. They also cover different ground. For example Swift is
a message standard but it is also a network and generally client
issues are how to create the message, how to test it complies
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with all standards in the User Handbook and how to transport
the message to and from the Swift network.
For Crest there is a message standard and a network but
also a business service for settlement and clearing; so the client
issues are how to create the message, test it complies with the
DEX, transport it on the relevant network and then track the on-
going status of transactions by requesting status updates and
responding accordingly.
With FpML there are multiple standards, no network and
clients mutually agree how to adapt standards for their own
needs no one uses a vanilla version of any of the FpML
standards.
There are also numerous standards without any critical mass
of users that would lend credibility in spite of lots of committed often voluntary effort by intelligent people to define the
standard. If it is difficult to see the connection between the
spend on implementing a standard and an associated business
benefit, the project will never get to the top of the pile and
attract focus and funding. In the Swift world it is not surprising
that established users resist migrating from ISO15022 because
it is doing a good job for them; meanwhile new users would
prefer an ISO20022 and XML-based standard.
Q.There are also perception issues, arent there?
There are some myths or general misconceptions around
standards and these generally come down to an expectation
that standards should simplify messaging. The fact is that a
complex transaction implies any message model also has to be
complex. And if that model tries to accommodate the needs of
multiple parties to allow widespread usefulness then the level of
complexity will increase. We call this the Standards Paradox: as
you accommodate more needs complexity grows. This is neither
good nor bad just a fact of messaging life.
Another common misconception is that XML is in some
way a strategy for messaging and that XML will also simplify
messaging neither is true. Try representing Einsteins Theory
of Relativity or James Joyces Ulysses in XML and they will not
suddenly become simple. Of course there are many tools to
facilitate working with XML but standard open tools workingwith complex structures and rules combined with the need to
integrate with lots of non-XML in-house systems does not lead
to messaging fluency.
Testing is another significant issue area. To test that a
message is consistent with a given standard in a development
environment is beyond the majority of financial institutions.
It is impossible to look at a message instance and determine
whether all mandatory fields, data formats, options and market
practice rules have been adhered to. Standards bodies vary
greatly in terms of testing facilities that are available and they
tend to vary from none at all to being available at certain times
subject to booking etc. From a project perspective efficiency
View from a bank: Ian Chittick, Lloyds Banking GroupIn one of the Swift Standards Forum sessions at Sibos in Toronto
last year, one session addressed the question of why the technical
plumbing issues of messaging standards should be of any interest
to senior people working on the business side of the institution.
The answer of one participant was straightforward: They help
us to make money.
Its a view that is echoed by Ian Chittick of Lloyds Banking
Group. The reason that it is so important to a non-technical business person is that
once you get into the exchange of financial information, the standards facilitate the
business.
Chittick says: the problem with standards is the second s there are too many of
them. This is true across technology, he adds the proliferation of browser versions
complicates the provision of internet banking services, for instance.He adds that the provenance of standards is important. Swift has done a great
job, but is has always been a bank approach. We dont even have to think about how
we have to talk to another bank, but when it comes to corporates, the situation is
different and we need to be more flexible.
Ultimately, however, standards are there to facilitate the business. One of the
interesting things is the value of bureaux: as a bank, it is not our core business to map
and translate between data formats we dont want to differentiate on the ability to
accept file-based transactions; we want to differentiate on the quality of our services
and products.
Chittick distances himself from the standards making process. Intellectually,
some people do get a buzz out of it. But for me it is about getting interoperability to
the point where you are facilitating the interesting parts of the business.
Ian Chittick is head of the Global Channels team within the Transaction Banking division
of Lloyds Banking Group.
is greatest when testing is integrated with the development
cycle and for that an electronic version of the standards that
encapsulates all rules is required.
There are numerous other issues like the way standards are
defined, documented and published; how changes (delta) are
tracked and documented, how one assesses the areas of an
implementation affected by a given change. The way that rules
are defined and local market practice encapsulated. The way
some standards are imprecise or vague and cannot be precisely
implemented electronically i.e. they are guidelines rather than
anything more specific. But the above is probably sufficient for
now.
Q.What are your current areas of focus and how do you seethat changing in the medium- to long-term?
Our current area of focus remains providing Transformer that
makes the implementation of standards faster, cheaper, higher
quality and more adaptable. We do also provide targeted
messaging solutions where a message standard is integrated with
a set of business rules and transaction flows to deliver a targeted
messaging solution for a specific business process. There is huge
room for improvement in the level of fluency with messaging
standards in most financial organisations and recent history
suggests this situation will persist so we see lots of opportunities
to solve client issues and improve existing infrastructures.
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Swift gears up for NY launchof MyStandards in MayThe online standards management and customer service tool from Swift is ready to go live.
David Bannisterreports on why it has been attracting so much attention.
MyStandards, the new web-based management and
communications tool developed jointly between Swift and a
group of pilot users will officially be launched in New York at the
beginning of next month.
The service is intended to provide a comprehensive
mechanism for financial institutions to communicate serviceinformation with their customers, as well as improve internal
management of standards and market practices.
Bank of New York Mellon, Citi, Clearstream, JP Morgan,
RBC Dexia, SIX, T2S and the UK Payments Council, have been
collaborating on MyStandards in a closed pilot, and are now
expected to be joined by others as the launch date approaches.
Initial reports from the closed trial emerged in a session at
the Sibos event in Toronto last year, where it became clear that it
will go beyond its original brief of being a simple management
tool, thanks in large part to the interactive rapid development
methodology that was used to develop it.
Speaking at a session in the Standards Forum part of Sibos,Bernard Lenelle, senior vice-president, product management
for core products and business strategy at Clearstream, said the
process had meant that we have been very close and had a
constant interaction with the developers.
Veronique Peters, project manager at Bank of New York
Mellon, agreed: It has been really comfortable Swift has been
asking for feedback all through, and weve been getting the
results of that come back to us.
The success of the development methodology has already
seen it adopted in a number of other projects, observed Brian
Crabtree, director of market practices standards and Swift at
Citi, who described it as a very effective, collaborative, iterative
approach.Essentially, MyStandards is a wiki, a web-based method
of collaborating on the creation and sharing of information,
the most famous example of which is Wikipedia. Financial
institutions can use MyStandards to capture information
about their use of standards and their business and market
practices. Internally this improves documentation of this
kind of information, and addresses the problems of change
management.
Typically, within Citi, for example, this is done manually
using Excel spreadsheets to capture the information, and the
spreadsheets have to be transformed into actionable change
requirement projects as new products and services are added.
This can be a very heavy process, said Crabtree. For Citi, the
main direction is to make that effort easier to manage, and to
improve sales and implementation with new customers as well
as for internal dissemination of all information.
Lenelle said MyStandards acts as a single repository of
all data, which is something we have been looking for for along time. The ease of contribution means that there is a risk
that the database could become cluttered by some users
adding or amending data, so it will still require a disciplined
management approach.
Asked if this meant that there was a danger that the
standards approach could itself be debased by users adding
endless work-arounds and quick-fixes of their own, BNY
Mellons Peeters said: Within the boundaries of the standard,
there is freedom in terms of the information you are
propagating that is part of your business process and it is
important to know about that.
Lenelle, who is co-chair of the corporate actions
sub-group of the Securities Market Practice Group, said
capturing of market practice is also greatly facilitated by
the MyStandards tool. By collaborating on this, institutions
will be able to concentrate on more competitive issues.
We should not be competing on standards we should
compete on services and MyStandards can communicate
what those services are to customers.
The launch of MyStandards has been a classic soft launch
as well as the trails at Sibos last year, the Swift Standards
people have been actively promoting it and seeking
participation ahead of the official launch.
Before the May launch event in New York, there will be an
opportunity to discuss the service at the Swift London BusinessDay at the end of April, a repeat of last years sucessful event.
In the meantime, interested parties can sign up to look at the
service for themselves at www.swift.com/MyStandardswhere
free trials are available till the end of April.
Banking Technology and Swift have teamed up to host a
roundtable event with some of the initial pilot participants and
other interested parties. This will appear online to coincide with
the New York launch event, as well as in a later issue of Banking
Technology.
To make sure that you are registered to receive a
complimentary issue go to www.bankingtech.com/register.
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Why standards bodiesneed to stick togetherBanks cannot complete on back-office functions. This opens the door to collaboration on standards, says Hans Tesselaar.
Prior to 2009, there was seemingly little need for standards
within financial services. Continued high turnovers ensured
there was little, or no, talk of efficiency, transparency or
passing savings on to customers, and reducing the vast
investment on IT integration was a non-issue. This was the
case until the banking crisis, which resulted in $1.5 trillion
in bank write-downs being realised from 2007 to 2009 (IMGGlobal Financial Stability Report, April 2010).
The financial crisis of 2008 is a term now used to discuss
a wide range of ills. Yet there is little doubt of the impact
it has had on financial services. Not only are banks now
scrutinising expenditure a lot more closely, but they must
also provide evidence of efficiency and cost-cutting if
they are to regain public trust. This increased focus on
expenditure naturally brought about a period of change
within the industry.
In parallel to the scrutiny of balance sheets, banks
made the stark realisation that they cannot compete on
back-office systems the battleground for innovation
and customer acquisition and retention lies in front-officecustomisation. This discovery opened the door to financial
services standards and collaboration.
Financial services: the next frontier
Standards bodies have long played a part in other industries;
the International Organisation for Standardisation has been
publishing standards since 1947, across industries ranging
from agriculture and construction, through mechanical
engineering to information technology. Yet the financial
services industry has lagged behind. However, in light of the
ongoing economic stagnation being experienced across
Europe, the financial services industry continues to look to
improve efficiency, and the employment of standards has
been recognised as essential to achieving this.
The importance of standards is clear when we consider
the significance of interoperability. Interoperability is the
key to ensuring that different systems can communicate
effectively. In the context of software implementation, the
integration costs both in terms of time and finance are
prohibitive. Integration costs are often as much as triplethe
purchase cost of the original software and, as a result, many
banks are opting to replace specific parts of their existing
IT, which have either become obsolete or are difficult to
maintain, with off-the-shelf software.
The common use of standards could ensure that a banks
systems, semantics and expectations are in-line, reducing
the cost, time and risk associated with the communication
process between different IT systems. Undertaking a
core banking system renewal, for example, if both bank
and vendor are fully interoperable and working from the
same set of standards, would not only reduce the cost of
integration (which can be tens of millions of pounds), butthe business case would be improved, allowing banks to
bring new and improved functionality to market at a greater
speed. This is good news for banks, for which innovation is
the key to staying ahead of competitors, but it is also good
news for software vendors, as banks are then increasingly
willing to invest in IT.
Standards bodies truly practicing what they preach are
increasingly looking to collaborate with each other. Integrating
individual industry frameworks allows all parties to leverage their
standards, for greater reach to banks and software vendors. BIAN,
for example, works with Swift, the Object Management Group,
the International Financial eXchange Forum and The Open
As more organisations seek to collaborate in order to increasecapability in terms of efficiency, cost-saving and flexibility, increased
emphasis is placed on the importance of communication
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Group. The Object Management Group works with a number of
other standards bodies, across different industries, such as the
Healthcare Information and Management Systems Society, with
which they collaborate on the creation of healthcare standards.
Inter-organisational collaboration occurs for a number of
reasons and has great potential for verticals such as financial
services. The Open Group and BIAN partnership came about
after The Open Group identified a need within their member
base for more thorough standards, specifically around
banking. When applying The Open Group Architecture
Framework in a banking
environment, the BIAN content speeds up the workby providing banking-specific architecture content. BIAN
benefits from such a partnership as TOGAF provides a
structured approach and adds value to the BIAN deliverables
for the project approach and capability to per form.
The point is that standards bodies focus on different
standardisation layers, and working together allows bodies
to offer broader and further reaching sets of standards.
Furthermore, in an age of overlapping industries and spaces,
offering a collaborative approach to standards, in which
already defined standards are reused, allows organisations
already invested in an existing standard to safeguard this
investment whilst adopting alternative frameworks on a
different level. Naturally each body has its own roadmap and
timelines set by their members; it is the alignment of these
roadmaps which presents the greatest challenge.
Why are standards bodies aligning?
The issue of collaboration among standards bodies has really
only come onto the agenda in recent years. This may be for
a number of reasons. Firstly, technological advances have
resulted in ever more generic underlying technology across
industries. The price of hardware has dropped considerably
and data and memory capacities have improved, resulting
in a more level playing field between the industries. This
has, in turn, allowed these industries to adopt common bestpractices in non-value add, non-differentiating, back-office
systems and processes. Secondly, and this is certainly true
for the financial services sector in recent years, regulatory
pressure is on the increase. The heavy hand of the regulators
can be felt across all industries, especially where data is
involved, and this has further increased awareness of the
possibilities of cross-industry standards collaboration.
The need for collaboration between standards bodies
Swift, BIAN, OMG, IFX and others is clear for both banks
and software vendors. Rather than aligning with just one
standard in the hope that it will become the de facto, they
can be sure that there will be no competition between
bodies, and therefore can avoid the potential risks this
would involve. Banks need to retain the flexibility to design
their own roadmap, knowing there is no r isk from aligning
the technology with a certain standard.
Standards where next?
The increasing complexity associated with IT architecture
means standards have never been more important.
Furthermore, as more organisations seek to collaborate in
order to increase capability in terms of efficiency, cost-
saving and flexibility, increased emphasis is placed on the
importance of communication. As a result, organisationsand systems that can converse with one another will
increasingly lead the pack. It is no surprise, therefore, that
a number of standards bodies have emerged, seeking to
encourage further inter-organisational collaboration.
The standards landscape is an evolving one and,
although the existing bodies are likely to stay separate
for at least another couple of years, it is probable that we
will see ever more alignment and collaboration as the
standards mature and technologies enable a more seamless
integration of the different layers of standardisation. Within
the next five years, there is the possibility that we will see
one generic financial services industry standard emerge.
Likewise, it is not difficult to imagine standards crafted
for the retail banking space crossing into other spaces,
for example insurance. Despite the accelerated uptake of
standards within financial services, it is unlikely that we
will see any new players entering the market for one
thing, existing bodies cover the whole landscape, from
application-application, business-business, messaging and
semantics, all standardisation levels are represented.
Nevertheless, it would be premature to declare the death
of internal standards, such as IBMs Information FrameWork.
Proprietary standards hold vast amounts of value in terms of
financial property, and as such their importance is unlikely
to be diminished; although they will face increasing pressureto become more aligned with open standards. This is
demonstrated by IBM recently joining BIAN as a member,
and taking a seat on the board of directors.
A fundamental principle of open standards is to not reinvent
the wheel, so it is encouraging to see standards bodies taking
their own advice, and collaborating to repurpose existing
frameworks. There exists a demand from the industry for further
cooperation; it is no longer enough in this ever-integrated
market for a standards body to cover just one area.
Hans Tesselaar is executive director at BIAN, the Banking
Industry Architecture Network
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Taking care of businessIts 20 years since the Financial Information eXchange protocol first took the trading world by storm.
David Bannisterspoke to FIX Protocol Limiteds Stuart Adams about its role for the future.
Twenty years ago several hundred dealing room IT and market
data specialists gathered at Salomon Brothers premises in
Buckingham Palace Road. Representatives of Goldman Sachs,
JP Morgan, Merrill Lynch, NatWest Markets, Nomura, Schroders
the whole of Londons trading and investment managementcommunity, pretty much, was there.
Theyd come to hear about the Financial Information
eXchange Protocol, developed by Salomon Brothers and
Fidelity Investments as a simple means of sending equity
trade data between institutions. I was there reporting for
the newsletterDealing with Technology. Taken aback by
the turnout, I asked the head of market data at one of the
broking firms what everybody doing there. He gave me a
withering look and said: Because if we want to trade with
Sallys, which we do, then we have to format our messages
this way. Soon.
In the intervening 20 years, FIX, managed by FIX Protocol
Ltd, has become the dominant pre-trade messaging andexecution protocol, spawning variants that encompass High
Frequency Trading and allow the protocol to be embedded
in silicon and incorporated into routers that allow for
intelligent order routing, low latency and other applications.
Hardline standards people sometimes dont like FIX being
referred to as such, but if youre looking for an example of a
de factostandard, youd be hard pushed to find a better one.
Which, in part, explains why FIX is a fundamental part
of the Standards Investment Roadmap. First produced in
2008 at Sibos in Vienna, the Roadmap brings together FIX,
the Financial Products Mark-up Language, Swift messages
and the eXtensible Business Reporting Language, showing
where each could perhaps should be used. Also involved
are implementation specialists the International Securities
Association for Institutional Trade Communications ISITC
and market data specialists the Financial Information
Securities Division, which has been instrumental in the
development of the new Legal Entity Identifier standard.
With the exception of Swift, all of these groups were
largely the vision of small groups of like-minded individuals,
which have grown by accretion into larger groups: how all of
these are now coming together shows how important it has
become to improve information flow across the industry, for
many reasons including cost, efficiency and transparency.
What is really interesting is that over the past few
years what we have seen is a realisation that standards, in
general, have become something that is important rather
than something that is just taken for granted, says Stuart
Adams, EMEA regional director at FPL. In the past people
looked at the evolution of FIX in the pre-trade space, initiallyfor equities and then into other asset classes, and they are
realising that while the protocol is free, the infrastructure
that you put in place to run it is not, so it is becoming even
more important to follow the use of those standards. For
example, in regulation: how can we use standards to address
regulatory requirements?
Adams says that in the regulatory world this is working
in the opposite direction too, with recent proposed US
legislation referring to the need to have non-proprietary,
free and open standards in place for the processing of
information not in financial services, but in areas such as
child protection welfare.
From something that has been taken for granted, people are now seeingstandards as fundamental in how they take their business forward.
JULY/AUGUST 2012
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Some of the politicians in the US who are behind that
legislation also understand
that the exchange of information between agencies and
between countries throughout the whole financial lifecycle
can be facilitated in such a way that you have transparency
and you mitigate systemic risk if you are using the right
types of standards, says Adams. It comes out of left field,
but it makes sense. From something that has been taken forgranted, people are now seeing standards as fundamental in
how they take their business forward.
In one sense, standards like FIX have become intrinsic
and robust to such an extent that they are make it easy to
address more complex issues, and have laid the ground
work for much of the current debate on business processes,
market practices and regulatory frameworks.
We are working very closely with Swift, and others, and
it is very much a united face that we take forward, says
Adams. On the roadmap, we have done joint meetings in
Washington, we have done joint meetings in Brussels, where
we have gone as Swift, FIX, FpML and XBRL and what we aretalking about is the business process. The common factor
is that we are trying to make sure we have interoperability
in the business process under ISO 20022, not just an ISO
standard. Again it comes back to protecting the business
investment that people that have already made.
As the dust slowly settles from the financial crisis that
began in 2007/8, it is becoming clear that standards and
common business practices need to combine with a
workable regulatory framework for the financial services
industry to move forward.
It really is roll up your sleeves time, says Adams.
Politicians talk holistically about what they want to achieve
but what it comes down to is the delegated powers thatare going to the European Securities Markets Authority,
and then ESMA taking guidance from the industry on how
to address the practical implications. How do we get the
regulations into being without burdening the industry with
a lot of additional cost? That is where standardisation is
starting to come forward and we are finding a greater level
of engagement.
As the Standards Roadmap has evolved, most recently
with the inclusion of XBRL, so the range of people involved
has had to broaden. XBRL is mandated by the US Securities
and Exchange Commission for company accounts and
reporting, which is is all very good in itself from the point
of view of having machine readable company accounts,
but, Adams says, for it to be truly useful, the involvement of
issuers is essential, and FPL has been working with XBRL on
this to add the appropriate workflows to the roadmap.
While all of the good work that is being done by those
toiling at the coal-face to align standards, business processes
and market practice, regulators are focusing with some
urgency on over-the-counter derivatives trading, and thisis the focus of a lot of work right now, says Adams. It is
ongoing and the regulation is changing quicker in that
space, so there is a lot of activity.
Also high on the agenda is the adoption of the Legal
Entity Identifier. Though people have been working
on definitions and structures for more than a decade,
the LEI comes all the way from the G20 governments:
down through the Financial Stability Board, through the
International Organisation of Securities Commissions
to regulators, to the standards bodies, starting with the
International Standards Organisation.
Without oversimplifying it, from an FPL perspective,
essentially it is data that is going to be included in a FIX field
and transmitted, says Adams. We have actually taken it a
little further than that in terms of looking at the party details,
the relationships between parties, and the hierarchies of
those relationships, but in essence it is data that is going
to be transmitted. What is important behind that is that at
the ISOCO level, a lot of the things that are talked about are
about transparency, which is about information, and when
it comes down to it, those are the same principles that are
behind a lot of our initiatives.
Adams says that there is currently a lot of interest in
the standards roadmap from the regulators. The good
thing is, because we are not a trade association lobbyingfrom a particular position, it is much easier for us to have
conversations with them, as we are completely neutral, he
says.
FPL is also about implementation, he says, not just talking
about the issues. A good example is the risk management
guidelines we have just published. That was from a coming
together of various market participants, and identifying
what information was being passed as part of an electronic
transaction, and what checks and balances should be in
place. It meant some tweaks to individual tags in the data
that was being transmitted, but overall it was about looking
at the business process and putting best practices in place.
How do we get the regulations into being without burdening the industry with alot of additional cost? That is where standardisation is starting to come forward.
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David Bannister, editor,
Banking Technology
(moderator)
PARTICIPANTS
CHAIRMAN
Stew Cofer, SWIFT
product manager,
JPMorgan Treasury
Services
David Broadway,
senior technicaladviser, Investment
Management
Association, and co-
chair of the Securities
Market Practice Group
Investment Funds
Working Group
Marc Delbaere,
head of research &
development, SWIFT
Standards
MyStandards, officially launched this month, is
a development that goes to the heart of what
SWIFT is doing to reduce the cost of managing
the implementation of standards, according
to no less a person than SWIFT chief executive
Lzaro Campos.
He may well have been understating thecase: initial reports from pilot users at Sibos in
Toronto last year were very positive, and as the
launch takes place in New York, a momentum is
gathering behind the initiative.
So what is MyStandards? The service
is intended to provide a comprehensive
mechanism for financial institutions to
communicate service information with
their customers, as well as improve internal
management of standards and market practices.
According to Marc Delbaere, the initiator and
business owner of MyStandards, the original productidea started some two years ago. It started towards
the end of 2009 when we did a full analysis of all of
the pain-points in the industry around standards,
he says. We were looking at the complete end-to-
end chain of what was happening, from defining
standards through to implementation, and we
realised that SWIFT had a somewhat restricted view
of what was happening.
Delbaere says that SWIFT identified two issues
that needed to be addressed. One of the early
things we recognised was that harmonising
global market practices was the tip of the iceberg
and the reality was that the industry, in dealingwith all of these specifications and standards,
had all sorts of other constraints, such as local
regulation or limitations of back-end systems.
That was one of the things we wanted to fix,
he says. The other was change management.
These standards change over time and every
time something changes, since we dont have
fully integrated change management from the
source of the standards to integration in systems,
this causes massive costs across the industry.
We wanted to treat change as something more
consumable all the way down from when
business people decide to change something,
to where you need to implement the change in
your systems. Really, those were the main two
drivers to the project.
A central part of the development was the
involvement of the user with a the range of
banks and other interested parties broughtin from the beginning and others joining as
development progressed to the open pilot stage.
Bank of New York Mellon, Citi, Clearstream, JP
Morgan, RBC Dexia, SIX, Bundesbank and the UK
Payments Council all contributed to the project,
as did the Securities Market Practice Groups.
Stew Cofer, SWIFT product manager,
JPMorgan Treasury Services: We were
approached early 2011 to participate in the
pilot. We had some queries about it s scope
and ambition, but immediately recognised the
value and had some ideas for initial use. Our
customers increasingly purchase services from
multiple financial institutions as they grow; it
follows that they increasingly benefit from better
standards management. These multi-banked
clients are honest and share with us the pain
they experience from variations generated from
different interpretations of standards by their
service providers; they are a driving reason we are
so involved in standards creation and enrichment
across many business areas. MyStandards seemed
a natural step in the right direction. Initially, we
sponsored content into MyStandards from a cash
management and a securities perspective.One of the things that is clear is that
MyStandards will address different needs for
different groups, and for many the attraction is
less to do with the change management issue
than with the ability to communicate standards
information quickly and uniformly to clients.
For JP Morgan it was less to do with the
first problem and more with the second. For
an organisation of our size, annual standards
changes are well tended. The communication
element was attractive because we are part of a
community that recognises the current process
A tool for changeTo coincide with the launch of the MyStandards product, SWIFT and Banking Technology combined to bring
together some of the people involved in the pilot development to discuss how the product has evolved and
where they see it going post-launch.
MAY 2012
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could improve, specifically in getting the
standards into applied business language in
a uniform way, says Cofer. For us the appetite
for being involved was based on our clients
need to understand applied use across their
service providers. Like many institutions we
have robust documentation, on boarding
processes, and interfaces with the industry.
JPMorgan is probably like a lot of institutions
in that when we write documentation,
standards are the starting point. The result
after we, competitors included, all strive forthe best way to apply these is some good
documentation; yet our customers still feel the
inconsistency. Ill claim some small bragging
rights here being the first to contribute a
practice/usage guideline to MyStandards in
the pilot has put us in a great position on this
point. We were very impressed at the output
and were able to give SWIFT requirements
that would directly benefit our customers in
very specific use cases. To be fair, most of what
an institution might need was part of the plan
from day one.
This, he says, will allow easier management
and dissemination of that documentation.
The involvement of potential users early
in the process was a departure for SWIFT,
and crucial to the development in fact,
collaboration changed the direction of the
development substantially.
In the beginning we had a fairly good idea
of the problem we were trying to solve, but if
you look at the evolution of the product from
what we thought we would build to what we
ended up building, there is quite a significantdifference theres perhaps a 30% difference
between the feature set that we planned
and what has turned out, says Delbaere.
The way that happened was that we were
sharing stories and screen mock-ups with the
customers from the start and there was a lot
of interaction. They were telling us, we will
have more of that and less of that and this
continuous feedback was invaluable.
SWIFT, like most IT-centric operations, uses
Agile development methodologies internally.
But what was unusual was the amount of
customer inclusion, very, very early in theprocess, he says. The first things we showed
were sometimes very sketchy, but it showed
where it might go. That was the deal, to be
able to set up expectations at the right level
and make sure that we were going in the right
direction.
Cofer says that it worked from his
perspective: We really have seen SWIFT
address almost everything that we asked
them to do.
David Broadway, senior technical adviser
at the Investment Management Association,
and co-chair of the SMPGs Investment Funds
Working Group, was one of those who came
to the development later, and he agrees that
the iterative development has been central.
The first time I saw MyStandards was at
an SMPG meeting a year ago when it was
introduced informally. We started using an
early version of the editor component to
capture the discussions around the messages
we were working on at the time, he says. At
that stage we were doing it as part of the beta
test and in that that process we identified
bugs which the facilitators took back to theircolleagues at Swift. It was the first step, but we
actually did use it and the work we captured
at that stage we were then able to use.
Broadway says that while the service isnt
yet fully mature, this constant redevelopment
gives him confidence that it will develop
further. It has a little way to go in terms of
what I have seen, but I already know that
there are future developments coming along,
which is part of the iterative approach. For
example, I joined the process in November
and was on a conference call in January and
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all of the things Id come up with had already
been dealt with.
Broadway says that his funds market
practice group currently has PDFs describing
market processes, supported
by spreadsheets describing the
component usage. What we want to do
next is to replace those spreadsheets withMyStandards representations of them, and
that will be a massive improvement on what
we have today in terms of what we see when
we try to capture market practice and the
consistency of whats presented as output.
This immediately eases the task faced
by national market practice groups when
it comes to comparing their processes.
Currently each group will have captured the
processes slightly differently and formatted
the spreadsheets differently. The consistent
MyStandards approach will ease this Thetools are there within MyStandards to do it all
on screen and that delivers extra capabilities
that we dont have today, he says.
Cofer adds that by taking this approach
there are benefits for the wider industry. This
is where Swift did a great job youre in the
funds space, and Im in the treasury services
space, but those suggestions really benefit
every other business area that might use
MyStandards, he says. Swift has taken that
perspective across the standards landscape,
so we got a lot of benefit that we hadnt asked
for.These benefits will only be fully realised
when there is a greater uptake, These benefits
will only be fully realised when there is a
greater uptake, however. The information has
to be in there, of course, says Broadway. Swift
has been working to load existing SMPG and
NMPG documentation into MyStandards we
still need to do some validation at this stage
but although it wont be in the public domain
until we validate it, there is an existing body
of work.
In the early days this implementation
will be at different speeds as different
stakeholders are at different stages of
adoption of standards most of the SMPG
and NMPG working groups date back to the
move from older standards to ISO15022, for
instance, and are just starting the transition
to ISO 20022, while the more recently formed
funds group was set up with ISO 20022 inmind.
We came from a slightly different starting
place, says Broadway. The people that
have been doing market practice in 15022
will see a very different representation in
MyStandards to what they are used to its
more hierarchical, and in my experience
you can visualise the message far more
easily than with flat tables. Weve had the
hierarchical presentation with ISO 20022
on the investment funds side, but without
the ability to capture processes in the same
place and amend them to create your
own specifications to make an optional
component mandatory, for instance for the
purposes of market practices. It is about doing
what you want to do in context, far better
than weve ever been able to do.
Cofer agrees: You cant compliment the
interactive nature and visual presentation of
MyStandards enough. Theres just nothing
like it.
Competition versus collaboration is
something that is talked a lot about, but
MyStandards could raise issues in some mindsabout where the boundaries are: surely if you
have more efficient processes than the bank
next door, it is a competitive advantage that
youll want to protect?
Cofer says that this might once have
been the case, but no more. Efficiency is
always an advantage but what if everyone
was equally efficient in a agreed way? he
says. I think a gap did perhaps exist for best
practice documentation, but MyStandards
will change that forever. No matter what the
adoption rate is, there has already emerged a
good way to describe standards. Im very pro
MyStandards at the moment, especially for an
institution since the content that is in there
now generates, with a click, your own client
documentation in a variety of formats.
The existence of a central source of
information will be one of the drivers to
wider adoption that will also remove this as acompetitive issue. The information is being
used by one consumer, but contributed by
many, and no institution is going to want
to not be one of the many, though there
is no motivation to be the only one on
MyStandards, he adds.
Broadway says that this is already the
case in other areas. In the securities world
it is a many-to-many relationship between
institutions. You can compete on services,
but the way you want information to flow
is to everyone each institution, such as
a custodian or an investment manager, is
connected to many counterparties, and the
more standardised the messages are between
them, the better for everyone.
Delbaere says that the diversity of the
industry was something that SWIFT was
aware of right at the beginning. When we
started, we realised we were looking at a
very diverse environment, and there would
be different needs as different business areas
were dealing with standards in very different
ways. At the end, when you abstract it, the
fundamental problems are all the same. Canyou describe what you are doing today? Thats
not easy, and everyone does it differently, so
just providing that capability is helpful, he
says. From a product point of view, what do
people care about? They care about what they
do today, and what the drivers for change are,
and that is what we started with.
Best practice groups are one way to
address these needs but the other way
is just to create a community, says Cofer.
MyStandards is very good at taking one part
of the process and uploading it, which is the
We used to compare national market practices manually on a spreadsheet, lining
up the countries and doing a gap analysis manually but in MyStandards it pulls itup and in 10 seconds or whatever, it does the analysis.
David Broadway, IMA
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My part of MyStandards. But you will only
get more engagement where people have an
input on the reasons for the changes.
Cofer divides the potential users of
MyStandards into three groups. The first
are those who consume the standards that
already exist and we have seen immediate
value from that: instead of looking at ahandbook, we interact with a click and see
the standards instead of digging through
user handbooks, he says. The second group
are those who are adding their information;
contributors such as large institutions, market
practice groups, and SWIFT itself. Cofer says
there are challenges here as you are see actual
use and interpretation versus the standards
in the cold light of day. The third group,
the wider community can examine the
dynamic that exists between standards and
interpretations. It allows them to understandwhat one institution does in relationship to
a standard as opposed to another institution
or how one market behaves differently than
another from the same base standard, he
said. Previously, when a multi-banked client
wanted one way of doing things with all of its
banks, they often chose to meeting with all of
their banking providers at once to realise their
goal; in-person, real-time co-opetition. With
MyStandards youd have the results of that
meeting on your screen without the meeting
at all.
Delbaere agrees: It also allows you tosay: this is what we do today and if you want
to communicate with us you have to do
it like this. As a community we can evolve
standard practices over time. We see it as a
way of bridging the gap between all of the
organisations defining standards and usage
(typically the big financial institutions, market
practice groups and market infrastructures)
and the ones that need to consume these
specifications efficiently.
For Broadway, the ability to extract data
in consistent format is a plus. It allows you
to pull the information out in a format that
you can distribute in a way that suits you for
that particular purpose, he says. We used to
compare national market practices manually
in spreadsheets, lining up the countries
and doing a gap analysis manually but in
MyStandards you can pulls them up together
and in 10 seconds or whatever, it will do theanalysis for you.
Cofer is equally enthusiastic about this
functionality. The export of XML schemas
that we can get is very useful, he says. Only
recently were we able to pull up schemas and,
with the help of Swift, put them into one of
several formats that our clients might prefer.
We communicate today using spreadsheets
and PDFs, but our creation time is much
shorter using MyStandards. And let s not
forget that a JPMorgan MyStandards spec
is then in the same format as one of our
competitors MyStandards specs. It s all about
consistency for our clients when we know
they have other providers.
In terms of large-scale deployment,
Cofer says there remain questions for a large
organisation in terms of the administration
that will be required and in terms of the
boundaries of who can see what, but he
says that if history teaches us anything, it
is that people will move on with this and
administration will become a focus after key
requirements are met.
Delbaere says that SWIFT has beenaddressing this. It is a difficult problem, he
says. We have tried to keep administration
and privacy features as simple as possible but I
am sure we will continue to get requirements
in this area.
The boundaries issue goes to the heart of
the matter, it is at heart a system for sharing
information. We have to be happy about
what we are sharing, and perhaps even more
important is a grasp on and control of who
sees what we share, says Cofer For us, the
MyStandards push is really about what it can
do for our clients. Often when a client moves
into the standards space for banking, there is
a natural knowledge exchange between that
client and their experienced provider(s). We
signed up for the pilot as we believed it would
aid this conversation, provided MyStandards
was executed properly.
He elaborates on this theme. Largelywhat MyStandards is enabling and again
we are pushing the client benefit is that
the people uploading market practices are
part of the same community as people who
are consuming them. The challenge is still
business applicability so the consumers can
put the standards into practice in an easily
understood, consistent manner. Even though
this is a role SWIFT cant play, they have
provided a fantastic platform to advance and
simplify the conversation.
With the launch of MyStandards this
month, SWIFT is introducing a powerful tool
that has a number of roles to play in the future
harmonisation of the industry, while also
improving efficiency and reducing costs for
the users. It is clear from the pilot work that
it also has a role to play in the relationships
between financial institutions.
But it is also just the beginning: as the
contributors to this article have pointed out,
there is still work to be done in populating
and validating the service, and in drawing in
the wider community.
As a cloud-based service, MyStandardswill always have one production version, as it
were, but it will continue to evolve to become
still better, says Delbaere. We will continue
to develop in the same mode, iteratively and
interactively. We have monthly checkpoints
with users to determine where we are and
where we can go. We expect that to turn
into a sort of user group to drive it forward.
From my point of view it is very important to
continue doing it as we have with the pilots,
because that has been one of the success
factors of the initiative.
You cant compliment the interactive nature and visual presentation ofMyStandards enough. Theres just nothing like it.
Stew Cofer, JP Morgan