SWIFTStandards Strategy cornerstones

San Jose, Costa Rica, 15 March 2005

SWIFTStandards_SanJose_v3.ppt

SWIFTStandardsStrategy cornerstones

Paul Miserez


SWIFTStandardsAgenda

Strategy cornerstonesStrategy cornerstones

The main objectiveThe main objective

IntroductionIntroduction


IntroductionWhat is SWIFT?Heritage

Understanding

Neutrality

Technology

7,650 FIs in > 200 countries Payments, Securities,

Treasury and Trade Reducing costs, improving

automation, managing risk

Est. 1973 by 239 banks in 15 countries

Developed shared messaging platform for financial transactions

Emphasis on security, reliability and availability

Store and forward, file transfer, interactive query & response

Open standards Multi-vendor IP VPN

Industry-owned community Overseen by regulatory

authorities Impartial to the data

transacted across the messaging platform


IntroductionWhat is SWIFT?

“… to provide low-cost, competitive financial processing and communications services of the highest security and reliability”

”… greater automation of the end-to-end financial transaction process, based on its leading expertise in message processing and financial standards setting”

“… enabling interoperability between its members, their market infrastructures and their end-user communities”

Mission excerpts



7,656 live users (Jan 05)

202 live countries (Jan 05)

2.3 billion messages/year (2004)

Latest peak day: 10,370,828 messages (1 Dec 04)

Message growth: 12.3% (2004)



Payments58%Securities

33%

Treasury7%

Trade2%

Traffic by market:% breakdown (Jan 2005 YTD)



Europe66%Americas

19%

Asia-Pacific12%

Africa2% Middle East

1%

Traffic by region:% breakdown (Jan 2005 YTD)


SWIFTStandardsThe main objective

Despite increasing business complexity:

Some examples of increased business complexity: Multiplication of financial instruments Communication reaches into corporate world Industry drive to shorter settlement cycles Increased competition lowers profit margins

Improvequality

BetterBetter

Reducecosts

CheaperCheaper

Better timeto market

FasterFaster


SWIFTStandardsComponents to make it betterbetter Maximise industry involvementMaximise industry involvement

– Focus on business requirements: solve the right problem

– Focus on end-to-end business transaction: avoid silos

Use formal approachUse formal approach– Reduce ambiguity: formal, machine readable descriptions

– Ensure completeness: systematic and thorough analysis

– Take into account detailed market needs: increase STP

– Improve industry validation: full involvement & transparency

Maximise reuse of standardised building blocksMaximise reuse of standardised building blocks– Define and agree once – re-use often: more stability

– Industry-wide and cross-industry: better interoperability

Improvequality

Reducecosts


BetterBetter CheaperCheaper FasterFaster

Improvequality

Reducecosts




SWIFTStandardsComponents to make it cheapercheaper Decouple business standard & physical representationDecouple business standard & physical representation

– Base applications on business standard: less maintenance

– Reduce dependency on specific technology: more stability

Provide formal specificationsProvide formal specifications– Reduce development time: less manual activities

– Reduce development risks: less interpretation

– Component-based approach: reusability & consistency

Use up-to-date technologiesUse up-to-date technologies– Use of “off-the-shelf” tools: cheaper and more advanced

– Better reuse of resources: infrastructure, tools and HRs

ConvergenceConvergence– Standards collaboration in fin. industry: avoid duplication

Improvequality

Reducecosts



Improvequality

Reducecosts




SWIFTStandardsComponents to make it fasterfaster Business case driven developmentBusiness case driven development

– Develop right thing at right time: no wasted time or efforts

– Prepare time line with industry: no surprises; ensure buy-in

More flexible release cyclesMore flexible release cycles– Launch new solutions when ready: up to 4 times per year

– Group maintenance in yearly release: allow for budget cycle

Formal descriptions and up-to-date technologiesFormal descriptions and up-to-date technologies– More automation in standards development: “generation”

– More automation in standards implementation: “injection”

ConvergenceConvergence– More coordination in financial industry: increased efficiency

Improvequality

Reducecosts





Standards development

Standards implementation

Standardsconvergence

SWIFT Standards

BAU

ONGOING

IN PROGRESS



Standards development

SWIFT Standards

BAU


Available 2005 Beyond

Customer-to-bank payment initiation

Bulk payments Cash

management Investment

funds Trade services

utility prototype

Bank-to-customer cash management

Investment funds (rel. 2, 3)

FIX (pre-trade / trade)

Exceptions & investigations

Direct debits Derivatives Trade services

utility

Investment funds (rel. 4)

Proxy voting

Standards deliverablesXML-based standards


Standards developmentProcess

Businessinput

Validation Group(per project)

Modeling Group(per project)

Validation

Scope & requirements

Feedback

Standardsdocumentation

InternalRepository

Standards, Workstation, methodology & guidelines

Businessmodelling

Automatedpublication

BusinessCase


Standards developmentBusiness Modeling

Transporting messages

They have some in common

All institutions have their own sets of data objects

XML

FIN

When building messages, data objects are grouped...

… and then messages are represented in syntax

SWIFT standardises

common data objects


Standards developmentMethodology

Business analysis and requirements analysis:Understand the business and the problem

Logical analysis and logical design:Define and refine the solution

Technical design and implementation:Automated physical implementation

Three-layered approachBusiness

model

Instructing Party

SWIFTIdent: BIC

Trade Condition

TradeDate: DatePriceCondit: RealOrderedQty: Real

Executing Party

SWIFTIdent: BIC

Trade

Security: SINAction: {Buy/Sell}

OrderToBuyOrSell

Businessmessages

Physicalmessages

Businessmodel

Instructing Party

SWIFTIdent: BIC

Trade Condition


Executing Party

SWIFTIdent: BIC

Trade


OrderToBuyOrSell

Instructing Party

SWIFTIdent: BIC

Trade Condition


Executing Party

SWIFTIdent: BIC

Trade


Instructing Party

SWIFTIdent: BIC

Trade Condition


Executing Party

SWIFTIdent: BIC

Trade


OrderToBuyOrSell

Businessmessages

Physicalmessages

Other features Implementation-neutral

Foster reuse (dictionary)

Involve industry experts

End-to-end view

Formal notation (UML)

Representation-neutral



Standardsconvergence

SWIFT Standards

ONGOING


International Standards Setters

ISO

ebXML

W3CFinancial Industry Bodies

FIX

ISITC-IOA

UN/CEFACT

OASIS

CEN

ITUISO/TC68

FpML CEFACT/TBG5

ECBS

ISDAISSA

ISMAIFSA

Bolero

SMPG

ANNA

EPC

IOSCO

Domestic Standards

FISD/MDDL

e-MoU/MG

OMG

Standards convergenceMultitude of organizations doing standards

CEFACT/TBG17


Standards convergenceThe current situation

FIX

IFX

ISO 15022

EDIFACT

FpML

Proprietary

?

?

?

?

?

?

?


Standards convergenceThe ultimate objective

Central Depository

Stock Exchange

Fund Manager

Financial Institution

CorporateCorporate

Financial InstitutionFinancialInstitution

Fund Manager

StockExchange


Standards convergenceStrategy Objective To enable communication interoperability between financial

institutions, their market infrastructures & end-user communities

Major obstacle The numerous uncoordinated standardisation initiatives (risk of

divergence and duplication of efforts)

Proposed solution UNIFI (ISO 20022) – A common ISO/UN-CEFACT standardization

approach (methodology, process, repository)

SWIFT’s role Act as UNIFI (ISO 20022) Registration Authority (RA)


Standards convergenceUNIFI (ISO 20022) – key componentsModeling-based standards development Syntax-independent business standard Standards Evaluation Groups

Syntax-specific design rules for XML Predictable and automatable Protect standard from technology evolution

Reverse Engineering approach Protect industry investment and provide interoperability Prepare future migration

ISO 20022 Repository Business Process Catalogue & Data Dictionary


UN/CEFACTCross-industy Repository

Account

Date

Amount

Price

Tax

UNIFI (ISO 20022)

Financial Repository

Omgeo

DTCC

FED

EBA

Target

Euroclear

ClearstreamISO 15022

FpML

FIX

IFX

OAGiISTH

MDDL

TWIST

RosettaNet

CIDX

BMA

SWIFT

Standards convergenceThe ultimate objective

UNIFIRA


Securities

ISO 7775 (syntax = traditional FIN, such as MT 521, MT 500, …)

ISO 15022 (syntax = enhancedFIN, such as MT 502, MT 54x, …)

UNIFI (ISO 20022) (syntax = XML, eg, Investment Funds, Cash Reporting, Bulk Credit Transfers)

Traditional FIN(e.g. MT 103)

Traditional FIN(e.g. MT 100, MT 202, …)

Other markets

Standards convergenceUNIFI (ISO 20022) and SWIFTStandards

SWIFTStandards

… migration to a standardized use of XML, guaranteeing interoperability across industries, particularly in but not

restricted to the financial industry


Standards convergence UNIFI (ISO 20022) registration bodies

ISO

Registration Management

Group

SWIFT

Registration Authority

CentralRepository

Business request

Standards Evaluation

Groups

Securities

Payments

XML message

ISTH Group

Bolero

FpML

SWIFT

Data Dictionary

BusinessProcess

Catalogue

ISO

ISO

ISO

Communities of users & developers

TBG5

Others


Standards convergenceStepping stones toward convergence

Today

Compati-bility

Liaisons

Interope-rability

Techno-logy

Agree-ments

Commu-nity

Coex-istence

Process

UNIFI


W3C

UN/CEFACT

e-bMoU

OMG

ISO/TC68

FIX

ISITC-IOAISSA

SMPG

SIAFISD/MDDL

G30

GiovanniniTC68/SC4

WG

8 & WG

11

EPC/ECBS

ISTH

IFX

RosettaNet/PMP

OAGi

X12

BMA

EACT

FPML

ISDA

ISDA

OASIS bolero.net

ICC

TC68

/SC6&

7

CEFACT/

TBG

5

IIBLP

IFSA

Securities Trade Finance

Acord

TC68/SC4&7

Payments Treasury

Insurance

UNIFI (ISO 20022)

CEFACT/

TBG

15

TWIST

Fedwire

CHIPSTCH

NACHA

Standards convergenceOverview of existing initiatives and liaisons

IFSA X9



Standards implementation

SWIFT StandardsIN PROGRESS


Standards implementationCo-existence – the key challenge

XML FIN

The possibility to use FIN- and/or XML-based standards in an end-to-end business transaction without needing to know (or being impacted by) what your counterparts are using.


Standards implementationCo-existence – problem description

How to ensure interoperability and STP despite the use of different syntaxes in an E2E- transaction?

inter-bank payment executioncorporate payment initiation corporate cash reporting

Ordering Corporate

Ordering Bank1

2

Beneficiary Corporate

Receiving Bank

1

2

Ordering Bank

IntermediaryBank (1)

Receiving Bank

IntermediaryBank (2)

1

2

3

Corporate Inter-bank Corporate


Standards implementationWhy do we need a “co-existence solution”?

Communication must remain possible between customers

– “Mixed” transactions must work end-to-end

– Some FIs want to move immediately to XML

– Some FIs want to remain in FIN for a long time Internal applications and DBs should not be

duplicated/changed to deal with multiple syntaxes

“Co-existence must bridge the gap that is created because institutions have internal business drivers at different moments in time.”


Standards implementationCo-existence – proposed way forward

InterfaceMiddleware

EAI

Account

DateDate

Standardiseddata objects

<AcctId>113-584<TrfValDt>2003-10-17<NtryDt>2003-10-17

XML

25:113-58461:0310171017

FIN

SWIFTNetSWIFTNet


XML


XML

25:113-58461:0310171017

FIN

SWIFTNetSWIFTNet

SWIFT mapping

rules

Businessapplication

Businessapplication

Businessapplication

Legacyapplication

FIN

Businessapplication

Businessapplication

Businessapplication

XML-awareapplication

XML

Businessapplication

Businessapplication

Businessapplication

OO-application

DataObjects


Standards implementationCo-existence – proposed way forward

Step 1Ensure semanticcompletenessof business process model

Step 2Define syntaxto use (MT and/or MX)

Step 3Provide supportand tools forinteroperability

To be used per end-to-end transaction


Standards implementationStep 1 – Check for semantic completeness

Step 1 Step 2 Step 3

IF NOT complement through standards developmentstandards development

or specify acceptable workaroundworkaround

Is all required data available and supported throughout the end-to-end transaction?


Standards implementationStep 2 – Syntax to use


Do we need additional standards development?

Do we have a mix of MTs and MXs?

MX standards development MX standards development (by default)

or MT standards development MT standards development (board approval)

Migration scenario Migration scenario (results in MX-only)

or Translation scenario Translation scenario (provides interoperability)


Publish rules Qualification Solution at interface

Solution as service

Syn

tax

map

ping

For

ma

l tr

ansl

atio

n ru

les

Tes

t ca

ses

Par

tne

r ac

cred

-ita

tion

Alli

anc

e (S

WIF

T

only

)

Plu

g-in

(al

l br

ands

)

Web

se

rvic

e

Business value for

community/ business

risk for SWIFT

Absolute minimum

Business risk for SWIFT

Value added steps

Delivered by others

(competitive space)

Delivered by

SWIFT (collaborative

space)

Cen

tral

-is

ed

tran

slat

ion

Standards implementationStep 3 – Tools for interoperability


What level of support should SWIFT provide?


SWIFTStandardsSummary

All new standards are XML-basedXML-based FIN-XML co-existenceco-existence is a must

Convergence – UNIFI (ISO 20022) with the purpose to … unifyunify!


&&uestionsAnswers

Supporting slides


Co-existence approach


Coexistence: underlying concepts1. Standardisation through modelling

All institutions have their set of data objects

Representing data objects in message syntaxXML FIN

Grouping data objects Order

DateDate

Account

Order

Date

SWIFT standardises common data objects

Transporting messages


Coexistence: underlying concepts 2. Reverse Engineering FIN

Execution Report Tag Field Name Re

q'd Comments

Standard Header Y MsgType = 8

37 OrderID Y OrderID is required to be unique for each chain of orders.

198 SecondaryOrderID N Can be used to provide order id used by exchange orexecuting system.

11 ClOrdID N Required for executions against electronically submittedorders which were assigned an ID by the institution. Notrequired for orders manually entered by the broker.

41 OrigClOrdID N Conditionally required for response to an electronic Cancelor Cancel/Replace request (ExecType=PendingCancel,Replaced, or Canceled). ClOrdID of the previous order(NOT the initial order of the day) when canceling orreplacing an order.

109 ClientID N Used for firm identification in third-party transactions.

76 ExecBroker N Used for firm identification in third-party transactions.

382 NoContraBrokers N Number of ContraBrokers repeating group instances.

375 ContraBroker N First field in repeating group. Required if NoContraBrokers> 0.

337 ContraTrader N

FIN messages

Coexistence Information

FIN XML

:25: acctId

:61:sub5 ntryAmt

.. ..

SupportSupportcoexistencecoexistence

XML

FINComplete &Complete &

UpdateUpdate

Order

DateDate

RepositoryCompareCompare

Account

Order

Date


Coexistence: underlying concepts 3. Formalised mapping rules

MT 942 - FIN

:20: … :25: … :61:sub1 :61:sub2 :61:sub3 :61:sub4 :61:sub5 ...

StatementEntry

valueDate: DateTimeentryDate: DateTimecdMark: CreditDebitMarkCodefundsCode: stringamount: decimal...

MT 942

acctId: AccountIdentification

1

1If ntryAmt > 99999999999999 then Error(AmountTooBig)

AccountCashEntryDetails

acctId: AccountIdentificationacctCcy: CurrencyCodeacctTp: CashAccountType1CodentryRef: stringntryAmt: CurrencyAndAmountntryDt: DateAndTimeChoicentrySts: EntryStatus1Code

ReturnTransaction


Coexistence: underlying concepts 4. SWIFT makes mapping rules available

MiddlewareEAI

BusinessapplicationBusiness

applicationBusinessapplicationBusiness

application

MiddlewareEAI

Businessapplication

Businessapplication

Businessapplication

Businessapplication

Middleware or EAI translates

(based on SWIFTdefined rules)1

Interface translates (based on SWIFT

defined rules)

2

Central translation in network application

4Mandatory SWIFTtranslation module

(similar to SNL)

3

SWIFT mapping rules


Coexistence: underlying concepts 5. Implementing data objects

XML


FIN

25:113-58461:0310171017

data objects:

“single window on standards”

Businessapplication

Businessapplication

Businessapplication

Businessapplication

InterfaceMiddleware

EAI

SWIFTmappingrules

Account

DateDate

Standardiseddata objects

Enterprise“database”


Co-existence examples


translation& mapping

mapping

Standards implementationCo-existence – example 1

MT 202 (FIN)

MT 205 (FIN)

MT 103 (FIN)

MT 910 (FIN)

How to forward info from C2B into MT 103 and into MT 202?

How to forward info from MT 103 and MT 910 into CashRep?

What is the correct field tag?How to convert the value?

XML<InstRef>abcde</InstRef>

FIN:20:abcde

PaymentInitiation(XML)

CashReporting

(XML)

mapping

translation& mapping



103 (FIN)

BulkCreditTransfer (XML)

103 (FIN)103 (FIN)103 (FIN)103 (FIN)103 (FIN)

How to process the incoming MT 103s & BulkCreditTransfers in the same application?

How to generate the outgoing MT 103s & BulkCreditTransfers from the same application?

OR



Investors Intermediary Transfer Agent

502 (FIN)502 (FIN)

502 (FIN)

502 (FIN)

RedemptionOrder (XML)

RedemptionOrder (XML)

How to allow one investor to move to XML?

(when intermediary is FIN)

How to allow most investors to continue in FIN?

(when intermediary is XML) OR


Integration


Some implementation aspectsIntegration in applications today

FIN

Businessapplication

Messagingapplication

FIN MTxxxapplication

UHB

Enterprisedatabase


Some implementation aspectsIntegration in applications today and tomorrow

FIN

FIN

Machine processable& human readable

FINXML

FIX Interface and EAI

Object oriented

application

FIN MTxxxapplication

Application

XML-awareapplication

XML

XML

Enterprisedatabase

UHB


Some implementation aspectsPartners aligned on implementation


More to come …

SWIFTNet

Some implementation aspects Infrastructure supports implementation

“Injection”

InternalRepository

“Publication”

Message samples

Financial Dictionary

XML Schemas

e-Documentation

StandardsWorkstation

•XML Schemas•Validation rules•Samples


FIN and XML-based standards portfolio


Ordering customer

Beneficiary customer

Ordering customer’s

financial institution

Beneficiary customer’s financial institution

Bulk credit transfer

MT 1xx, 2xx

FIN-based XML-based

Pay

men

t In

itia

tio

n

MT

101

Exc

epti

on

s &

In

vest

igat

ion

s

Exceptions & Investigations

Exc

epti

on

s &

In

vest

igat

ion

s

MT 9xx

Reporting

Rep

ort

ing

MT

9xx

MT

9xx

Rep

ort

ing

Standards deliverablesPayments market


Standards deliverablesMoney markets & treasury

Ordering party

Trading party

Trading party

Settlement partycustodian

FX order

Treasury

FX & Loan/Deposit Advice & Allocations

Interest rate swap

Money markets

Derivatives

FIN-based XML-based


Clearing agent

Buyer Seller

Custodian

Reconciliation

I/CSD

Settlement Settlement

Reconciliation Reconciliation

Corporateactions

Corporateactions

Corporate actions

FIN-based XML-based

Pre-trade/trade

Post-trade

Pre-settlementPre-settlement

Reconciliation

Standards deliverablesSecurities market: equities & fixed income


Fund management company

Investor’s intermediary

Transfer agent

Institutional investor

Investment manager

Fund accountant

Price report

FIN-based XML-based

Orders Orders

TransfersTransfers

Cash flow report

ReportingReporting

Prospectus data

Account management Account management

Standards deliverablesSecurities market: investment funds


Seller’s bank

Buyer’s bank

Guarantees

Collections

Letters of credit

Trade Services Utility

FIN-based XML-based

Standards deliverablesTrade services market

SWIFTStandards Strategy cornerstones

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