asset servicing strategy for the csd community ameda lut buntinx marrakech, 21-23 october 2009

Asset Servicing Strategy for the CSD CommunityAMEDA

Lut Buntinx

Marrakech, 21-23 October 2009

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Contents

• SWIFT’s Asset Servicing Strategy• Corporate Actions• STaQS for Corporate Actions• ISO 20022 for Corporate Actions• Data Distribution• Proxy Voting

Asset Servicing Solutions – AMEDA - Marrakech 21-23 October 2009

Asset Servicing Solutions – AMEDA - Marrakech 21-23 October 2009 3

Developing an Asset Servicing Strategy

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Standardising and automating asset servicing: drivers, challenges and solutions

• Why standardise and automate asset servicing?– Meet increased requirement for better corporate governance

and operational risk management– Address staffing challenges– Align with clearing and settlement harmonisation efforts

• What are the challenges?– Inconsistent data quality leads to interpretation risk– Lack of automation, manual processing dependency create

operational risk– Complexity of cross-border processing adds costs and risks

• What are the solutions? – Standards, market practices and tools supporting automation


SWIFT’s new asset servicing strategy – targeting the major painpoints

• Our asset servicing customers feel the most pain in the areas of corporate actions and corporate actions related reference data.

• There is also a need for efficiency improvements in the area of meeting services (proxy voting) and tax services

• Consultation with our members has convinced us that we are ideally positioned to take the lead and drive resolution of these issues

5Asset Servicing Solutions – AMEDA - Marrakech 21-23 October 2009

SWIFT’s new asset servicing strategy – key goals

• We aim to:• Replace text with data standards• Enforce and support market practices• Increase automation and use of standards

• We will:– Work with issuers and agents to standardize and automate the

announcement process– Work jointly with large infrastructures to move from proprietary to ISO

standards, including ISO 20022– Support the adoption of a Corporate Actions unique identifier– Support ISO 20022 implementation and coexistence with ISO 15022. – Develop easy access to SWIFT for smaller cients (e.g., LITE)– Standardise tax processes and engage tax authorities– Improve transparency and efficiency of shareholders meeting services

and proxy voting processes


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SWIFT’s new asset servicing strategy – plan of action

• Identify key milestones for each action to facilitate progress review

• Prepare detailed roll-out plans: action, deliverables, milestones, community, involvement of industry groups (SMPG, ISMAG, ISSA)

• Complete roadmap by December 2009

• Start executing!



Corporate Actions

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Adoption continues to grow for CA messagesMonthly Traffic Evolution – MT 56x messages sent

2009 traffic growth YTD is about 7% in spite of flat or negative growth in other messaging

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

Jan

Feb Mar Apr

May Ju

n Jul

Aug Sep Oct

Nov Dec

200320022001

200420052006

YEAR

30M 22%25M 36%

18M

35M 18%

45M 26%

53M 18%

msg %change

2007 65M 21%

74M 14.3%2008

Scalability to handle peak flow is a growing concern



The risks associated with corporate actions are very high and although this is not a new issue for the industry, more and more participants are realising theneed to address these risks as a matter of urgency.

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Pre-Decision Processing

Decision Processing

Post-Decision Processing

Stock Available

Pari PassuUnconditional

RegistrationInstruction Deadline

Decision Deadline Acceptance

or this Record Date?

Ex Date

Record Date?(Pre) Notification

Research

No Notification from counterpart

Incorrect Information

No Diary Entry

Positions Disagree

Host System not Updated

Position Taken Late

Missed Deadlines

Incorrect decision applied

Trading shares not available

Trading shares not owned

Host system(s) not updated/updated

incorrectly

Positions not protected

Courtesy Checkfree & Celent

A corporate action transaction can last for months, with significant risks


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Challenges• Significant shortfall in message

quality and market practice compliance

• Limitations of software vendor solutions

• Difficult business case – management buy-in for improvement projects

Drivers• Minimise risks/ reduce losses• Enhance operational efficiency• Reduce costs• Comply with regulatory

requirements• Improve customer service• Maximise portfolio performance• Achieve scalability

The Drive for STP• Standards • Market practice and tools • Best practices

SWIFT is working with the industry to address their needs for Corporate Actions


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• Four SWIFTReady applications products demonstrated compliance with market practices and got rewarded in 2009:

Working with partners to help ensure quality software capability for corporate actions

“As firms seek to reduce risk from corporate actions, expect to see more emphasis and funding given to solutions that are able to increase productivity and reduce risk.”

~Phillip R. Silitschanu, Aite Group



STaQS for Corporate Actions

• Simulation Testing and Qualification Service (STaQS)

• Tests MT 564 Notification and MT 566 Confirmation messages for compliance to market practice

… a health check for Corporate Actions messages

• What can you do with this service?– Measure conformance– Identify improvement areas– Benchmark progress– Improve counterparty automation

STaQS for Corporate Actions


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Benefits & status – STaQS for CA

• Benefits of STaQS for Corporate Actions– Addresses biggest community-wide issue: formatting of notifications

and compliance to market practice– Improves consistency, boosts STP via ad hoc testing, self-policing– Consistency in market practice prepares for the process of migration

to, and translation with, ISO 20022 messages for CA• Version 2.3 features

– EIG 2009; DvE data element test ahead of SR 2010 enforcement– New detailed Error Report, support for multi-listed securities

• Pricing– Parent BIC level annual subscription, 2 to 16 KEUR per traffic tier

• Future – alignment with SMPG, easier use, instruction testing



ISO 20022 for Corporate Actions

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What is driving the move to ISO 20022?

• New initiatives– Global harmonisation– Giovannini (barrier one) and

SEPA in Europe– Market infrastructures– Automation in the ‘funds’ market

• New players– Corporates, fund managers

• New technology– XML, SOA, web services

• www.iso20022.org


Advantages of ISO 20022 over ISO 15022

• Builds on the ISO 15022 data dictionary concept and registration infrastructure, but strengthens the monitoring by the industry

• Uses a more robust, syntax independent development methodology based on UML modelling of business processes and transactions (business modelling)

• Uses XML as the syntax for the actual physical messages (Many current ISO 15022 users are requesting ISO 20022 XML equivalent messages because their communication interface is already XML based.)

• Has a wider scope than ISO 15022 which is for securities only

• Allows for extension mechanism to include market specifics



Data Distribution

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The Event Notification Dilemma

• Different data formats, communication means & Data Providers’ release schedules

• Operational Staff to maintain systems and software

• Headcount for data discrepancies resolution

• Manual checking of inconsistencies

• Risk of misinterpretation or miss-keying


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The Market Data Provider Landscape Quality securities reference data

• Data Distribution Solution– FIN or FileAct– Securities Market Data Providers (SMDP)

• Interactive Data, Telekurs, and WM Datenservice, Fidelity ActionsXchange• London Stock Exchange, Singapore Stock Exchange, Australian Stock

Exchange, Canadian Depository, KSEI (Indonesia), Bombay Stock Exchange and DTCC Global Corporate Actions Validation Service (GCA VS)

– Types of information• Corporate Actions (ISO 15022), Pricing, Reference Data, Indices, Foreign

Exchange, Proxy voting material, Tax rates, Prospectus– Market Data Provider User Group (MDPUG)– Providers agree to compliance with MDPUG principals and SMPG

guidelines


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SWIFT Data DistributionHow can the subscribers benefit?

• Enables STP through ISO15022 standards

• Centralises maintenance of data feeds

• Minimises risk and compliance concerns; secure, reliable delivery

• Defines mandatory roles & responsibilities; SWIFT Service Description

• Enables flexibility in obtaining feeds from different providers

• Reduces manual data normalisation

• Simplifies resolution of any data issues



SWIFT Proxy V oting

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ISO 20022 Proxy MessagesProviding a higher level of automation and efficiency

• Minimise risks associated with errors

• Reduce costs and errors due to less manual intervention

• Streamline and standardise deadlines

• Help eliminate ‘under’/’over’ voting with increased precision in vote execution

• Accommodate funds voting

• Maintain audit trails• Provide transparency• Increase voting levels• Comply with regulatory

requirements• Integrate new customers/agents

rapidly• Standardise with ISO 20022

messaging

• ISO 20022 Proxy Voting messages will standardise and automate the proxy voting process, reducing risk, increasing voting levels, and strengthening regulatory compliance capabilities.


• Available in Live & Test/Pilot environments• New Release 1.1 available for testing 24 July, Live Nov. 2009• Smart Test Messages available• Strong Proxy Agent support• Encouraging global cross-border and local market adoption • Will support emerging regulatory attention in EU, UK, US and

corporate governance concerns in Asia Pacific• Third-party application vendors/partners demonstrating

readiness to handle the ISO 20022 proxy voting messages• No competing standard • Allows for audit trail of all activity• Promoting implementation with seasonal awareness

Current Status of SWIFT Proxy Voting


Thank you

asset servicing strategy for the csd community ameda lut buntinx marrakech, 21-23 october 2009

Documents

asset servicing strategy

asset servicing customers

corporate actions iso

areas of corporate actions

iso standards

data standards

better corporate governance

tax processes