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Buy sides testify to value of SWIFT’s Global Electronic Trade Confirmation solution

As investment manager and broker coverage of the solution grows, users confirm its ease of implementation, cost-effectiveness and reliability as an alternative to central matching

Published on 07 Nov 2012

SWIFT's Global Electronic Trade Confirmation (GETC) solution is a ‘ready alternative' to incumbent solutions for automated securities confirmation matching, and is already bringing value to a growing number of buy and sell side firms. These were among the key messages to attendees at the recent Post-Trade Client Forum held in SWIFT's London office.

Designed to bring the community up to date on the latest developments with the GETC solution, and with SWIFT's suite of multi-asset class post-trade processing solutions more broadly, the forum brought together a number of firms at various stages of deploying GETC to share their views and experiences with the wider audience.

Representatives of Deutsche Asset Management (DWS), Legal & General Investment Management (LGIM)  and COR-FS explained their approaches to GETC deployment, alongside attendees from a leading custodian and a leading broker, and each testified to the cost-effectiveness of the solution, its value in helping preserve existing high levels of STP and its credibility as an alternative for the marketplace.

For Deustche Asset Management, the decision to implement GETC has been driven by the mandatory migration to a alternative carrier tool central matching model by its incumbent provider. As Carola Marx, Head of DWS Transaction Processing Group Frankfurt, told attendees, "this project is not being driven by us, but by an outside party, and we are having to spend money to change something that we were very happy with".

As a consequence, the priorities for Deutsche Asset Management were to retain its current high level of STP, to continue to use its existing TradeFlow matching and settlement system (which it has implemented for securities and other instruments), to retain an allocation workflow (rather than moving to a block level model), and to deploy the cheapest, most reliable solution, requiring the least implementation effort.

"After a neutral review of all possibilities in the market, we found SWIFT best met our requirements," she said. "We wanted to replace the carrier tool, not the matching platform. We have TradeFlow as a strategic platform and we were not interesting in an additional platform that would increase workload and could impact STP. In addition, we see SWIFT as a reliable partner - very service-oriented, and with a very good understanding of our requirements."

Deutsche Asset Management will go live with the SWIFT MT509, MT515 and MT517 messages for electronic trade confirmation at the beginning of 2013, taking a ‘step by step approach', Marx said. "We are in close contact with our brokers and we will agree week by week to go live with another broker. We will finalise this process, keeping Q2 to resolve any issues, and being ready in time for our existing service to be closed down in mid-2013."

A very important factor has been the support of the front office, she continued, which is making it more straightforward to bring on board brokers to support GETC over SWIFT. "We have been very clear with our brokers that they should follow us," she told the forum. "For those brokers that will not move to SWIFT, this will show in their scorecards as ‘red'. We are also informing our brokers about the different options for them to use SWIFT, including Accord, Alliance Lite2 and translation services. If a broker is interested to support and service us, there is a way for them to do it via SWIFT, and we are directing brokers to SWIFT to get an understanding of the options they have."

Legal & General Investment Management (LGIM) has been live on GETC for some time, with five brokers. Another major broker will go live early next year and there are "a few others in the pipeline", Lee Toms, Head of Investment Operations, told attendees at the Post-Trade Forum. LGIM's reasons for implementing GETC were very similar to those of Deutsche Asset Management, he said.

"We want to retain an allocation process. This is something we hold quite dear to our hearts. We are also very keen on the SSI enrichment. We will also go live with other solutions in order to achieve full broker coverage, but we were a pioneer on GETC - and our approach remains very much the same. We are not wedded to any one organization, and what we want is the most efficient, robust, cost-effective platform available. It is important that there is a credible alternative in the market, and we are still very much behind GETC."

In the short term, LGIM will maintain two platforms, he said, but "inevitably there may be a tipping point when we will move to only one", he added. "We will, from an investment operations perspective, encourage our central dealing desk to push the volumes through the most efficient platform. The length of time we have both will also depend on disaster recovery and contingency planning, and these aspects will form part of our decision as well," he told the forum.

Giving the perspective of a provider of outsourcing services to the buy side, the representative of one leading custodian said his firm would migrate some of its clients to central matching, but for others, "GETC is a ready alternative". "It fits naturally with the local matching model we have," he said. "We have secured funding for January, and we will go out to brokers in the first and second quarters of next year."

Another attendee shared the view of a leading sell side firm, live on GETC with LGIM for fixed income and equities. "We are keen to support customer demands for alternatives to satisfy reliability requirements among others," he told attendees.

COR-FS is one of the solution vendors with which SWIFT is working to ensure their post-trade solutions support the GETC workflow. Its Head of operations Paul Bowen explained that COR-FS is in "very advanced conversations" with customers about GETC and "will hopefully have one customer live by the end of the year".

"The debate about central versus local matching is out there, and people will make up their own minds," he said. "Local matching gives greater control for the buy side and the ability to carry SSIs in the message and bring some aspects of settlement matching further forward in the process carry some clear advantages."

Echoing a view shared by a number of participants in the forum, Bowen continued: "At the end of the day, it's down to customers to decide. The key is choice: choice creates competition which is good for everyone as it forces down prices and brings energy to this area of the market, where it has been lacking for a while."