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Securities Day in Germany confirms that SWIFT services meet market requirements

Over 120 securities market professionals gather in Frankfurt to catch up on current trends and developments in the securities business, share information and network

Published on 09 Jan 2013

SWIFT Germany invited securities business experts from all over Germany to attend the 2nd SWIFT Securities Day in Frankfurt in November 2012, kindly hosted by Deutsche Bank at their conference premises. On the day, more than 120 participants gathered to catch up on current trends and developments in the securities business and share information as well as network with colleagues and partners. Both the speeches and the pivotal panel discussion among high-profile users were once again followed with great interest and involvement from the participants. The issues discussed showed a strong demand for SWIFT's products and services as an essential support in furthering automation and standardization in the securities business processing as well as great appreciation for its indispensable contribution to the development of the T2S project. Jürgen Marstatt, Head of SWIFT Germany, welcomed participants to the event, introduced the agenda and moderated the proceedings throughout the day.

SWIFT's GETC solution implemented by one of the leading asset managers worldwide 

The first presentation of the day by Michael Etscheid, Head of TPG Improvement & Monitoring, DeAM explained the assessment and decision making process that his company went through to replace the terminated Oasys Global Carrier Tool with SWIFT's GETC workflow solution at Germany's leading Asset Manager, DeAM/DWS of Deutsche Bank. SWIFT was selected amongst several providers due to its unrivalled cost effectiveness, short-term implementation and resilience as well as its capability to keep up the existing high automation rate and to comply with the special set-up of DeAM/DWS comprising two back offices and two entities. Attendees found this case study very interesting since it is the first adoption of this solution by a major user and they were impressed by the demonstration of its step-by-step implementation, including the migration of 115 brokers.

"The 2nd German Securities Day resulted once again in very positive feedback from participants. We are very grateful to Deutsche Bank for having kindly hosted this event for the second year running and for offered to do the same again next year.” 

Thomas Redelberger, Securities Initiatives, EMEA, SWIFT

Collateral management - an increasingly important area of competition for the financial industry

In his presentation, Swen Werner, Executive Director Collateral Management, J.P.Morgan, highlighted the challenges and opportunities for financial institutions driven by the global regulation of collateral management. Regulation and market trends are pushing for greater transparency and STP in services. Though collateral is becoming more expensive with the potential to restrict business activity and profits as an impact of the Basel III CVA charge, it mitigates risk and facilitates transacting business at the same time. Migration to central clearing raises certain challenges but also new opens revenue opportunities. Sven demonstrated how J.P.Morgan's solution as a leading collateral agent supports the future operating model by maintaining a single operational process across the entire trading portfolio, whether CCP-cleared or bilaterally collateralized, funding efficiencies by managing a single pool of collateral inventory.

Process optimization in Corporate Actions as part of Custody Services through ISO 15022

"This is a topic that is not regulation-driven but client-driven", said Marc Becker, Corporate Actions Asset Services, Clearstream Banking Frankfurt, introducing his presentation to the audience. He demonstrated how corporate action processing - which is still largely manual - can be optimized by- by standardizing and enhancing message formats along the custody process. Moving the local market standard for German banks from proprietary formats to ISO 15022 allows for the delivery of complete event data to all customers and therefore reduces dependencies on a third party data provider. IT development effort in the end-to-end value chain is also reduced by standardization. SWIFT MT566 confirmations are based on actual cash settlement, and optional SWIFT MT564 REPE provides cash forecast two business days prior to payment date.The automation of both message types can be used for detailed cash forecasts and reconciliation on both the customer side and the paying agent side.

T2S - Project status, time schedule and outlook on next steps

A detailed project overview on TARGET2 Securities was given by Helmut Wacket, T2S Programme Office, European Central Bank. 23 CSDs - with 5 CSDs out of the EU - have signed the T2S framework to date, representing almost 100% of settlement volumes in EUR. The Currency Participation Agreement has so far only been signed by Denmark, so EUR and DKK will be settled in T2S by 2018. Other central banks may join later. In July 2012, the ECB Governing Council approved appointments and mandates of the members of T2S Governance groups. The 4CB have completed 80% of software development, around 50% has been tested. The legal framework has been defined, technical documentation has been finalized, and CSDs/NCBs completed feasibility assessments. SWIFT and SIA/Colt have been selected as connectivity providers - plus the Eurosystem's existing communication network - and completed the Proof-of-Concept phase in advance of the deadline. The important increasing role of T2S in post-trade harmonization was also pointed out as was the importance of CSD Regulation as the basis of the new European model for securities settlement.

The impact of T2S on user operations - and how SWIFT can help

SWIFT's role in T2S was presented by Tanja Haase, Securities Initiatives EMEA, SWIFT. She explained how SWIFT's involvement in T2S goes far beyond its "carrier" function as both a standardization body defining ISO 20022 messages that are also re-usable in other contexts (pillars 1 &2) and a provider of consultancy services to the 4CB for T2S-specific messages (pillar 3) as well as a network and services provider. After an overview on the SWIFT Value-Added Network solution (VAN) for T2S, she concisely juxtaposed the challenges of T2S for user operations along the T2S timeline and the capabilities of SWIFT's end-to-end services to support connectivity (either direct or indirect). Describing SWIFT's T2S Value Proposition, Tanja explained the contents and benefits of various Consulting Services and Training modules for T2S as well as the scope, value and deliverables of SWIFT's Standards expertise.


Panel Discussion: How T2S will change Market Infrastructures fundamentally - Impact on the operations and business models of institutions in Germany

Moderated by Frank Elbe (Caceis Deutschland), high-profile experts Karla Amend (Clearstream Banking Frankfurt), Andreas Geissler (BNY Mellon), Hilmar Schwarz (DWP Bank), Katharina Tobiasch (Deutsche Bundesbank) and Britta Woernle (Deutsche Bank) discussed the most probing questions with regard to forthcoming changes in market infrastructures through the impact of T2S. All panelists agreed that there will be fundamental changes in operations and business models but the assessment of the expected outcome led to some controversy.

A number of  significant statements were made by the panelists:

  • The separation of custody and settlement functions will have an extensive impact on the future roles of CSDs, custodians and financial institutions.
  • Business models must be reviewed as settlement alone will not work anymore and service offerings will change, e.g. CSDs must offer custody services on market level.
  • Among CSDs, consolidation will lead to the "survival of the fittest" and to new CSDs likewise.
  • T2S will alter the current "spaghetti architecture" of organizational structures and custody processing into an "adapter model".

On the most part though, the panelists were optimistic and they expect the overall impact of T2S to be positive:

  • T2S is expected to make collateral management more effective and require less liquidity, help harmonize regulation and thus improve liability.
  • As settlement will be carried out in central bank money rather than commercial bank money, positive effects to the security of the settlement process will occur.
  • Harmonization of the settlement process in Europe through T2S leads to higher transparency, allowing for stronger risk management and enabling central supervision and control by the authorities.
  • Cost reductions up to 90% are expected prevalently in cross-border clearing and settlement, since German domestic settlement is already considered to be highly efficient and low cost. On the downside, there was a view that there is a risk of higher costs for domestic German settlement after the implementation of T2S.
    "We are very proud of the success of this event and the levels of expertise and seniority that it attracts from within the German securities market. We remain committed to delivering thought leadership in this area and to supporting our customers in all ways possible as they prepare for the significant market change that will be brought about by T2S.” 

    Jürgen Marstatt, Head of SWIFT Germany

Technical and functional adaptations required are seen as the greatest effort and cost drivers. After all, around 130 new message types are to be implemented. But ultimately the panelists came to the conclusion that regardless of the many challenges involved, all parties involved will end up benefiting from T2S.

In his closing remarks, Jürgen Marstatt thanked both the speakers and the attendees for their time and engagement and reiterated SWIFT's commitment to supporting customers not only as a network provider for T2S but also with a wide range of consulting and training services that have been designed specifically to help our customers understand the impacts of T2S and the opportunities that it creates. The final cocktail at the end of the day offered yet another networking opportunity to all attendees of this year's SWIFT Securities Day.