Sibos 2008 in Vienna — 15-19 September 2008

Conquering the challenge of Standards co-existence

> Wednesday 17 September - 14:00-15:00

How is the industry tackling the challenge of standards co-existence and what real progress is currently being made across industry segments? What are the key issues for different market segments and how are institutions and communities dealing with the nuances and complexities surrounding this challenge? What is driving the pace of change? What are the implications for your institution?

Vienna, Wednesday 17 September 2008

In the eye of the standards storm

SWIFT’s new MX messages will one day replace MTs, but dissent in some payments communities focuses on cost and the date of migration

A key issue for anyone involved in the financial industry is the underlying matter of message formats. SWIFT is in the process of introducing a new improved extensible mark-up language (XML)-based message format to replace the existing MT message types. The MX messages have improved functionality, but not everyone in the market is happy about migrating their systems to the new format.

Ingrid Versnel, Head of Payments and Trade, Global Technology and Operations, Royal Bank of Canada said that the challenge is that MX is seen as a cost burden to the user community. “It is an unnecessary cost burden in a part of the business that already has good STP rates,” she said.

In order to take advantage of ISO 20022, banks will have to replace all their back-office legacy systems. “That is not a business incentive for anyone,” Versnel added.

“It would be a step backwards if Europe was on MX while North America was still on MT.” Armin Borries, Clearstream

The end date for MT is nigh?
Another bone of contention within the community is the migration date for MX adoption and the end of MT. Session chair Alan Goldstein, Chief Information Officer at BNY Mellon Asset Management posed the question: who should
set the date for change? RBC’s Versnel believes that people need to make that decision themselves. “They need to set their own dates,” she said.
“For example, Europe should set a date for its own community without that
being imposed on North America. SWIFT should set an ultimate long-term goal, but this needs to meet the majority of players’ needs.”

However, this would leave disparities between Europe and North America, which is not an ideal situation. From the securities side, Armin Borries, Managing Director at Clearstream, declared he was happy his industry was now working on one standard. “It would be a step backwards if Europe was on MX while North America was still on MT. We’re a global community with a focus on cross-border settlements,” he said.

One solution to the question of how and when to migrate to MX was proposed by Jonathan Arneault, Business Unit Executive at IBM. “The move should be done by market segment rather than geography,” he suggested. Other members of the panel saw problems with this.

The benefits of adopting XML-based standards are evident: it allows human interaction with the data in a much more accessible way than the traditional MT format. “You can reach emerging markets much more easily and the cost of entry is lower,” observed Arneault. RBC’s Versnel countered this, saying that those who have already looked at MX find it difficult to deal with: “There is a lot to learn and it is a daunting task to acquire the MX skills.”

Risk in co-existence?
One concern expressed by audience member Einar Lyford, from Norway’s FSA, was the operational risk of translation, if the two formats were to run in tandem for an extended period of time. IBM’s Arneault agreed that such risk is an issue, but seemed to be assured that banks and vendors would be able to mitigate any exposure.

Risk was also a concern when the panel discussed whether or not SWIFT should translate from one message type to the other for members who have not yet migrated to MX. Clearstream’s Borries would be in favour of central translation, but was worried about liability issues in the case of a SWIFT error.

RBC’s Versnel would support central translation – but only if this accelerated the migration to MX to stop co-existence. “It would depend on how quickly SWIFT could deliver central translation and whether the cost was reasonable,” she said.

Goldstein summed up by saying: “It is clear that the end of MT needs to be defined. SWIFT needs to meld the needs of its community to form a cogent strategy.”