New service set to significantly increase transparency in post-trade processing while helping to prevent costly settlement fails.
There is currently no way of tracking a securities transaction end-to-end throughout its lifecycle across multiple intermediaries. This lack of visibility increases the risk that a security may not be in the right place at the time of completion, leading to one of the biggest challenges facing the securities industry today: settlement fails.
Settlement fails add operational costs of around USD 3 billion a year for the securities industry, as well as regulatory penalties, such as those introduced by the Central Securities Depository Regulation (CSDR) in Europe earlier this year.
Tackling friction, cutting costs
Together with 17 leading financial institutions, we’ve now successfully piloted the first phase of a new service, Swift Securities View, that tackles this major friction point. The comes as part of the securities industry’s push towards ‘zero-touch’ processing, and leverages the power of a Unique Transaction Identifier (UTI) to make the complex flow of a securities trade as simple as tracking a package.
Available for broad adoption in 2023, Swift Securities View gives market participants a clear view of all the steps in the settlement journey. It enables them to identify trades at risk of failing, including early detection of any discrepancies between buy-sell instructions, so they can take pre-emptive action.
It does this by using an ISO-standard transaction identifier that links messages related to the same securities flow, enabling automated tracking of both sides of the transaction by all market participants involved.
Transforming post-trade processing
As part of our strategy to enable instant, frictionless and interoperable transactions globally, we’re encouraging universal adoption of the transaction identifier to achieve standardised data use across the post-trade lifecycle. This will bring increased transparency to securities transactions, help reduce risk, and support innovative new services.
“Swift Securities View does more than just empower our customers to identify and rectify discrepancies in settlement transactions,” says Vikesh Patel, Head of Securities Strategy at Swift. “It sets the blueprint and foundation for a new industry standard to radically transform the industry, just as Swift GPI continues to do for cross-border payments. Our early pilot results show this potential and further strengthen our mission of making transactions instant and frictionless, across all industries.”
The pilot included the following market participants, amongst others: ABN Amro Clearing, Blackrock, BNP Paribas, BNY Mellon, Citi (Securities Services and Global Markets), Credit Suisse, Euroclear, Euronext, HSBC, J.P. Morgan, Northern Trust, Optiver, Pershing, and SEB.
What the community is saying
Steve Wager, Executive Manager, Head of Direct Markets Management, at BNY Mellon said: “The UTI adoption by the industry could facilitate earlier matching, which is key to timely settlement, especially with trade settlement cycles shortening across the globe.”
Jeff King, Head of Core Custody Product, Citi Securities Services, said: “With the rollout of CSDR in Europe and the planned move to T+1 in Asia and the US, it is becoming increasingly important to ensure settlement efficiency and having transactions match and settle on time. The inclusion of the Unique Transaction Identifier within the settlement lifecycle data communication and the adoption of Swift’s Securities View Service within the industry facilitates heightened transparency earlier in the settlement lifecycle allowing matching issues to be discovered higher up the settlement chain rather than waiting on matching updates to come back from CSDs and market infrastructures.”
Olivier Grimonpont, Managing Director, Product Management - Market Liquidity, Euroclear, said: “Euroclear consistently focuses on improving operational efficiency in the post trade space and helping our clients reduce settlement fails. We were pleased to participate in the pilot, which enabled the market to test the potential of adopting a UTI to improve transaction lifecycle visibility.”
Pierre Davoust, Heads of CSDs, Euronext, said: "At Euronext Securities we are continuously looking into ways that enable our clients to improve their daily business. We are pleased to support this important initiative that helps the industry to strengthen the settlement processes and reduce fails.
Paul Baybutt, Global Head of Middle Office for Securities Services at HSBC said: “We’re pleased to participate in this Swift pilot. Wider adoption of the Unique Transaction Identifier should improve visibility for market participants to identify transactions that might be at risk of failing and address potential settlement issues quicker and even before they occur. Expanding the use of UTIs should therefore make it more efficient for service providers, such as ourselves, to respond to client queries about the status of their transactions – which is ever more important with the implementation this year of the Settlement Discipline Regime.”
Edward Monrad, Head of Market Structure at Optiver said: “Critical to the health of financial markets is a well-functioning and reliable post-trade process. By seeking to increase transparency and efficiency around settlement, Swift's Securities Tracking Pilot is making an important contribution toward this very goal. The UTI has the potential to substantially improve the OTC settlement process and reduce costs by allowing parties to a trade to easily find out where and how other parties are instructing in case of mismatches. Optiver is pleased to be participating in this pilot and looks forward to widespread adoption of the UTI.”
Russ Stamey, Senior Vice President, Asset Servicing, Northern Trust said: “We applaud Swift Securities View as another step toward full transaction transparency, enabling more efficient securities settlement and more control in the post-trade space.”