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SWIFT helps industry drive harmonisation benefits of T2S

SWIFT helps industry drive harmonisation benefits of T2S

18 June 2014

One of the many promised benefits of the new pan-European settlement system TARGET2-Securities (T2S) is that it will drive harmonisation across the post-trade securities environment in the Eurozone and beyond. A crucial element of harmonisation is standardisation. In the case of T2S, the CSDs and banks (directly connected participants (DCPs)) that will communicate directly with the new platform must use ISO 20022 formatted messages to do so.

While initially it was thought that the move to T2S could quickly result in the adoption of ISO 20022 by the rest of the market – the 80-90 per cent of flows driven by indirectly connected participants (ICPs) – as the 2015 go-live for T2S approaches it is clear that the ICPs will continue to use established ISO 15022 formats, as well as a range of proprietary formats, to communicate with the DCPs in the short to medium term. To ensure the harmonisation benefits of T2S are realised, DCPs need to accommodate continued ISO 15022/proprietary format use alongside their own ISO 20022 based communications, while avoiding fragmentation and having to provide a different communications solution for each client.

This challenge was a central discussion point at a recent event for DCPs and CSDs convened and hosted by SWIFT at its La Hulpe headquarters. Welcoming participants, Isabelle Olivier, Head of Clearing & Settlement, EMEA, SWIFT, said the purpose of the event was to share insights and ideas about how to tackle areas of common concern in the run-up to the introduction of T2S – including how to harmonise communication between DCPs and ICPs.

The value MyStandards brings us is enabling us to centralise all our T2S documentation and guidelines and to maintain them more easily.

— Robin Leary, Global SWIFT Product Manager, Citi

During the interactive sessions that followed, attendees – representing a range of DCPs and CSDs – discussed different approaches to addressing this issue. A point made several times was that if the issue is not tackled, customers will keep communicating with their service providers in their own preferred formats, forcing the service providers to adapt to each – and that T2S creates an opportunity to drive further harmonisation in client-to-service provider communications. Some attendees favoured a less restrictive route – for example recommendations as to how to use ISO 15022 for T2S – while others said there should be common and enforced rules for usage. Another area of variance was how willing DCPs are to share the work they have already done to create guidelines for their clients when it comes to using ISO 15022 for T2S. Attendees’ views on the role of SWIFT in helping to address this challenge ranged from offering guidance and expertise to taking a more proactive role on standards definition and implementation.

For its part, SWIFT expressed its willingness to collect and compare the specifications already created by the different DCPs and CSDs and assess the value of creating a generic template for use of ISO 15022 for T2S, for feeding back to the industry and for potential endorsement by the Securities Market Practice Group (SMPG).

SWIFT’s Standards management solutions and expertise – adding value in practice

Whether or not further work on the standards definition side is required, SWIFT is already supporting the community in driving harmonisation from T2S via its standards management tools and through its specialist consultancy services.

During the event, attendees had the opportunity to hear about the experiences of users of both. Istituto Centrale Banche Popolari Italiane (ICBPI) described the consultancy assignments SWIFT has carried out for it around T2S, commending SWIFT for its knowledge and expertise on the topic and stressing the strength of the collaboration.

Using MyStandards in combination with the Readiness Portal allows us to push out our guidelines and specifications much more quickly internally – and to our customers.

— Robin Leary, Global SWIFT Product Manager, Citi

Meanwhile, Citi shared its view on SWIFT’s collaborative standards management platform MyStandards, and the Readiness Portal for T2S – a new cloud based application that eases on-boarding by enabling clients to test their messages against specifications and prove their ability to reach quality and straight-through processing rates. “The value MyStandards brings us is enabling us to centralise all our T2S documentation and guidelines and to maintain them more easily,” said Robin Leary, Global SWIFT Product Manager, Citi. “Using MyStandards in combination with the Readiness Portal allows us to push out our guidelines and specifications much more quickly internally – and to our customers.”

The candid discussions that took place during this event showed that there is a real will in the industry to discuss common concerns around T2S – and how to work together to address them to make the transition to T2S as smooth as possible.

— Tanja Haase, Business Manager, Clearing & Settlement, EMEA, SWIFT

“SWIFT clearly has an important role to play here, whether in supporting further standards definition, providing products and services to help with standards management and testing as well as training and consultancy - and of course connectivity,” adds SWIFT’s Olivier. “We look forward to continuing to foster useful, collaborative discussions at the community level about T2S challenges and solutions, as well as to providing practical solutions to our customers to help them tackle these challenges in their own operations in the run-up to T2S go-live.”