Vasu Prakasam, Managing Director
Kenya Commerce Exchange,
The SWIFT Bureau in NAIROBI.
SWIFT Presentation
24 February 2010Nairobi, Kenya
AITEC BANKING & MOBILE MONEYCONFERENCE
KENEX provides SWIFT connectivity to banks and isequipped to offer all products of SWIFT to banks, corporates
and eligible Financial Institutions.
KENEX BUREAUNairobi, Kenya
Agenda
• SWIFT and Securities Markets in Africa • SWIFT and Securities Markets in Africa
• Achieving DVP (Delivery vs. Payment)• Achieving DVP (Delivery vs. Payment)
• Introduction to SWIFT• Introduction to SWIFT
• Q & A• Q & A
Agenda
• Introduction to SWIFT• Introduction to SWIFT
1973-2009
Fund administrators
MA-CUGs
Banks found SWIFT
Money brokers
Trading institutions
- Registrars & transfer agents
- Custody providers- Trust or fiduciary
services companies
Investment managers
- Broker-dealers- Central depositories &
clearing institutions- Exchanges
- payments MIs- proxy voting agencies- non-shareholding financial institutions
- Treasury counterparties- Treasury ETC service
providers
Travelers' checks issuers
Securities MIs
1987
1988
1989
1990
1973
1992
199519
98
1999
2000
2002
2004
2008
Securities market data providers
1996
Treasury Securities ETC service providers
2009
Corporates
S.W.I.F.T
SWIFT in figures
8,242 users
208 countries
Peak day 17,860,068 messages (15 Oct 2008)
Average Daily Traffic 15,367,993
S.W.I.F.T
SWIFT in Africa
Over 1000 live users
54 countries
Agenda
• SWIFT and Securities Markets in Africa • SWIFT and Securities Markets in Africa
Why SWIFT in Africa Globalization drives cross-border trading Information requirements have exploded Need for infrastructure that works seamlessly both
within and across markets Efficient communication and secure messaging is
needed Africa has the same infrastructure needs as
markets everywhere and must meet international standards
But African markets are small and may not be able to acquire needed infrastructure
How can SWIFT How can SWIFT help you realise help you realise value?value?
Full ‘lifecycle’ of a trade on SWIFT
Payments
VMUs
Settlement instruction
Settlement confirmation
Collaterallending & borrowing
CorporateActions
Reporting
Trading - and
execution
Securities market:
Custodian
Post-trade
Pre-trade / Trade
I/CSD
Settlement
Reconciliation
Settlement
Reconciliation
Seller
Corporate
actionsPre-settlement
Reconciliation
Clearingagent
Buyer
Corporateactions
Pre-settlement
Reconciliation
Proxyvoting
MT-based MX-based (under development)
Broker/Dealer ServicesBroker/Dealer Services
Broker Dealer Services
• Multi Asset Class Transaction Processing
• Cross Border Trade Allocation/Confirmations
• Regulatory reporting for Domestic and Global Markets
• Order Management
• Trade Management
• Asset Servicing
• Financing and Position Management
• Settlement Management
PRE_TRADEPRE -TRADE
TRADE PRE_TRADEPOST-TRADE
PRE-SETTLEMENTPRE_TRADE
CLEARINGSETTLMT/RECON
PRE_TRADECUSTODY PRE_TRADEASSET
SERVICING
SWIFT offers a suite of messages that handle the requirements of all Asset Classes.
These messages cover 8 main categories
Investment Lifecycle – B/D services
Asset Servicing:-Corporate ActionsMT 564-565-566-567-568-Depository Receipts (Instr Change)MT 587-588-589
Asset Servicing:-Corporate ActionsMT 564-565-566-567-568-Depository Receipts (Instr Change)MT 587-588-589
Order Management:MT 502-509- FIX over SWIFT
Order Management:MT 502-509- FIX over SWIFT
Trade Management:MT 513-514-515-517-518-576-584
Trade Management:MT 513-514-515-517-518-576-584
Financing/Position Mgmt:- Position/Movement StatementsMT 535-536-537-549-575- Stock Lending/BorrowingMT 516-526-581-582- Depot Management (Intra)MT 508-524-538- Collateral ManagementMT 527-558-569- Margin MT 503-504-505-506-507 - Treasury MT 300 Series
Financing/Position Mgmt:- Position/Movement StatementsMT 535-536-537-549-575- Stock Lending/BorrowingMT 516-526-581-582- Depot Management (Intra)MT 508-524-538- Collateral ManagementMT 527-558-569- Margin MT 503-504-505-506-507 - Treasury MT 300 Series
Settlement Management:-Settlement InstructionsMT 528-529-540-541-542-543-Settlement ConfirmationsMT 544-545-546-547-Settlement Status/AllegementsMT 548-578-586
Settlement Management:-Settlement InstructionsMT 528-529-540-541-542-543-Settlement ConfirmationsMT 544-545-546-547-Settlement Status/AllegementsMT 548-578-586
Accounting/Reporting:- Position/Movement StatementsMT 535-538- GeneralMT 590-591-592-595-596-598-599
Accounting/Reporting:- Position/Movement StatementsMT 535-538- GeneralMT 590-591-592-595-596-598-599
Investment managementInvestment management
Reaping the benefits of automation
Investment Manager
Payments & Cash management
Foreign Exchange
Money Markets
Derivatives
Securities reporting
Collateral Management
Securities lending & borrowing
Trading, Indication Of Interest
Post trade matching
Clearing and Settlement
Corporate Actions
Investment Managers are at the centre of every securities transaction
SWIFT offers the financial industry a common platform of advanced SWIFT offers the financial industry a common platform of advanced technology and access to solutions through which you can build your technology and access to solutions through which you can build your competitive edge.competitive edge.
Investment Investment ManagerManager
Global ReachOver 8,200 end-points in 208 countries
The SWIFT networkBringing Global Reach
800
2,800
600
1,100
1,6001,200
All leading brokers and custodians and 90 % of top Investment managers (>100 billion) are connected to the
SWIFT network
The current challenges for an Investment Manager
Volumes•Volume sensitive and exposed to risk. With small margins, risk can be significant if something goes wrong. Volumes are not only increasing but values are higher as institutions bundle orders.
•Business growth and fluctuations in dealing volumes
•Manual processes are not scalable and time is needed to train and recruit staff
Efficiency•Processing time becomes an issue when continuing to work in manual mode.
•Manual intervention reduces competitiveness because of early cut-off times
Cost Risk•True processing costs are ignored, because a number of costs are hidden - Current focus has been to handle and support growth. - However, due to consolidation, competition increases, margins further decrease; then costs are looked at
• Accurate processing, no errors - Manual work increases operational risk - Order amounts increase as more institutions bundle their orders.• Financial risk is widely disregarded until there is a problem.
Increasing the value of SWIFT for Investment Managers
Value drivers for the industry
Reach (Standardised Messaging)
Re-usability(Single Window)
STP
Resilience / Security
Pricing
Reach (Standardised Messaging)
Re-usability(Single Window)
STP
Resilience / Security
Pricing
Stand
ards
Quality of Service
Comm
unity
Value delivery channels for an institution
Custodian ServicesCustodian Services
Functions that SWIFT supports for the custodian segment of the trade life-cycle
ReportingReporting
Client
Operations
Management
Ancillary FunctionsAncillary Functions
Reconciliation/ Control
Interfaces
Information FeedsPricingCorporateActions
••
• Income/Dividends
F/X
F/X
Cash ManagementCash Management
&Attribution
Performance
Measurement&
Attribution
• Accounting/NAVS• Administration• Transfer Agency
Fund Support•
Accounting/NAVS
• Administration
• Transfer Agency
Order ManagementOrder Management
Confirmation/Affirmation and
Allocation
Confirmation/Affirmation/Allocation
Portfolio ManagementPortfolio Management
Settlement/Clearance &Custody
Settlement/Clearance &Custody
PortfolioAccounting
Execution
Execution
Margin/CreditMargin/CreditSecurities Lending/
Borrowing
Securities Lending/Borrowing
Risk ManagementRisk Management
ComplianceCompliance
MT516,526,581-582
MT300,304CLS
MT900,910,940,950MT103,202
FIX: MT502,509 MT513
MT515,517,518
MT508,524,540-549,578,535-538,575-576,
584,586-589,564-568
SWIFTNet FundsMT502,509,515
MT535-537
Market Data Solution
MT535-537, 575,576
Securities Market InfrastructuresSecurities Market Infrastructures
Securities Market InfrastructuresArgentina Caja de Valores
Australia Australian Stock ExchangeSFE – Austraclear
Austria OeKB
Belgium CIKEuroclear BankMTSNational Bank of Belgium
Brazil CBLC
Canada CDS
Croatia Sredisnja Depositarrna Agencija
Denmark OMXVP
Estonia Estonian Securities DepositoryOMX
Finland NCSD Finland – APKOMX
France Euroclear FranceEuronext Paris – MATIFMTS
Germany Eurex ClearingClearstream Banking AGMTS
Greece Central Securities DepositoryBank of Greece
Hong Kong HK Futures ExchangeHong Kong Monetary AuthoritySEHK Options Clearing House
Hungary Keler
Israel Tel Aviv Stock Exchange
Italy CCGMonte Titoli
Japan Bank of JapanJSCCTokyo Stock Exchange
Kazakhstan Kazakhstan Stock Exchange
Korea Securities Depository
Latvia Bank of LatviaCentral DepositoryOMX
Lebanon Midclear
Lithuania OMX
Luxemburg Clearstream Banking SA
Mexico S.D. Indeval
Netherlands Euroclear NederlandMTS
Norway VPS
Poland National Depository for Securities – KDPW
Portugal Banco de Portugal – SITEMEMTS
Russian Federation
Depository Clearing CompanyThe National Depository Center
Singapore Central DepositorySingapore Exchange
Slovakia Bank of Slovakia
Slovenia Central Securities Clearing Corporation – KDD
South Africa STRATEJSE Securities Exchange
Spain IberclearMEFFMTS
Sweden NCSD Sweden – VPCOMX
Switzerland SISSIS x-clear
Taiwan Securities Central Depository
Thailand Thailand Securities Depository
UAE - Dubai DIFX
UK (& Ireland)
CRESTLCH.ClearnetLondon Stock Exchange
USA Chicago Mercantile ExchangeClearing CorporationDTCCFederal Reserve BanksOmgeoOptions Clearing Corporation
Zimbabwe Reserve Bank of Zimbabwe
Standards
Recommendations, Barriers or Regulations
20012001 CPSS-IOSCOCPSS-IOSCO Recommendation 16Recommendation 16: “Securities Settlement Systems should use or accommodate relevant international communication procedures & standards…”
20032003 G30G30, Recommendation 2, Recommendation 2 ““Harmonise message standards & communication protocols”
20032003 GiovanniniGiovannini, Barrier 1, Barrier 1“Define EU wide protocol to eliminate national differences in IT & interfaces used by Clearing & Settlement providers”
20042004 ESCB-CESR,ESCB-CESR, Standard 16 (draft) Standard 16 (draft) “Entities providing securities clearing and settlement services, and participants in their systems should use or accommodate relevant international communication procedures and messaging and reference data standards………”
G30 Global Clearing and Settlement: A Plan of Action - Recommendation 2Harmonise messaging standards & communication protocols
“All market participants should adopt ISO15022 as the global standard for straight-through securities messaging across the entire securities life cycle”
“XML should become the language to describe standardised messages”
“Market participants should support and use communication networks that adopt open, standardised, IP-based protocols for securities transactions”
A world without SWIFTDifferent Standards, Messaging & Connectivity
MarketInfrastructures
User
Single Window from SWIFTReusing Standards, Messaging and Connectivity
MarketInfrastructures
User
SWIFT meeting the challengePresent and future
Communication network
– SWIFTNet (IP based service)
Market Practice Standards worldwide
– Securities Market Practice Group (SMPG)
Data Standards
– ISO15022
– SWIFT ISO XML Standards
– UNIFI (ISO20022 - Standards convergence)
What can SWIFT bring to theEAC Securities Markets?
Standards Security, Reliability and Risk Resilience Co-Operation Services Provide VALUE to the whole market SWIFT has done it before
Revenues/ Revenues/ PortfolioPortfolio
Conclusion
Net Profits/ Net Profits/ Portfolio Portfolio
PerformancePerformance
Multiple Multiple StandardsStandards
Complex Complex ProductsProducts
Manual Manual ProcessesProcesses
Legacy Legacy SystemsSystems
Lack of Systems Lack of Systems IntegrationIntegration Multiple LinksMultiple Links
Cost Reduction and Improved Performance
Agenda
• Achieving DVP (Delivery vs. Payment)• Achieving DVP (Delivery vs. Payment)
Stock-Market Stock-Market Securities Securities TradeTrade flows flows WithoutWithout Allocation process, Allocation process, without without AffirmationAffirmation processprocess
Stock Exchange
Buyer’s Broker
Seller’s BrokerBuyer’s
Investment Manager
MT 502
MT 513
MT
502
MT
502
MT
518
MT
518
MT 515
MT 509
MT 515: Broker sends complete info on securities purchased or sold.
MT 513: Broker sends preliminary info only.
These messages are not mutually exclusive.
Stock-Market Stock-Market Securities Securities TradeTrade flows flows WithWith Allocation process, Allocation process, with with AffirmationAffirmation processprocess
Stock Exchange
Buyer’s Broker
Seller’s BrokerBuyer’s
Investment Manager
MT 502
MT 513
MT
502
MT
502
MT
518
MT
518
MT 514
MT 515
MT 517
Allocation process: MT 514s and MT 515s.
Affirmation process: MT 517.
These processes can exist independently from one another.
MT 509
Securities Securities Settlement Settlement flows for versus payment transactions flows for versus payment transactions ““Full DVPFull DVP market” market”
Seller’s BrokerBuyer’s
Investment Manager
MT
541
MT 545
MT 541
Central Securities Depository
Seller’sCustodian
Buyer’sCustodian
MT
543
MT 543
MT 547
MT
545
MT
547
MT
548
MT
548
MT 548 MT 548
Securities Securities Settlement Settlement flows for versus payment transactions flows for versus payment transactions ““non-DVPnon-DVP market” market”
Seller’s BrokerBuyer’s
Investment Manager
MT
541
MT 544
MT 540
Central Securities Depository
Seller’sCustodian
Buyer’sCustodian
MT
543
MT 542
MT 546
MT
545
MT
547
MT
548
MT
548
MT 548 MT 548
Buyer’s Cash Correspondent
Seller’s Cash Correspondent
Central Bank
MT
202
MT 202
MT
210
MT
942
MT
207
MT
900 M
T 900M
T 210
Category 2 - Financial Institution Category 2 - Financial Institution TransfersTransfers
– MT 202 General Financial Institution Transfer
– MT 207 Request for Financial Institution Transfer
– MT 210 Notice to Receive
Category 9 – Cash Management Category 9 – Cash Management and Customer Statusand Customer Status
– MT 900 Confirmation of Debit
– MT 942 Interim Transaction Report
Category 5 – Securities MarketsCategory 5 – Securities Markets– MT 502 Order to Buy or Sell
– MT 509 Trade Status Message
– MT 513 Client Advice of Execution
– MT 514 Trade Allocation Instruction
– MT 515 Client Confirmation of Purchase or Sale
– MT 517 Trade Confirmation Affirmation
– MT 518 Market Side Securities Trade Confirmation
– MT 540 Receive Free
– MT 541 Receive Against Payment
– MT 542 Deliver Free
– MT 543 Deliver Against Payment
– MT 544 Receive Free Confirmation
– MT 545 Receive Against Payment Confirmation
– MT 546 Deliver Free Confirmation
– MT 547 Deliver Against Payment Confirmation
– MT 548 Settlement Status and Processing Advice
ISO 15022 & FIN Message Types used in mappingISO 15022 & FIN Message Types used in mapping
What needs to be shared?
Standards Business practices Business solutions Market Infrastructures Infrastructure Components / Services Resources
Prerequisites for sharing
Shared vision
Common understanding
Perceived benefit
Champion/s
How does Africa benefit?
Your return on our investment Your return on our investment
Global counterparty connectivity Greater risk mitigation, compliance and inward
investment for the region World standardised and integrated financial
infrastructure A strong foundation for outward investment
opportunities
The SWIFTNet messaging services
SWIFTNet FIN
• Secure, reliable, and STP-oriented messaging using SWIFT MT formats.
• Appropriate for exchange of individual structured financial messages and short reports.
SWIFTNet InterAct
• Secure, reliable, and STP-oriented messaging using new SWIFT MX or proprietary formats.
• Appropriate for exchange of individual structured financial messages and short reports.
SWIFTNet FileAct
• Secure, reliable, and flexible file transfer (any formats).• Appropriate for exchange of batches of structured financial
messages and large reports.
SWIFTNet Browse
• Secure browsing.• Appropriate for manual transaction input and reporting using
HTML-based graphical user interfaces.
Business solutionsCustomer solutions
SWIFTNet FIN
Broader rangeof business
solutions
Extendedreach
Access to MI’s Enabling thecommunity
SWIFTNet
More than 8,000 FIN correspondents in
more than 200 countries
AccordCash reportingBulk payments
MA-CUGSCORE
RTGSACH
SWIFTNet: single window accessto the financial worldMarket infrastructures
Partnership
Successrequirespartnerships
SWIFT is your partner
&&uestionsAnswers