Mapping local market practice to ISOThe role of SMPG

AMEDA Leadership Forum – 29th April 2009

John Falk

AMEDA Leadership Forum 29th April 2009 2

Three major trends affectingSecurities Market Infrastructures (SMI)

1. Focus on core business to develop added-value services for their user-community

2. Internationalisation of their landscape– participants and new competitors

3. Drive towards full Straight Through Processing to decrease risk and processing costs

Growing importance of international market practices and standards (ISO 15022,

ISO 20022) in a domestic market

AMEDA Leadership Forum 29th April 2009 3

SMI participants have to deal with different Standards, Messaging & Connectivity

Securities MarketInfrastructures

SMI Participant

Increases Costs

Increases Risk

AMEDA Leadership Forum 29th April 2009 4

Single Window from SWIFT, sameStandards, Messaging and Connectivity

SMI Participant Securities MarketInfrastructures

Why Standardize?

Increased cost

Missed opportunity

AMEDA Leadership Forum 29th April 2009 6

SMPG

Standards at Work: SMPG

Securities Market Practice Group

Create globally agreed harmonized market practices which, integrated with standards, will bring the securities industry closer

to achieving STP.

STP

StandardsStandards

Market PracticeMarket Practice

7AMEDA Leadership Forum 29th April 2009

SMPG Activities

• Organize national market practice groups

• Collate national market practice rules

• Define cross-border market practice rules

• Harmonize market practice differences

• Publish market practice rules

• Identify conformance mechanisms

8AMEDA Leadership Forum 29th April 2009

SMPG Countries

• Representatives from National Market Practice Groups (NMPGs), now established in 39 markets, represent their countries at the Global SMPG level– Americas: AR*, BR, CA, CL*, CO*, EC*, MX, PE*, UR*, US,

VE* – EMEA: AT, BE, CH, DE, DK, EG, ES, FI, FR, GR, GB, IS, IE,

IL, IT, LU, NL, NO, PL, PT, RU, SE, TR, UA, ZA, Euroclear, Clearstream

– Asia/Pacific: AU, CN, HK, IN, JP, KR, NZ, SG, TH, TW

* Countries where SMPG is working on the creation of a NMPG

9AMEDA Leadership Forum 29th April 2009

SMPG Organization

Steering Committee

National Market Practice Groups and Convenors

Broker/dealers, investment managers, custodians,

depositories, regulators, and vendors

The goal: To standardize market practices and message formats10AMEDA Leadership Forum 29th April 2009

AMEDA Leadership Forum 29th April 2009 11

Securities Market: Equities and Fixed Income

Custodian

Post-trade

Pre-trade / Trade

CSD

Settlement

Reconciliation

Settlement

Reconciliation

SellerCorporat

eactions

Pre-settlement

Reconciliation

Clearingagent

Buyer

Corporateactions

Pre-settlement

Reconciliation

Proxyvoting

SMPG process

National Market Practice Groups (NMPG)National Market Practice Groups (NMPG)

National Market Practice Groups (NMPG)

Securities Market Practice Group (SMPG)

Administration

www.smpg.info Publication

Review, discussion & refinement

Collate common elements, specify additional country

requirements, identify further opportunities for

harmonization

Analyze & document local practices

12AMEDA Leadership Forum 29th April 2009

Prerequisites for sharing

• Shared vision

• Common understanding

• Perceived benefit

• Champion/s

13AMEDA Leadership Forum 29th April 2009

AMEDA Leadership Forum 29th April 2009 14

Mapping examples / Access Comments

Today Broker-dealers62 Brokers

Corporate Insurance companies

Broker-dealers

Banks

Investmentmanagers

Stock Exchanges

DepositoriesTrustees

Clearing systems

Paymentsystems

Settlementsystems

Government institutions

MT

547

Seller’s

Broker

Buyer’s Investment Manager

MCDR

Bu

yer’

s

Bro

ker’

sC

leari

ng

A

gen

t

Bu

yer’

sC

usto

dia

n

Buyer’s Broker

Seller’

s

Bro

ker’

sC

leari

ng

A

gen

t

Seller’s Investment

Manager

Seller’

sC

usto

di

an

MT

541

MT

541

MT

541

MT

543

MT

543M

T 541

MT

543

MT

543

MT

543

MT

547

MT

541

MT 541

MT

547M

T 545

MT

545

MT

547

MT

545

MT

547

MT

547

MT

545MT

543

MT 545

MT

545

Cen

tral

Ban

k

MT 202 (RTGS)MT012(RTGS)

17AMEDA Leadership Forum 29th April 2009

Zoom: barrières #1 & #3

Source : First Giovannini Report on EU Clearing & Settlement Arrangements

B1

B3

Les barrières 1 et 3 ont aussi été positionnées en haut du classement en termes des coûts qu’elles génèrent pour l’industrie.

18AMEDA Leadership Forum 29th April 2009

AMEDA Leadership Forum 29th April 2009

Mapping local market practice to ISOThe role of SMPG

AMEDA Leadership Forum – 29th April 2009

John Falk