Introduction to SWIFT
FIRMA Conference
Dennis Goodenough
Senior Business Manager, SWIFT
18 April 2011
Agenda
• Overview
–
–
–
–
–
–
–
–
History
Governance
Membership
Organization
Oversight
Products
Figures
Standards
• Securities
• Payments and cash
management
• Q&A
Introduction to SWIFT - FIRMA - 18 April 2011
2
SWIFT history
First
Sibos
1978
First
Operating Centre
opens
Asia
1976
Securities
1980
1970s
1987
1980s
First corporates
join SWIFT SWIFTNet live
1996
1990s
2001
2000+
1973
1977
1986
1996
2004
SWIFT
founded
SWIFT
goes
Live
Value-Added
services
Volumes
exceed 3M
messages/
day
SWIFTNet
migration
complete
1979
North
America
Introduction to SWIFT - FIRMA - 18 April 2011
3
SWIFT - Governance
Oversight
National Bank of Belgium and G-10 Central
Banks
Governance Board
Board committees
National member groups
National user groups
SWIFT members
SWIFT community
Introduction to SWIFT - FIRMA - 18 April 2011
4
Oversight: Co-operating central banks
from the G-10 countries
Lead overseer: National Bank of Belgium
•
Bank of Canada
• De Nederlandsche Bank
•
Deutsche Bundesbank
• Sveriges Riksbank
•
European Central Bank
• Swiss National Bank
•
Banque de France
• Bank of England
•
Banca d' Italia
• The Federal Reserve
System (USA), represented by
•
Bank of Japan
Introduction to SWIFT - FIRMA - 18 April 2011
the Federal Reserve Bank of New
York and the Board of Governors
of the Federal Reserve System
5
SWIFT - User categories
Supervised
Financial
Institutions
SWIFT
Community
Non-Supervised
Entities
active in
the financial
industry
Closed
User
Groups/
Corporates
Introduction to SWIFT - FIRMA - 18 April 2011
6
SWIFT – A customer-centric user community
Banks
Payment Systems
Corporates
Clearing & Settlement
Systems
Insurance
Companies
Government
Institutions
Broker-Dealers
Customer
Securities MI’s
Stock
Exchanges
Depositories
Payments MI's
IMI's
Introduction to SWIFT - FIRMA - 18 April 2011
Trustees
7
SWIFT – Members (shareholders)
• Eligible shareholders:
– Banks
– Broker/dealers
– Investment Management Institutions
• Non-shareholding member – threshold
of five shares
• Upon joining, the organisation can buy
one share or opt out until the next reallocation of shares
Introduction to SWIFT - FIRMA - 18 April 2011
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Countries’ organisation
• National Member Groups
– All SWIFT shareholders within same country
– Advisory role for membership matters: local admission criteria
and new users
– Nominate Directors who are then appointed by the
shareholders
• National User Groups
– All SWIFT users within same nation
– Advisory role for operational and technical matters
Introduction to SWIFT - FIRMA - 18 April 2011
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SWIFT – Board of Directors
Board of Directors
Banking &
Payments
Committee
Securities
Steering
Committee
Technology
and
production
Committee
Standards
Committee
Community input
Audit
& Finance
Committee
Introduction to SWIFT - FIRMA - 18 April 2011
Human
Resources
Committee
10
Oversight
• SAS 70 report
• Self assessment of performance against the
overseers’ High Level Expectations for SWIFT
Introduction to SWIFT - FIRMA - 18 April 2011
11
Data Protection
• Data Privacy Working Group
– SWIFT group
– 12 experts in data privacy from EU, US, Australia, Canada
– Review policies
• Contractual Policies
–
–
–
–
–
Commitment to the confidentiality and protection of users data
Data retrieval policy, Personal Data Protection Policy
Available on swift.com
Audited
SAS70
Introduction to SWIFT - FIRMA - 18 April 2011
12
Data Retrieval Policy
• Principles
– Traffic data: limited usage permitted, for billing, pricing,
market and service analysis
– Message data: strictly confidential, usage and disclosure must
be permitted by customers or required for problem
investigation
• Exceptions
– Collective request: request of message data by, for example,
a market infrastructure, for statistical purpose
– Mandatory request: legally enforceable request by a judicial,
administrative, governmental or other competent authority
Introduction to SWIFT - FIRMA - 18 April 2011
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Platform – the SWIFT product stack
Payments
SWIFT Solutions
Treasury
Securities
Trade
Standards
Rules
Messaging services
Directories
&
Information
services
Interfaces
Testing
Services
&
Prof
Svcs
Secure IP Network (SIPN)
Secure, reliable and resilient platform
Introduction to SWIFT - FIRMA - 18 April 2011
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SWIFT in figures
Introduction to SWIFT - FIRMA - 18 April 2011
15
SWIFT in figures (January 2011 YTD)
•
•
•
•
•
•
> 4.0 billion messages per year
9,693 customers
210 countries and territories
~ 2,000 employees
Average daily traffic 17.2 million messages
Peak day of 18.9 million messages – 1 March 2011
• Note: SWIFT does not ‘own’ the data contained in messages it
transports
Introduction to SWIFT - FIRMA - 18 April 2011
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SWIFT standards
• SWIFT sets standards because a common
language for international financial
transactions:
–
–
–
–
Improves automation
Ensures human understanding of the data
Reduces errors
Helps save costs
• SWIFT message standards are recognised
by the International Organisation for
Standardisation (ISO)
• SWIFT works with the financial community
to coordinate standards convergence
worldwide and avoid unnecessary
duplication
Introduction to SWIFT - FIRMA - 18 April 2011
17
FIN message categories
• Category 1 – Customer Payments & Cheques (16 messages)
• Category 2 – Financial Institution Transfers (16 messages)
• Category 3 – Treasury Markets – Foreign Exchange,
Money Markets & Derivatives (26 messages)
• Category 4 – Collections & Cash Letters (18 messages)
• Category 5 – Securities (67 messages)
• Category 6 – Treasury Markets – Metals & Syndications
(19 messages)
• Category 7 – Documentary Credits & Guarantees (29 messages)
• Category 8 – Travellers Cheques (11 messages)
• Category 9 – Cash Management & Customer Status (21 messages)
• Category 0 – Service and System Messages (66 messages)
Name of Presentation – Confidentiality: External
4
ISO
15022
53
ISO
15022
18
Standards
The current and future message landscape
 Payments, Cash and Trade (111
messages)
 Securities, FX and Derivatives (112
messages)
- including 57 ISO 15022 messages
 Service & System Messages (66)
346 live messages
 Payments, Cash and Trade (127
messages)
 Securities, FX and Derivatives (160
messages)
FIN
& ISO
15022
(MTs)
287 completed messages
Current
ISO
20022
Future ISO
20022
Payments, Cash, Trade and Cards
 Payments, Cash and Trade (132
messages)
 Securities, FX and Derivatives (173
messages)
Securities, FX and Derivatives
> 300 messages in progress
Name of Presentation – Confidentiality: External
19
ISO 20022 messages
287 completed messages
Payments, Cash, Trade and Cards Securities, FX and Derivatives
•
• Settlement & Reconciliation (29)
• Corporate Actions (13)
• Investment Funds
Payments and Cash Management
– Account Management
•
•
Change/Verify Account Identification (3)
Bank Account Management (15)
– Payments Initiation
•
•
•
Initiation (4)
Mandate (4)
Creditor Payment Activation Request (2)
– Payment Clearing and Settlement (6)
– Cash Management
•
•
•
•
Bank-to-Customer Cash Management (3)
Notification to Receive and Account Reporting Request (4)
Exceptions and Investigations (17)
Trade
– Trade Services Initiation
•
•
Cards and Related Retail Financial Transactions
– Acceptor to Acquirer Card Transactions (15)
127 messages
Name of Presentation – Confidentiality: External
Securities Trade (30) and Settlement (16)
Reference Data (3) and Acct Mgmt (5)
Securities Management (7)
Cash Management (6)
Funds Processing Passport (2)
• Other Securities
– Securities Transaction Regulatory Reporting (4)
– Proxy Voting (8)
– Issuers’ Agents Communication (22)
• Foreign exchange and OTC Derivatives
Invoice Financing Request (3)
Financial Invoice (1)
– Trade Services Management (50)
•
–
–
–
–
–
– Non-Deliverable Forwards (7)
– Currency Options (4)
– Generic (4)
160 messages
20
ISO 20022: The standards community
• Registration Management Group, RMG
– Overall governance, court of appeal
– Approve business justifications for new standards
– Create Standard Evaluation Groups (SEGs)
• Standards Evaluation Groups, SEGs
68 financial
professionals
from 21
countries and 12
liaison
organizations
– Represent future users in specific financial areas
– Validate candidate message standards
• Registration Authority, RA
– Ensure compliance with the standard
– Maintain and publish ISO 20022 Repository
• Technical Support Group, TSG
– Assist RMG, SEGs, RA and submitting organizations
Introduction to SWIFT - FIRMA - 18 April 2011
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ISO 20022 messages
287 completed messages
Payments, Cash, Trade and Cards Securities, FX and Derivatives
•
• Settlement & Reconciliation (29)
• Corporate Actions (13)
• Investment Funds
Payments and Cash Management
– Account Management
•
•
Change/Verify Account Identification (3)
Bank Account Management (15)
– Payments Initiation
•
•
•
Initiation (4)
Mandate (4)
Creditor Payment Activation Request (2)
– Payment Clearing and Settlement (6)
– Cash Management
•
•
•
•
Bank-to-Customer Cash Management (3)
Notification to Receive and Account Reporting Request (4)
Exceptions and Investigations (17)
Trade
– Trade Services Initiation
•
•
Cards and Related Retail Financial Transactions
– Acceptor to Acquirer Card Transactions (15)
127 messages
Name of Presentation – Confidentiality: External
Securities Trade (30) and Settlement (16)
Reference Data (3) and Acct Mgmt (5)
Securities Management (7)
Cash Management (6)
Funds Processing Passport (2)
• Other Securities
– Securities Transaction Regulatory Reporting (4)
– Proxy Voting (8)
– Issuers’ Agents Communication (22)
• Foreign exchange and OTC Derivatives
Invoice Financing Request (3)
Financial Invoice (1)
– Trade Services Management (50)
•
–
–
–
–
–
– Non-Deliverable Forwards (7)
– Currency Options (4)
– Generic (4)
160 messages
22
SWIFT in Securities
Introduction to SWIFT - FIRMA - 18 April 2011
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Securities standards on FIN (MTs)
• There are 67 category 5 securities messages, covering the
following business areas:
– Pre-Trade / Trade (trade initiation and confirmation)
– Settlement & Reconciliation (settlement instructions,
confirmations and statements)
– Corporate actions (asset servicing)
– Securities lending and borrowing
– Collateral
• Securities industry players also widely use payments, cash
management (categories 1 and 2) and foreign exchange
messages (category 3)
Introduction to SWIFT - FIRMA - 18 April 2011
24
Securities settlement – a typical scenario
MT 502 block Order
MT 513 Advice of Execution
Client 1
= 300
shares
Investment
manager
PEFIGB22
MT 514 Allocation (1) 300
MT 515 Confirmation (1) 300
Broker
dealer
BDAPGBPP
MT 509 Status (optional, to DK)
MT 543 Deliver
Against Payment
MT 541 Receive
Against Payment
MT 541 Receive Against Payment
Custodian
GLOBGB22
Introduction to SWIFT - FIRMA - 18 April 2011
MATCH
CSD
CRSTGB22
27
Securities settlement – a typical scenario
MT 502 block Order
MT 513 Advice of Execution
Client 1
= 300
shares
Investment
manager
PEFIGB22
MT 514 Allocation (1) 300
MT 515 Confirmation (1) 300
Broker
dealer
BDAPGBPP
MT 544
Confirmation
Delivery
MT 509 Status (optional, to DK)
MT 543 Deliver
Against Payment
MT 541 Receive
Against Payment
MT 541 Receive Against Payment
Custodian
GLOBGB22
MT 545 Confirmation Receipt
Custodian a/c
MATCH
CSD
CRSTGB22
Broker a/c
Shares
Introduction to SWIFT - FIRMA - 18 April 2011
$$$$
28
Securities settlement – a typical scenario
1
MT 502 block Order
MT 513 Advice of Execution
Client 1
= 300
shares
Investment
manager
PEFIGB22
3
MT 514 Allocation (1) 300
MT 515 Confirmation (1) 300
9
2
MT 545
Confirmation
Receipt
5a
4
Broker
dealer
BDAPGBPP
MT 544
Confirmation 8a
Delivery
5b
MT 543 Deliver
Against Payment
MT 541 Receive
Against Payment
6
MT 541 Receive Against Payment
Custodian
GLOBGB22
Client 1 a/c
+
Shares
Introduction to SWIFT - FIRMA - 18 April 2011
$$$$
-
MT 545 Confirmation Receipt
8a
Custodian a/c
MATCH
7
CSD
CRSTGB22
Broker a/c
Shares
$$$$
29
MT 3xx
messages
FX & currency
options
Loans and
deposits
OTC
derivatives
+ 450
customers
Independent of
counterparty
Accord for Securities
Trade
matching
on
Accord
Accord for Treasury
NEW
OTC Equity &
Fixed Income
Transactions
For Prime &
Executing
Brokers and
Custodians
Community
driven
Live since May
2009
Accord for Securities – Prime/Executing Broker
Solution for hedge fund transactions
Executing
Broker
Hedge Fund
2. Real time status
updates + exception
handling on GUI + full
reporting in MT 998
Daily Trade
report
Prime
Broker
1. Automated
pre-matching,
4. Settlement
OK
3 . PSET agents’ local
code is x-ref to a BIC in
Accord
Custodian
Introduction to SWIFT - FIRMA - 18 April 2011
Custodia
n
Agent
CSD (PSET)
Agent
31
Accord for Treasury
Single-slide overview
Deal
FX, FX Options,
Money markets,
OTC Derivatives,
Commodities
Confirmations:
(MT 300,305,306,320,
330,340,341,360,
361,362,392, MT 600)
Accord
Subscribers (>475
in 70 countries)
• Banks
• Brokers
• Custodians
• Fund mgrs
• Corporates
(strong growth)
• Real-time reporting &
exception
handling
• Integration available for
various
Back-Office Systems
Introduction to SWIFT - FIRMA - 18 April 2011
SWIFT
Copies of
confirmations
Accord
subscriber or
nonsubscriber
Copies of non-SWIFT
data: fax, e-mail, e-FX
portals, Broker feeds,
Reuters, etc.
Accord
• Real-time Confirmation Matching Service
• Availability of >99.97% last 5 years
• >90K msgs/hour observed matching capacity
• Common matching rules + user-defined rules
• Financial Liability for Matching results
32
SWIFT in Payments and Cash Management
Introduction to SWIFT - FIRMA - 18 April 2011
33
Common Payments Messages
• MT 103 Scope
– This message type is sent by or on behalf of the financial institution
of the ordering customer, directly or through (a) correspondent(s), to
the financial institution of the beneficiary customer.
– It is used to convey a funds transfer instruction in which the ordering
customer or the beneficiary customer, or both, are non-financial
institutions from the perspective of the sender.
• MT 202 Scope
– This message is sent by or on behalf of the ordering institution
directly, or through correspondent(s), to the financial institution of the
beneficiary institution.
– It is used to order the movement of funds to the beneficiary
institution.
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Payments and cash management processes
Customer-to-Bank
Interbank
Bank-to-Customer
INITIATION
Customer Credit Transfer
Initiation
Customer Direct Debit
Initiation
CLEARING
&
SETTLEMENT
Payment Status Report
ACCOUNT
REPORTING
ACCOUNT
REPORTING
B2C Account Report
B2C Account Report
B2C Account Statement
B2C Account Statement
B2C DebitCreditNotification
Introduction to SWIFT - FIRMA - 18 April 2011
B2C DebitCreditNotification
35
High level message flow
(Wire transfers)
Originator
Settlement path can
change based on
information exchanged
using SWIFT messages
Community Bank
IBK # 1
Payment
Initiation
IBK # 2
Beneficiary’s Bank
Beneficiary
SETTLEMENT
Fed
SWIFT MESSAGING
Introduction to SWIFT - FIRMA - 18 April 2011
36
Cover payments – Timing aspects
Pay $1000
Pay $1000
Mr.
Jones
London
It’s only
03:00
ET!
103
Bank A
London
It’s
22:01!
103
09:00
ET
Introduction to SWIFT - FIRMA - 18 April 2011
09:00
ET
CET
Bank C
New York
910
09:01
ET
09:01
ET
Mr. Ueda
Tokyo
202
09:00
Bank C
New York
103
Bank B
New York
09:00 CET
Bank B
New York
103
It’s only
03:00
ET!
202
Bank A
London
09:00 CET
Bank D
Tokyo
Mr.
Jones
London
Bank D
Tokyo
Here it’s
16:00
Mr. Ueda
Tokyo
37
Cover payments – Cost aspect
Pay $1000
Pay $1000
Mr.
Jones
London
Mr.
Jones
London
Charges
$20
103
Bank A
London
Bank A
London
103
$980
Bank C
New York
910
Bank C
New York
$1000
Charges
$10
Charges
$10
Mr. Ueda
Mr. Ueda
Tokyo
$1000
No customer
charges
$1000
$965
Bank D
Tokyo
202
103
Charges
$15
103
Bank B
New York
$1000
Bank B
New York
$1000
No customer
charges
202
$955
Introduction to SWIFT - FIRMA - 18 April 2011
Bank D
Tokyo
Mr. Ueda
Mr. Ueda
Tokyo
$990
38
Q&A
?
Introduction to SWIFT - FIRMA - 18 April 2011
39
Thank you
Introduction to SWIFT - FIRMA - 18 April 2011
40