Post Trade Services Wednesday May 18 th 206 Ian Bessarabia & Hugo Smit

SWIFT in figures 2

Regulatory pressure New entrants changing the competitive landscape Re-think business model Institutionalisation and shifting of client base to Asia, Africa and Latin America Low interest rates / margins Globalisation of markets New market entrants Risk management & Compliance Focus on middle and back office Business development opportunities New Competition 3 Important trends affecting the Securities industry

Challenges Competition Regulatory Pressure Multi-Asset Investment Strategies Many Counterparts Outsourcing Increasing number of transactions Standardization Compliance Automation NEED FOR Scalability

How SWIFT addresses challenges Helping our community to reduce risks thanks to automation and STP Global Reach and Identity Financial Messaging Industry Standards Compliance with regulations & Data Management Security and Resiliency Automation at your own pace Customer Care and Support

Your scalable path towards increased STP Network and Connectivity Messaging and Standards Business Solutions Security & Resiliency Automation and Scalability Customer Care and Support Global reach through single channel Receive your statements Monitor your statements Send your instructions Comply with regulations and improve your STP with proper data Place regulatory compliance at the source of your business flows Integrate SWIFT with your other used systems/formats

Your scalable path towards increased STP Current Solutions Global identifier : BIC Code Multi custodians connectivity through single channel Cash reporting aggregation Cash reporting monitoring Payments Instructions & Cash Positions Sanctions Screening for cash flows Network and Connectivity Messaging and Standards Business Solutions Settlement and Reconciliation of Assets Corporate Actions Processing Collateral Management Funds Distribution Processing Customized Integration Reference Data – Identification and hierarchy of parties Global reach through single channel Receive your statements Monitor your statements Send your instructions Comply with regulations and improve your STP with proper data Place regulatory compliance at the source of your business flows Integrate SWIFT with your other used systems/formats Standards Management KYC solution for funds distribution

All ISO messages already in use They support: Block and Allocation Equities and Fixed Income trades Local matching Exchange of SSIs Reject or Cancellation possible at each step Exception processes Agreed market practice eases implementation A Market Best Practice – Process GETC 8 Market Practice

End to end automation Set of ISO messages used in the GETC market practice Trade order - FIX Block Advice - MT 513 Buy sideSell side Allocations – MT 514 Confirmations – MT 515 Affirmations – MT 517 Portfolio Management and Trading System Local matching system STP workflow Application In te rf a c e FX Fixed Income INTERFACESINTERFACES Equities ISO mapping Local matching STP via ISO standards ISO standards Settlement Status – MT 509 DJE 9

MT Background Sent by broker to confirm a trade and/or allocation to Investment Manager ̶ Legally binding confirmation in some markets Contains Trade & Settlement details Point of inter-operability between FIX and SWIFT ISO messaging ̶ FIX Execution message can map into a MT515 Approved by SEC as a legally acceptable form of confirmation Widely supported message with more than 2,200 receivers 10 DJE

Optional use of MT 509 Status Update - Market best practice 11 MTDescription MT 509Reject any of the following: MT 513 block advice, an MT 514 allocation, and an MT 515 confirmation. Accept a MT 513 block advice. MT 509Broker may use the MT 509 to reject or accept a cancellation of an allocation MT 509IM may use the MT 509 to reject or accept a cancellation of an MT513 execution or a MT515 confirmation MT 509IM may indicate the block is accepted and matched. Allocations will follow

12 Settlement Ecosystem

Industry challenges: Timeliness and accuracy of settlement Solution: Standardised messaging for clearing and settlement Benefits: The clearing and settlement messaging continue to have, the highest volume of the securities traffic Highly automated area in the trade lifecycle Used by more than 4,000 financial institutions worldwide and STP improvement facilitating cost and risk reductions Most of the clearing houses are connected to the SWIFT Network Clearing and settlement messages Asset classes: Equities, Fixed Income, Listed derivatives Settlement Discipline CSDR 13

14 Industry challenges These are the messages which are widely received over the SWIFT network by Investment Managers, which explains there is a strong need to know the status of holdings and transactions Solution Set of messaging standards which allow for automation of the securities reporting Benefits There are over 5,000 securities institutions connected to the SWIFT network including practically all the custodians in the financial sector. Move the proprietary links to a secure, reliable and integrated communication channel Receive standardised messaging Reduce manual intervention and increase the reconciliation rate Ensure this process becomes an exception based process rather than entirely manual Reconciliation messages Asset classes: Equities, Fixed Income, Listed derivatives Reconciliation CSDR

Copy Service CSDR CSD Investment Firm Custodian IMI How could a Copy Service be promoted ? The regulators require a ‘on-demand’ direct data feed of settlement messages. SWIFT could promote idea of a Regulator setting up a passive connection to SWIFT ready to be activated whenever they want to receive real time copies of message sent over the SWIFT network. Only the CSD and the Regulator would need to join the FIN Copy closed User Group. SWIFT perspective Fulfill rgulatroy reporting requirment without impacting sending and receiving parties. Regulator FIN Inform ‘T-Copy’ Closed User Group 15

Growing GETC community DJE BUY SIDES 8 direct participants 10 via 3 rd party concentrators ABN AMRO BANK N.V. BARCLAYS CAPITAL INC Barclays Capital Securities Limited BEAR STEARNS INTERNATIONAL LIMITED BNP-Paribas SA CLSA Ltd. Commerzbank AG CREDIT AGRICOLE CIB Credit Suisse Securities (Europe) Limited DAIWA CAPITAL MARKETS EUROPE LIMITED DAIWA SECURITIES CO.LTD. DZ BANK AG Exane S.A. Goldman Sachs International Hongkong and Shanghai Banking Corporation Limited HSBC Bank Plc HSBC Trinkaus und Burkhardt AG Instinet Europe Limited Instinet Pacific Limited INVESTMENT TECHNOLOGY GROUP LIMITED J.P. MORGAN SECURITIES Jefferies International Limited Jefferies LLC. Joh. Berenberg, Gossler and Co Kg JPMorgan Securities (Asia Pacific) Kempen and Co. N.V. Kepler Capital Markets MERRILL LYNCH INTERNATIONAL Metzler B. Seel. Sohn & Co. MORGAN STANLEY NATIXIS Nomura International plc Royal Bank of Scotland Plc. Sanford C. Bernstein Société Générale State Street Bank GmbH TRADITION SECURITIES AND FUTURES UBS Limited WGZ Bank AG Westdeutsche Genossenschafts-Zentralbank SELL SIDES 50 direct participants Others via 3 rd party concentrators SELL SIDES who receive MT517 affirmation 16

17 MT515 Matching Logic

Block sent by the Broker – Data Set Business Data supplied in the Block Advice IM’s Order Reference Broker’s Block Reference Trade Date Settlement Date Deal Price Days Accrued Direction of Trade Free / Against Payment Quantity Advised Security Identifier Security Line/Listing Sender’s Role & Identity Receiver’s Role & Identity Accrued Interest Block Commission DJE 18

Allocation – Internal Data elements to match to MT515 Confirmation Business Data supplied in the Allocation IM’s Order Reference Broker’s Block Reference IM’s Allocation Reference Trade Date Settlement Date Deal Price Settlement Currency Direction of Trade Free / Against Payment Allocated Quantity Total Block Quantity Security Identifier Security Line/Listing Sender’s Role & Identity Receiver’s Role & Identity Portfolio Identifier IM’s SSIs DJE 19

Confirmation by the Broker – Data Set Business Data supplied in the Confirmation IM’s Order Reference Broker’s Block Reference IM’s Allocation Reference Broker’s Confirmation Ref Trade Date Settlement Date Deal Price Days Accrued Direction of Trade Free / Against Payment Bargain Conditions Broker’s Trading Capacity Confirmed Quantity Security Identifier Security Line/Listing Sender’s Role & Identity Receiver’s Role & Identity Portfolio Identifier Broker’s SSIs IM’s SSIs Settlement Amount Deal Amount Fees and Charges (when non-zero) Accrued Interest DJE 20

Matching Fields (example) Accepted Matching fields Contract / Trade Date :98A::TRAD// Settlement Date :98A::SETT// Buy / Sell :22H::BUSE//BUYI Payment indicator :22H::PAYM//APMT Type + Quantity :36B::CONF//UNIT/40000, Security Identifier :35B:ISIN FR Buyer :95P::BUYR//BUYCFRPP Seller :95P::SELL//SELLFRPP Settlement Amount :19A::EUR , Place of Settlement :95P::PSET//BICAAAAA Receiving Agent :95P::REAG//BICAAAAA Delivering Agent :95P::DEAG//BICAAAAA Safekeeping Accounts (up to 4) :97A::SAFE// Receiving Custodian :95P::RECU//BICAAAAA Delivering Custodian :95P::DECU//BICAAAAA Mandatory Field for Matching Secondary Field for Matching DJE 21

Actions applied by Securities Participants Removal (archival) Parsing Validation Chaining/Cancellation Matching Reporting DJE 22

Chaining/cancellation Links a cancellation request with the original MT515 confirmation A-20C::SEME//REF123 A-23G:NEWM A-20C::TRRF//TR1 … A-20C::SEME//REF456 A-23G:CANC A-20C::PREV//REF123 A-20C::TRRF//TR1 … 1. Initial MT5152. Cancellation request Only MT515s with NEWM are taken into account for matching DJE 23

Primary Matching Fields Compare an order in your internal system with a MT515 confirmation sent by the broker Initial comparison done on primary fields to determine potential matching candidates INTERNAL DATA :98A::TRAD// :98A::SETT// :22H::BUSE//BUYI :22H::PAYM//APMT :22F::TRCA/ACCO/HFPB :36B::CONF//UNIT/40000 :35B:ISIN FR … MT515 :98A::TRAD// :98A::SETT// :22H::BUSE//SELL :22H::PAYM//APMT :22F::TRCA/ACCO/HFEB :36B::CONF//UNIT/40000 :35B:ISIN FR … ? matching candidate ? DJE 24

Matching intelligence – Settlement details optional no yes Status is unmatched Yes to both no Status is mismatched Status is matched Primary fields match Settlement amount within tolerance Secondary fields match ? Settlement details are present in both confirmations? no Status is Matched without settlement details yes DJE 25

Standard matching rules – comparing values :98A::TRAD// :22H::BUSE//BUYI:22H::BUSE//SELL :95P::DEAG//IRVTBEBBXXX:95P::DEAG//IRVTBEBB  :98A::SETT// :98A::SETT// DJE :95P::DEAG//IRVTBEBBXXX:95R::DEAG//

Available matching statuses for confirmations Matched : Matched : the confirmations corresponds to the matching rules Mismatched : Mismatched : a pair is found, but there are differences in secondary matching fields Unmatched Unmatched : either a confirmation is sent (outstanding) or received (alleged), with no valid matching candidate Cancelled : Cancelled : the confirmation is no longer processed Rejected Rejected : the confirmation is stored in database, with a rejection error DJE 27

Matching intelligence: Settlement Amount tolerances set by Place of Settlement :22H::PAYM//APMT :95P::PSET//CRSTGB2L :19A::SETT//GBP , :22H::PAYM//APMT :95P::PSET//CRSTGB2L :19A::SETT//GBP ,... Tolerance for CREST GBP: 10, Tolerance for CLEARSTREAM EUR: 12,... Within tolerance DJE 28

User-defined matching rules Created by end users Purpose: teach matching system to ignore acceptable differences in fields ̶ C1-95a::BUYR - Buyer ̶ C1-95a::SELL - Seller For future occurrence of same difference in values Example Matching entity: BANKGB2LXXX :95P - DEUTGB2L Counterparty: CPTYUS33XXX :95Q - DEUTSCHE BANK LONDON Matching entity: BANKGB2LXXX :95Q – DEUTSCHE BANK Counterparty: CPTYUS33XXX :95Q - DEUTSCHE BANK LONDON DJE 29

Customer Automated Testing Service SWIFT’s consulting services to ensure accurate implementation of messages SWIFT consulting services has developed a service which facilitates the analysis of your message flows against a set of validation rules to certify the compliance of your messages. This service also facilitate the simulation of business scenarios. This service will allow you to assess the syntax the formats the compliance with the market best practices the processing of business flows SWIFT consulting has developed a service to simulate the different business scenarios. This service will allow you to send and/or receive test messages with a testing partner who will act as your counterpart. The test scenarios may include the whole range of messages, from GETC (Global Electronic Trade Confirmation) trade allocations to confirmation and Affirmations (MT 502, MT 509, MT 514, MT 515, MT 517) or cash management (MT 101, MT 103, MT 900, MT 910, MT 940, MT 950).

What does SWIFT offer 31

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