Mapping local market practice to ISO The role of SMPG AMEDA Leadership Forum – 29th April 2009 John Falk

Three major trends affecting Securities Market Infrastructures (SMI) Focus on core business to develop added-value services for their user-community Internationalisation of their landscape participants and new competitors Drive towards full Straight Through Processing to decrease risk and processing costs Globalisation Deeper financial markets promote cross-border flows Harmonisation Markets become more accessible Consolidation Participants are amalgamating horizontally across geographies Regulation Supervisory burdens are becoming heavier increasing capital costs. Growing importance of international market practices and standards (ISO 15022, ISO 20022) in a domestic market AMEDA Leadership Forum 29th April 2009

Increases Costs Increases Risk SMI participants have to deal with different Standards, Messaging & Connectivity SMI Participant Securities Market Infrastructures Increases Costs Increases Risk Standards: ISO 15022 ISO 20022 Syntax Messaging: one by one, FT, authentification, integrity, message retrieval, audit trail, store & forward AMEDA Leadership Forum 29th April 2009

Single Window from SWIFT, same Standards, Messaging and Connectivity SMI Participant Securities Market Infrastructures AMEDA Leadership Forum 29th April 2009

Why Standardize? Increased cost Missed opportunity

SMPG AMEDA Leadership Forum 29th April 2009

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. Standards STP Market Practice AMEDA 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 AMEDA 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 AMEDA Leadership Forum 29th April 2009

National Market Practice Groups and Convenors 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 formats AMEDA Leadership Forum 29th April 2009

Securities Market: Equities and Fixed Income Pre-trade / Trade Post-trade Buyer Corporate actions Pre- settlement Reconciliation Proxy voting Seller Corporate actions Pre- settlement Reconciliation This gives an overview of message flows for the equities, fixed income and listed options. Today with FIN messages – and these are represented with the orange arrows, we have messages for pre trade, post trade, pre-settlement and reconciliation. Plus what we call corporate actions. In other words, we have FIN or 15022 messages, as we sometimes refer to them, covering the entire securities trade lifecycle. We have also been working in the pre-trade area to produce XML standards – the new 20022 standard. The messages, exchanged between buy-side and sell-side firms include: The Indication of interest, the quote, the order, the execution and the pre-allocation. The work we have done in the pre-trade / trade area is the result of a joint project with FIX. This was carried out in the context of working group 10, part of ISO. We expect to continue working in other areas with respect to the development of 20022 standards. We are currently working with the market to develop MX messages for proxy voting which will be available Q1 next year for piloting. CSD Settlement Reconciliation Custodian Clearing agent AMEDA Leadership Forum 29th April 2009

SMPG process www.smpg.info Publication Review, discussion & refinement Collate common elements, specify additional country requirements, identify further opportunities for harmonization Analyze & document local practices Securities Market Practice Group (SMPG) Administration National Market Practice Groups (NMPG) AMEDA Leadership Forum 29th April 2009

Prerequisites for sharing Shared vision Common understanding Perceived benefit Champion/s AMEDA Leadership Forum 29th April 2009

Mapping examples / Access Comments AMEDA Leadership Forum 29th April 2009

Broker-dealers 62 Brokers Today Broker-dealers 62 Brokers MCDR/NIT

Tomorrow - STP MCDR/NIT Corporate Insurance companies Broker-dealers Banks Investment managers Stock Exchanges Depositories Trustees Clearing systems Payment systems Settlement systems Government institutions MCDR/NIT

Securities Settlement flows (Phase1) Buyer’s Investment Manager Seller’s Investment Manager Buyer’s Broker Seller’s Broker MT 547 MT 543 MT 541 MT 545 MT 547 MT 543 MT 541 MT 545 MT 543 MT 541 MT 545 MT 547 Custodian Buyer’s Buyer’s Broker’s Clearing Agent Seller’s Broker’s Clearing Agent Seller’s Custodian MT 541 MT 547 MT 545 MT 543 MT 543 MT 541 MT 541 MT 543 MT 547 MT 547 MT 545 Central Bank MT 202 (RTGS) MT 545 AMEDA Leadership Forum 29th April 2009 MCDR MT012(RTGS)

AMEDA Leadership Forum 29th April 2009 Zoom: barrières #1 & #3 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. AMEDA Leadership Forum 29th April 2009 Source : First Giovannini Report on EU Clearing & Settlement Arrangements

AMEDA Leadership Forum 29th April 2009

Mapping local market practice to ISO The role of SMPG AMEDA Leadership Forum – 29th April 2009 John Falk