Slide 1 ACSDA_ John Falk Securities Market Infrastructures SWIFT A Single Protocol for Clearing and Settlement ACSDA International Seminar, Punta del Este - Uruguay : 28 th October 2005

Slide 2 ACSDA_ Recommendations, Barriers or Regulations What is meant by a by a Single Protocol for Clearing and Settlement? Clearing and Settlement?

Slide 3 ACSDA_ Recommendations, Barriers or Regulations 2001CPSS-IOSCO, Recommendation 16 “Securities Settlement Systems should use or accommodate relevant international communication procedures & standards…” 2003Giovannini, Barrier 1 “Define EU wide protocol to eliminate national differences in IT & interfaces used by Clearing & Settlement providers” 2003 G30, Recommendation 2 “ “Harmonise message standards & communication protocols” 2004ESCB-CESR, 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………” Giovannini Barrier 1 “National differences in the information technology and interfaces used by clearing and settlement providers should be eliminated via an EU wide protocol SWIFT should ensure the definition of this protocol through the Securities Market Practice Group” G30 Recommendation 2 “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”

Slide 4 ACSDA_ SWIFT meeting the challenge Present 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 (ISO Standards convergence)

Slide 5 ACSDA_ Securities ISO 7775 (syntax = traditional FIN, such as MT 521, MT 500, …) ISO (syntax = enhanced FIN, such as MT 502, MT 54x, …) UNIFI (ISO 20022) (syntax = XML, such as Investment Funds, Cash Reporting, Bulk Credit Transfers, …) Traditional FIN (e.g. MT 103) Traditional FIN (e.g. MT 100, MT 202, …) Other markets ISO Standards

Slide 6 ACSDA_ W3C UN/CEFACT e-bMoU OMG ISO/TC68 FIX ISITC-IOA ISSA SMPG SIA FISD/MDDL G30 Giovannini TC68/SC4 WG8 & WG11 EPC/ECBS ISTH IFX RosettaNet/PMP OAGi X12 BMA EACT FPML ISDA IFSA OASIS Bolero ICC TC68/SC6&7 CEFACT/ TBG5 IIBLP UNCITRAL IFSA Securities Trade Finance TC68/SC4&7 Payments Treasury EAN/UCC UNIFI - ISO CEFACT/ TBG15 TWIST Fedwire CHIPS TCH NACHA UNIFI (ISO 20022) Overview of existing initiatives

Slide 7 ACSDA_ A Single Protocol for Clearing and Settlement What is being proposed?

Slide 8 ACSDA_ Giovannini Barrier 1: Progress  Market research phase  Market consultation –Paper published January 2005 –Consultation closed April 2005 –Independent Advisory Group established in June 2005 to define protocol content whilst maintaining: – Key principles; Leverage, Openness, Neutrality, Inclusivity – Business not a technology focus – Congruency with G30 –Summary of consultation responses published July 05

Slide 9 ACSDA_ Giovannini Barrier 1: Progress Consultation response statistics  71 responses to consultation  Responses from 21 out of 25 EU countries plus 9 from non EU countries  70% from EU Organisations –23 Financial Institutions & FI ‘clubs’ (e.g. ISITC Europe) –12 [I]CSD’s / Clearing Houses –8 Equity Exchanges –6 ‘Other’ (Central Banks, Consultants etc) –And 22 non-EU Institutions/Infrastructures

Slide 10 ACSDA_ Protocol framework Proposed recommendation  The original 9 element framework should be simplified into 6 elements over 2 layers

Slide 11 ACSDA_ Terminology: Protocol scope Exchange VMU / ETCP Trade Date Space 1 Pre-trade / Trade Space 3 Clearing & Settlement Order Trade Institutional (buy) Side Street (sell) Side Space 2 Post Trade / Pre-Settlement Trade Date + X GC CCP SA IMIB/D (I)CSD SC B/D Space 4 Space 4 - Custody Services Non Trade Related Activity SA IMI: Investment Manager B/D: Broker Dealer VMU: Virtual Matching Utility ETCP: Electronic Trade Confirm provider GC: Global Custodian SC: Sub-Custodian SA: Settlement Agent (Clearer) CCP: Clearing House / Central Counterparty (I)CSD: (International) Central Securities Depository Area of mandatory Protocol usage Cash Clearing systems and Central Banks

Slide 12 ACSDA_ Protocol Content : Example Element 1 : Data Standards –EU Cash & Securities: Securities Clearing & Settlement Systems, C&S Infrastructures and CCP’s should implement relevant ISO data standards in support of ISO15022/20022 –Such as but not limited to: – ISO Country Codes – ISO Currency codes – ISO ISIN – ISO Date/time format – ISO BIC – ISO MIC – ISO CFI – ISO IBAN – ISO IBEI (Provisionally)

Slide 13 ACSDA_ Next Steps  Present draft recommendation: –17 October 2005 – SMPG –18 October 2005 – SWIFT Board –24 October 2005 – CESAME group  Industry review –October – January  Final publication –March 2006 Please look at

Slide 14 ACSDA_ Focus on the Data Layer: How far from common data standards are we? European CSD’s

Slide 15 ACSDA_ Common Data Standards - ACSDA

Slide 16 ACSDA_ Securities Market Infrastructures on SWIFT CREST Euroclear Euroclear NL Euroclear France Clearstream STRATE JSE Securities Exchange SIS LCH.Clearnet Sydney Futures Exchange ECSDA …and others! Hong Kong FE Omgeo Singapore SE DIFX Monte Titoli Tokyo SE London SE Iberclear FMC DTCC CBLC CAJVAL NDC & DCC, Russia INDEVAL

Slide 17 ACSDA_ Communicating with Securities Market Infrastructures using SWIFT Benefits for system owners >>> increased internationalisation of client activities  Access to all types of domestic and international players >>> market practice standardisation >>> trading >>> clearing >>> settlement >>> real time DVP >>> custody >>> corporate actions >>> risk reduction  Global standards ISO 15022, XML, FIX for  Low entrance barriers for  Time to market is  Mission critical levels of >>> reliability, security and support >>> short >>> remote members Order/Trade Settlement Post-Trade/ Pre-Settlement institutional (buy) sidestreet side

Slide 18 ACSDA_ & & uestions A nswers

Slide 19 ACSDA_ John Falk Securities Market Infrastructures SWIFT A Single Protocol for Clearing and Settlement ACSDA International Seminar, Punta del Este - Uruguay : 28 th October 2005