1. SWIFT in the Securities Business
Bagin Alex
Senior Regional manager Middle East,

2. Agenda SWIFT short intro SWIFT in the securities market SMPG scope
Egypt and South Africa example

3. SWIFT’s mission
SWIFT is a worldwide community of financial institutions whose purpose is to be the leader in communication solutions enabling interoperability between its members, their market infrastructures and their end user communities.

4. SWIFT - A customer centric user community
Banks
Corporates
Payment Systems
Clearing & Settlement Systems
Insurance Companies
Customer
Government Institutions
Broker-Dealers
Stock Exchanges
Securities MI’s
Depositories
Payments MI's
IMI's
Trustees

5. Traffic stats (1) August 2007 YTD

6. Traffic stats (2) August 2007 YTD

7. Agenda Pre-trade/trade Post trade/pre settlement
Clearing and a settlement
Custody Services
Investment funds

8. Trade Confirmation – FIN and ISO 15022
Execution
Allocation
Confirmation
Status requests
Status
Reporting

9. Agenda Pre-trade/trade Post trade/pre settlement
Clearing and a settlement
Custody Services
Investment funds

10. Agenda SWIFT short intro SWIFT in the securities market SMPG scope
Egypt and South Africa example

11. Example IMI B/D Custodian Clearer Bank CSD Trading and Confirmation
Settlement Instructions
Settlement Instructions
Custodian
Clearer
Cash / FX
Cash / FX
Bank
Settlement Instructions
Cash / FX
Settlement Instructions
CSD

12. Example Equities Transaction Lifecycle
IMI
SWIFTNet FIX + FIN
B/D
FIN
FIN
Custodian
Clearer
FIN
FIN
Bank
FIN
FIN
FIN
CSD

13. Agenda Pre-trade/trade Post trade/pre settlement
Clearing and a settlement
Custody Services
Investment funds

14. Reporting – FIN and ISO 15022 Statement of Transactions
Statement of Holdings
Settlement Status Request
Settlement Status

15. Corporate Actions – FIN and ISO 15022
Account Service
MT564
Notification
MT565
Corp.Action Instruction
MT567
Corp.Action Instruction status
MT566
Confirmation of Account activity
Account Owner
Receipt of proceeds
Announcement
of the offer

16. Corporate Actions
There are 3,000 institutions receiving and 1,000 institutions sending on SWIFT
Users are in over 140 countries
There were 45m corporate actions messages sent over SWIFTNet FIN in 2005
YTD Traffic growth is 18%

17. Agenda Pre-trade/trade Post trade/pre settlement
Clearing and a settlement
Custody Services
Investment funds

18. In the Funds Space, Everyone wants to…
- Drive Distribution
gather assets & customers, increase share of customer wallet
- Increase Efficiency
reduce cost, risk, streamline staff, better customer service

19. SWIFT’s Value to the Funds Industry
Partnering with SWIFT to:
Drive Distribution
Pension Fund automation
Reduce proprietary links & internet
Offshore Distribution
More automation
Better customer service
Deliver Hedge Funds Products

20. SWIFTNet Funds Offering
ISO standards built by the industry for the industry
55+ transaction flows linking entire marketplace
Inclusive – Distributors, Fund Co’s, Brokers & TA’s
Commitment confirmed by circa 120 major players
Solution live, benefits already proven
Domestic & X-border, institutional & retail
Mutual, Pension & Hedge Fund processing

21. Direct Institutional Wholesale Supermarket/Platform
SN Funds: Enabling End to End STP in Mutual, Pension and Hedge Fund Processing  
SWIFT ISO Set of Messages to Automate
57 different Fund Transaction Flows:
Orders - Subscriptions/Redemptions
Confirmations/Cancellations/Status
Cash flow/forecast
Price reporting / NAV calculation
Statement of executed funds transactions
Statement of holdings
Switches
Transfers & Re-registration
Account opening & maintenance
Commissions
Static data
Requests for statements
Statement of pending funds transactions
Distributor
Direct Institutional Wholesale
Supermarket/Platform
Fund Administration
(TA, TPA)
Fund Manufacturer
(Fund Manager)
LIVE
TESTING
2007 DEVELOPMENT

22. Securities Strategic Priorities (set by the industry)
Market Space
Strategic Priorities
Equity and fixed income
Pre-trade / Trade
Succeed in Pre trade /Trade messaging
Be the messaging platform of choice for market infra-structures
Drive Industry towards Standards convergence
Post Trade / Pre-settlement
Platform of choice for Post-trade / Pre-set.
Clearing and Settlement
Grow traffic in Clearing and Settlement and Custody services
Custody Services
Investment funds
Become messaging platform of choice for the Funds industry in Middle East and Africa

23. SWIFT Market Share Traditional Spaces
Market Space
SWIFT Market Share
Clearing & Settlement
55%
Custody Services
16%
Corporate Actions 3%
Reporting
43%

24. ü ü ü ü ü SWIFT means value Straight-through-processing (STP)
Scalability ü
International Standards ü
Cost effective solutions ü
Security and reliability

25. SWIFT is used at a network layer level for the connectivity
SWIFTNet and FIX?
SWIFT is used at a network layer level for the connectivity
Unilink is the hub providor for the inteface
1) So whats all this got to do with swift – really there are two significant activities, one is related to the a) standards behind electronic trading and the b) second is utilising the swift network to transport these messages.
2) Firstly regarding the standards -
a) I mentioned earlier in the standards explanation that convergence of different financial standards is a major objective for swift. FPL is the trade association that owns and maintains the FIX standard. SWIFT & FPL reached an agreement a few years back to work together to try and achieve as much commonality between the swift ISO20022 standard and the FIX standard.
b)_The most recent FIX release 4.4. (covers equity and fixed income and goes beyond just the pre trade and trade messages) is a significant step towards this convergence. The end goal is to make it easier for front and back office systems to be able to handle swift & fix messages so that front to back office integration can become a reality.
c) And as we know not only is this important to investment managers and brokers but also to custodians who rely on obtaining the trade settlement details as quickly as possible after the trade is executed – from a settlement and acctg update perspective. And of course having common standards across the front, middle, and back offices in theory should make it easier for a custodian who has the outsourcing contract to run an IMI mid-back office. (If time permits – discuss OMS systems, fix engines)
3) the more commercial aspect – swiftnet FIX – new solution allows swift users to exchange fix messages across the swift network. swift acts as a HUB in between and because we are not just a telco provider like I have shown with the central FIN application, the FIX hub similarly adds value- message certification, mandatory field validation, archival, guaranteed delivery, authentication etc. A big advantage for IMIs and BDs in dealing with a HUB is the removal of multiple direct leased line connections, and cost & maintenance that goes with this.

26. Agenda SWIFT short intro SWIFT in the securities market SMPG scope
Egypt and South Africa example

27. SMPG scope
Create globally agreed harmonised market practices which, integrated with standards, will bring the securities industry closer to achieving STP.
Standards
STP
Market Practice

28. SMPG tasks Organise national market practice groups
Collate national market practice rules
Define cross-border market practice rules
Harmonise market practice differences
Publish market practice rules
Identify conformance mechanisms

29. SMPG organisation SMPG Steering Committee SWIFTStandards
SMPG Steering Committee
National Market Practice Groups and Convenors
SWIFTStandards
Broker/dealers, investment managers, custodians, depositories, regulators, & vendors
+ In dialogue with many other groups, including ECSDA & ACSDA.
List also includes:
ECSDA & ACSDA
EFS
EFAMA
ISITC
ISSA
ISO TC 68
Giovannini Barrier 1 IAG
SWIFT HWGSS and SSC

30. SMPG meetings At National level: At Global level
Whenever felt appropriate
Minimum twice a year
At Global level
2 times a year
Amsterdam (28-30 March 2007) draft minutes available on smpg.info
Boston (5-6 October 2007)
+ Third meeting ‘just for Funds‘

31. SMPG countries Americas: BR, CA, MX, US.
EMEA: AT, BE, CH, DE, DK, ES, FI, FR, GR, GB, IE, IL, IT, LU, NL, NO, PL, PT, RU, SE, TR, ZA, ICSDs
Asia/Pacific: AU, HK, JP, KR, NZ, SG, TH, TW, IN

32. Agenda SWIFT short intro SWIFT in the securities market SMPG scope
Egypt and South Africa example

33. Egypt CSD market scope CSD Swiftnet Domestic VPN
131 Brokers (20 on SWIFT)
1114 Issuers
Swiftnet
Domestic VPN
CSD
2) So as you can see – the commercial offering is the ability to send pure FIX orders across swift, great value for buy & sell side to remove multiple connections with counterparts – cost and maintenance of these
3) And Like the FIN application it’s the value added by the intelligent application in the middle
13 Primary Dealers
26 Custodians (4 on SWIFT)
26 Direct settlement members

34. Egypt CSD market on SWIFT today
Broker and primary dealers (20 on SWIFT on branch codes )
SWIFTNet
Swiftnet
CSD
2) So as you can see – the commercial offering is the ability to send pure FIX orders across swift, great value for buy & sell side to remove multiple connections with counterparts – cost and maintenance of these
3) And Like the FIN application it’s the value added by the intelligent application in the middle
Custodians (4 on SWIFT)

35. Egypt CSD market on SWIFT by end of this year
Broker and primary dealers 50 NEW BIC codes
SWIFTNet
Swiftnet
MI-CUG
CSD
2) So as you can see – the commercial offering is the ability to send pure FIX orders across swift, great value for buy & sell side to remove multiple connections with counterparts – cost and maintenance of these
3) And Like the FIN application it’s the value added by the intelligent application in the middle
Custodians (4 on SWIFT)

36. Egypt CSD market scope evolution
131 Brokers
1114 Issuers
Swiftnet MI-CUG
CSD
2) So as you can see – the commercial offering is the ability to send pure FIX orders across swift, great value for buy & sell side to remove multiple connections with counterparts – cost and maintenance of these
3) And Like the FIN application it’s the value added by the intelligent application in the middle
13 Primary Dealers
26 Custodians
26 Direct settlement members

37. Agenda SWIFT short intro SWIFT in the securities market SMPG scope
Egypt and South Africa example

38. Settlement Process SFIDvP
Sell Order 100/R20,000
Buy Order 100/R20,000
SETS/BDA
Broker A on Behalf of Client A
Broker B on behalf of Client B
Confirmation
Confirmation
“Locked in Trade”
CSD Participant
CSD Participant
SAFIRES Reservation of securities on S)
Strate Ltd
Status intimations
Status intimations
A: Security X B: Security X
Confirmation
>100
>100
Confirmation
Payment Order
Payment Confirmation
A Trade for 100 securities against a Rand amount of R20,000 is struck on the Exchange.
The matching takes place in the SETS/BDA system.
The JSE sends the trade details through to Strate Ltd.
Strate sends a buy/sell allegement through to the respective Client's CSD Participant.
The Client will also send an instruction through to his CSD Participant.
The CSD Participant matches their Clients instruction with the allegement received from Strate.
The CSD Participant sends a commit message to Strate for the trade settlement (according to stipulated cut-off times). The CSD Participant has the right, but not the obligation, to commit subject to availability of securities and/or cash. If this commit is not received the reverse substitution or fails process (voluntary or compulsory) is initiated.
8. Prior to each settlement run (on S), Strate will ‘reserve’ securities for settlement that day. CSD Participants must then fund their accounts in SAMOS (depending on whether they are Nett receivers or payers of money for that settlement run). Strate also sends SWIFT messages to SAMOS detailing the funds each CSD Participant is required to fund or receive for settlement (S).
9. On fulfilment of these obligations CSD Participants receive confirmation of settlement from Strate. This comes in the form of a ‘settled’ status intimation. The Client’s position is then updated in the CSD Participants internal system accordingly.
10. CSD Participants may send their Clients confirmation of settlement.
SAMOS
SARB
Bank A Bank B
R20,000
R20,000

39. On-Exchange Trade - SWIFT Message Flow
Client A
Broker A
Broker B
Client B
MT515
MT515
JSE Trading System
MT544/5/6/7
MT544/5/6/7
BDA System MT MT
MT540/1/2/3
MT540/1/2/3
SAFIRES MT MT
MT548
MT548
CSDP
CSDP
MT586
MT586
As per MT
SAMOS
As per MT

40. ü ü ü ü ü SWIFT means value Straight-through-processing (STP)
Scalability ü
International Standards ü
Cost effective solutions ü
Security and reliability

41. SWIFT Pricing Challenge I
Eurocent/kChar 30
Achieved
26.03 25
52.1.%
23.92
19.93 20
17.50
14.75 15
12.46 10
2001
2002
2003
2004
2005
2006

42. SWIFT Middle East regional conference 2008
17, 18 and 19 March,
Conrad Hotel,
Cairo, Egypt

43. Shoucran