1. SWIFT Presentation 24 February 2010 Nairobi, Kenya
AITEC BANKING & MOBILE MONEY
CONFERENCE
SWIFT Presentation
24 February 2010
Nairobi, Kenya
Vasu Prakasam, Managing Director
Kenya Commerce Exchange,
The SWIFT Bureau in NAIROBI.

2. KENEX BUREAU Nairobi, Kenya
KENEX provides SWIFT connectivity to banks and is
equipped to offer all products of SWIFT to banks, corporates
and eligible Financial Institutions.
Kenex provides SWIFT Services on a shared platform.
Majority of the Banks in East Africa are on Kenex Systems.
Located in Nairobi and operating since Apart from SWIFT Services Kenex provides Software Solutions such as Electronic Payment Systems to Financial Institutions.

3. Agenda Introduction to SWIFT SWIFT and Securities Markets in Africa
Achieving DVP (Delivery vs. Payment)
Q & A

4. Agenda
Introduction to SWIFT

5.
Banks found SWIFT
- Broker-dealers
- Central depositories & clearing institutions
- Exchanges
Corporates
1973
Securities market data providers
2009
1987
2008
Travelers' checks issuers
Fund administrators
1988
2004
Money brokers
1989
2002
MA-CUGs
- Registrars & transfer agents
- Custody providers
- Trust or fiduciary services companies
S.W.I.F.T
1990
2000
Securities MIs
1992
1999
- Treasury counterparties
- Treasury ETC service providers
SWIFT is the Co-operative of Banks with HQ in Brussels, engaged in providing secured telecommunication facilities to banks using its network known as SWIFTNetFIN
The network spans 209 countries and connects over 8500 banks and financial institutions.
In existence since 1973, SWIFTNetFIN currently usesr TCP/IP protocol and offers a plethora of products and services to Banks and players in the Security Industry.
The products cover not only National and International Banking but also a large number of players in the Capital Market.
1995
Investment managers
1998
1996
- payments MIs
proxy voting agencies
non-shareholding financial institutions
Trading institutions
Treasury
Securities ETC service providers

6. S.W.I.F.T SWIFT in figures 8,242 users 208 countries
Peak day 17,860,068 messages (15 Oct 2008)
Average Daily Traffic 15,367,993
The size of operations of SWIFT is very well illustrated by the figures here. The last peak was in 2008 with over 17 million messages a day.
The average traffic per day is over 15 million messages.

7. SWIFT in Africa 54 countries Over 1000 live users
In Africa, SWIFT has its presence in 54 countries with over a 1000 live users.

8. Agenda SWIFT and Securities Markets in Africa
Over 40 percent of messages carried by SWIFT relates to Capital Market Operations.
In Africa, the usage of such messages are very little with the largest market being in South Africa.

9. Why SWIFT in Africa Globalization drives cross-border trading
Information requirements have exploded
Need for infrastructure that works seamlessly both within and across markets
Efficient communication and secure messaging is needed
Africa has the same infrastructure needs as markets everywhere and must meet international standards
But African markets are small and may not be able to acquire needed infrastructure
In Africa, there are a number of factors that hampers Capital Market Operations.
Among them, National Barriers, Infrastructure, lack of unified standards etc may be listed as the most important.

10. How can SWIFT help you realise value?
SWIFT is here to help the countries in Africa to overcome such negative factors, specially in the Capital Market area.

11. Full ‘lifecycle’ of a trade on SWIFT
Trading - and execution
VMUs
Settlement instruction
Payments
Settlement confirmation
SWIFT has systems that addresses the messaging needs in the entire life cycle of a trade activity.
Broadly the area may be classified as Trade initiation and Confirmation, Reconciliation and Settlement and Corporate Actions.
Let us see some of the services SWIFT has to assist various market segments.
Collateral
lending & borrowing
Reporting
Corporate Actions

12. Securities market: Buyer Seller I/CSD Custodian Clearing agent
Post-trade
Pre-trade / Trade
Buyer
Corporate
actions
Pre-
settlement
Reconciliation
Proxy
voting
Seller
Corporate
actions
Pre-
settlement
Reconciliation
I/CSD
Settlement
Reconciliation
Custodian
Clearing
agent
MT-based
MX-based (under development)

13. Broker/Dealer Services

14. Broker Dealer Services
PRE_TRADE
PRE -TRADE
TRADE
POST-TRADE
PRE-SETTLEMENT
CLEARING
SETTLMT/RECON
CUSTODY
ASSET
SERVICING
Multi Asset Class Transaction Processing
Cross Border Trade Allocation/Confirmations
Regulatory reporting for Domestic and Global Markets
Order Management
Asset Servicing
Trade Management
Financing and Position Management
Settlement Management
SWIFT offers message types to assist Broker-Dealers in their areas of activity, such as Pre and Post trade activities, Clearing and Settlement, Custody Services and Asset Servicing ( Position Management and Financing Activities)
SWIFT offers a suite of messages that handle the requirements of all Asset Classes.
These messages cover 8 main categories

15. Investment Lifecycle – B/D services
Order Management:
MT FIX over SWIFT
Trade Management: MT
Financing/Position Mgmt:
- Position/Movement Statements MT
Stock Lending/Borrowing MT
Depot Management (Intra) MT
Collateral Management MT
- Margin MT
- Treasury
MT 300 Series
Settlement Management:
Settlement Instructions MT
Settlement Confirmations MT
Settlement Status/Allegements MT
Asset Servicing:
Corporate Actions MT
Depository Receipts (Instr Change) MT
The entire lifecycle of B/D services start with Order Management and ends with Financing and Position Management.
The Message Types that SWIFT uses are given here.
Accounting/Reporting:
- Position/Movement Statements MT
- General MT

16. Investment management
Reaping the benefits of automation
Investment management

17. Investment Managers are at the centre of every securities transaction
Trading,
Indication
Of Interest
Derivatives
Post trade
Money
Markets
Investment
Manager
matching
Foreign
Clearing and
Investment
Manager
Exchange
Settlement
Payments &
Cash
management
Corporate
Actions
The role of Investment Managers in the Capital Industry cannot be under-estimated. That has spurred SWIFT to give special attention to their area of activity.
Securities
Securities
lending &
reporting
borrowing
Collateral
Management
SWIFT offers the financial industry a common platform of advanced technology and access to solutions through which you can build your competitive edge.

18. The SWIFT network Bringing Global Reach
Over 8,200 end-points in 208 countries
800
2,800
600
1,100
1,600
1,200
You will see here that 90% of all top Investment Managers have access to SWIFT.
All leading brokers and custodians and 90 % of top Investment managers (>100 billion) are connected to the SWIFT network

19. The current challenges for an Investment Manager
Volumes
Efficiency
Volume sensitive and exposed to risk. With small margins, risk can be significant if something goes wrong. Volumes are not only increasing but values are higher as institutions bundle orders.
Business growth and fluctuations in dealing volumes
Manual processes are not scalable and time is needed to train and recruit staff
Processing time becomes an issue when continuing to work in manual mode.
Manual intervention reduces competitiveness because of early cut-off times
Cost
Risk
True processing costs are ignored, because a number of costs are hidden - Current focus has been to handle and support growth. - However, due to consolidation, competition increases, margins further decrease; then costs are looked at
Accurate processing, no errors - Manual work increases operational risk - Order amounts increase as more institutions bundle their orders.
Financial risk is widely disregarded until there is a problem.
The investment managers are faced with many challenges, in terms of Risks, Costs, Volumes and Efficiency.
Manual, unstandardized processes increase risks due to errors and delays.
As competition increases, margins suffer and hence costs become critical
Increased Volumes are not possible withy manual processes and hence the need to automated systems.
And finally Efficiency demands cutting down in processing time and increase in responsiveness.

20. Increasing the value of SWIFT for Investment Managers
Value drivers for the industry
Value delivery channels for an institution
Reach (Standardised Messaging)
Re-usability
(Single Window)
STP
Resilience / Security
Pricing
Standards
Community
SWIFT addresses these issues by providing standardized and reusable delivery channels with attendant benefits of Resilience, Security and lower prices.
The value drivers for SWIFT are Uniform Standards, Access to Community and exemplary quality of service.
Quality of Service

21. Custodian Services

22. Settlement/Clearance & Settlement/Clearance &
Functions that SWIFT supports for the custodian segment of the trade life-cycle
Securities Lending/
Cash Management
Securities Lending/
Portfolio Management
Cash Management
Borrowing
Portfolio Management
MT900,910,940,950
MT103,202
Margin/Credit
Borrowing
Margin/Credit
MT516,526,
F/X
Order Management
Execution
MT300,304
CLS
F/X
Order Management
FIX: MT502,509
MT513
Execution
Reporting
Client
Operations
Management
Confirmation/
Affirmation/
Ancillary Functions
Ancillary Functions
Allocation
Confirmation/
Affirmation and
Reconciliation/ Control
MT515,517,518
Risk Management
Allocation MT
Risk Management
Compliance
Interfaces
Market Data
Solution
Settlement/Clearance &
Compliance
Settlement/Clearance &
Custody
Information Feeds
MT508,524, ,578,
, ,
584, ,
Custody •
Pricing
Now SWIFT offers the essential services to the Custodian. These services cover, Securities Lending and Borrowing, Portfolio Management, Order Management, Risk Management, Compliance, Reporting etc.
There are specialized message types that will take care all the areas depicted here.
Corporate
Actions
MT , 575,576
Income/
Dividends
Accounting
Portfolio •
Accounting/NAVS
Performance
SWIFTNet Funds
MT502,509,515
&
Fund Support •
Administration •
Measurement
Attribution •
Transfer Agency
Accounting/NAVS
& •
Administration
Attribution •
Transfer Agency

23. Securities Market Infrastructures
SWIFT has linked a large number of SM infra-structures through out the world with the Capital Market players.
Securities Market Infrastructures

24. Securities Market Infrastructures
Argentina
Caja de Valores
Australia
Australian Stock Exchange SFE – Austraclear
Austria
OeKB
Belgium
CIK Euroclear Bank MTS National Bank of Belgium
Brazil
CBLC
Canada
CDS
Croatia
Sredisnja Depositarrna Agencija
Denmark
OMX VP
Estonia
Estonian Securities Depository OMX
Finland
NCSD Finland – APK OMX
France
Euroclear France Euronext Paris – MATIF MTS
Germany
Eurex Clearing Clearstream Banking AG MTS
Greece
Central Securities Depository Bank of Greece
Hong Kong
HK Futures Exchange Hong Kong Monetary Authority SEHK Options Clearing House
Hungary
Keler
Israel
Tel Aviv Stock Exchange
Italy
CCG Monte Titoli
Japan
Bank of Japan JSCC Tokyo Stock Exchange
Kazakhstan
Kazakhstan Stock Exchange
Korea
Securities Depository
Latvia
Bank of Latvia Central Depository OMX
Lebanon
Midclear
Lithuania
OMX
Luxemburg
Clearstream Banking SA
Mexico
S.D. Indeval
Netherlands
Euroclear Nederland MTS
Norway
VPS
Poland
National Depository for Securities – KDPW
Portugal
Banco de Portugal – SITEME MTS
Russian Federation
Depository Clearing Company The National Depository Center
Singapore
Central Depository Singapore Exchange
Slovakia
Bank of Slovakia
Slovenia
Central Securities Clearing Corporation – KDD
South Africa
STRATE JSE Securities Exchange
Spain
Iberclear MEFF MTS
Sweden
NCSD Sweden – VPC OMX
Switzerland
SIS SIS x-clear
Taiwan
Securities Central Depository
Thailand
Thailand Securities Depository
UAE - Dubai
DIFX
UK (& Ireland)
CREST LCH.Clearnet London Stock Exchange
USA
Chicago Mercantile Exchange Clearing Corporation DTCC Federal Reserve Banks Omgeo Options Clearing Corporation
Zimbabwe
Reserve Bank of Zimbabwe

25. Standards
The most important work that SWIFT has been doing in this area has been the development and implementation of standards in association with organization such as ISO.
In addition SWIFT has been in the forefront in promoting Communities in carrying out businesses.
During the current decade SWIFT has actively participated in efforts to overcome barriers to integration and also to develop common standards, especially in the European Community.

26. Recommendations, Barriers or Regulations
2001 CPSS-IOSCO
Recommendation 16: “Securities Settlement Systems should use or accommodate relevant international communication procedures & standards…”
2003 G30, Recommendation 2
“Harmonise message standards & communication protocols”
2003 Giovannini, Barrier 1
“Define EU wide protocol to eliminate national differences in IT & interfaces used by Clearing & Settlement providers”
2004 ESCB-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………”
CPSS- Committee on Payment & Settlement Systems. (by Central Banks of G10 countries)
IOSCO- Int. Organization of Securities Commissions.
Giovannini- Group. 72 reps of Securities Sector recommended on barriers to harmonizing standards for
Clearing and Settlement.
CESR- Committee of European Settlement Regulators
ESCB-Governing Council of European Central Banks.

27. G30 Global Clearing and Settlement: A Plan of Action - Recommendation 2 Harmonise messaging standards & communication protocols
“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”
It is interesting to note the recommendation of the G30, the Consultative Group on International Economic and Monetary Affairs founded in 1978, a private sector initiative recommends…..adoption of ISO as the standard.
SWIFT has adopted this standard and is moving towards XML for messages.

28. A world without SWIFT Different Standards, Messaging & Connectivity
User
Market
Infrastructures
Imagine the consequences of a world without standards. It will be a veritable Babel!

29. Single Window from SWIFT Reusing Standards, Messaging and Connectivity
User
Market
Infrastructures
Whereas, one where there is uniformity allows inter-connectivity, reusing of standards and global messaging.

30. 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)
UNIFI – an initiative from ISO for Universal Financial Industry Standards.

31. What can SWIFT bring to the EAC Securities Markets?
Standards
Security, Reliability and Risk Resilience
Co-Operation
Services
Provide VALUE to the whole market
SWIFT has done it before

32. Lack of Systems Integration Net Profits/ Portfolio Performance
Conclusion
Cost Reduction and Improved Performance
Revenues/ Portfolio
Lack of Systems Integration
Multiple Links
Legacy Systems
Multiple Standards
Complex Products
Manual Processes
What is the aim of integration, to reduce costs and achieve better performance, by plugging possible leakages such as …….
Net Profits/ Portfolio Performance

33. Agenda
Achieving DVP (Delivery vs. Payment)

34. Stock-Market Securities Trade flows Without Allocation process, without Affirmation process
MT 502
Buyer’s Broker
Buyer’s Investment Manager
Seller’s Broker
MT 509
MT 513
MT 515
MT 502
MT 518
MT 518
MT 502
MT 515: Broker sends complete info on securities purchased or sold.
MT 513: Broker sends preliminary info only.
These messages are not mutually exclusive.
502-order to buy or sell, 509 – Trade Status. 513-Client Advice of execution.
515-Client Confirmation of Purchase or sale
Stock Exchange

35. Stock-Market Securities Trade flows With Allocation process, with Affirmation process
MT 502
Buyer’s Broker
MT 509
Seller’s Broker
MT 513
MT 514
Buyer’s Investment Manager
MT 515
MT 502
MT 518
MT 518
MT 517
MT 502
502-order to buy or sell, 509 – Trade Status. 513-Client Advice of execution.
515-Client Confirmation of Purchase or sale. 517-Trade Confirmation affirmation
Allocation process: MT 514s and MT 515s.
Affirmation process: MT 517.
These processes can exist independently from one another.
Stock Exchange

36. Central Securities Depository
Securities Settlement flows for versus payment transactions “Full DVP market”
Seller’s Broker
Buyer’s Investment Manager
MT 543
MT 541
541-Receive against payment. 542-Deliver free, 543-Deliver against payment, 545-Receive against payment
Confirmation. 547-Deliver Against Payment Confirmation 548-Settlement Status
MT 548
MT 545
MT 547
MT 548
MT 541
MT 543
MT 548
MT 548
MT 545
MT 547
Buyer’s
Custodian
Seller’s
Custodian
Central Securities Depository

37. Securities Settlement flows for versus payment transactions “non-DVP market”
Seller’s Broker
Buyer’s Investment Manager
Buyer’s Cash Correspondent
Seller’s Cash Correspondent
MT 543
MT 900
MT 900
MT 202
MT 210
MT 541
Central Bank
MT 202
Do not think that SWIFT can operate only in a DVP market. It can cater to even a non-DVP market.
MT 942
MT 210
MT 548
MT 545
MT 547
MT 548
MT 207
MT 540
MT 542
MT 548
MT 548
MT 544
MT 546
Buyer’s
Custodian
Seller’s
Custodian
Central Securities Depository

38. ISO 15022 & FIN Message Types used in mapping
Category 2 - Financial Institution Transfers
MT 202 General Financial Institution Transfer
MT 207 Request for Financial Institution Transfer
MT 210 Notice to Receive
Category 9 – Cash Management and Customer Status
MT 900 Confirmation of Debit
MT 942 Interim Transaction Report
Category 5 – Securities Markets
MT 502 Order to Buy or Sell
MT 509 Trade Status Message
MT 513 Client Advice of Execution
MT 514 Trade Allocation Instruction
MT 515 Client Confirmation of Purchase or Sale
MT 517 Trade Confirmation Affirmation
MT 518 Market Side Securities Trade Confirmation
MT 540 Receive Free
MT 541 Receive Against Payment
MT 542 Deliver Free
MT 543 Deliver Against Payment
MT 544 Receive Free Confirmation
MT 545 Receive Against Payment Confirmation
MT 546 Deliver Free Confirmation
MT 547 Deliver Against Payment Confirmation
MT 548 Settlement Status and Processing Advice
These are the FIN message types that are commonly used in the Securities Market.
CAVEAT:
1) Mapping to be confirmed
with local market specialists
2) Further analysis should
also review required data
elements per flow

39. What needs to be shared? Standards Business practices
Business solutions
Market Infrastructures
Infrastructure Components / Services
Resources
Finally, in the way forward, players need to share ….

40. Prerequisites for sharing
Shared vision
Common understanding
Perceived benefit
Champion/s

41. How does Africa benefit?
Your return on our investment
Global counterparty connectivity
Greater risk mitigation, compliance and inward investment for the region
World standardised and integrated financial infrastructure
A strong foundation for outward investment opportunities
What are the benefits on your investment?

42. The SWIFTNet messaging services
Secure, reliable, and STP-oriented messaging using SWIFT MT formats.
Appropriate for exchange of individual structured financial messages and short reports.
SWIFTNet FIN
Secure, reliable, and STP-oriented messaging using new SWIFT MX or proprietary formats.
Appropriate for exchange of individual structured financial messages and short reports.
SWIFTNet InterAct
Secure, reliable, and flexible file transfer (any formats).
Appropriate for exchange of batches of structured financial messages and large reports.
SWIFTNet FileAct
Apart from Messaging SWIFT provides a number of services using the applications shown here.
Secure browsing.
Appropriate for manual transaction input and reporting using HTML-based graphical user interfaces.
SWIFTNet Browse

43. SWIFTNet: single window access to the financial world
Market infrastructures
SWIFTNet FIN
Access to MI’s
Enabling the community
RTGS
ACH
More than 8,000 FIN correspondents in more than 200 countries
SWIFTNet
Customer solutions
Business solutions
Extended reach
Broader range of business solutions
MA-CUG
SCORE
Accord
Cash reporting
Bulk payments

44. Partnership
Success
requires
partnerships
SWIFT is your
partner

45. uestions
&
Answers