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

2. 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

3. 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 ISO Syntax
Messaging: one by one, FT, authentification, integrity, message retrieval, audit trail, store & forward
AMEDA Leadership Forum 29th April 2009

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

5. Why Standardize?
Increased cost
Missed opportunity

6. SMPG
AMEDA Leadership Forum 29th April 2009

7. 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

8. 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

9. 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

10. 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

11. 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 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 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 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

12. 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

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

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

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

16. 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

17. 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)

18. 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

19. AMEDA Leadership Forum 29th April 2009

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