Financial market infrastructures
Financial Market Infrastructures (FMIs), especially those providing payments processing and securities clearing and settlement services, are currently the principal drivers behind the adoption of ISO 20022 based standards across financial markets worldwide.
Payments infrastructures are facing especially intense pressure as the pace of change in the payments ecosystem continues to accelerate. Although recent years have seen the proliferation of niche businesses supporting eCommerce payments, almost all of these depend ultimately on infrastructures that have been in place for decades. Service providers want to be able to offer new services that differentiate them. At the same time regulatory demands are increasing.
In the UK, Canada and other juristictions, plans are accordingly being developed that build up to a complete technology refresh of the core infrastructure systems themselves. These major development propositions typically have at least a 4-5 year lead time.
As Hannah Nixon, Managing Director of the UK’s Payment Systems Regulator has said: "The payments industry, including the technology, infrastructure, and services offered to users, is going through the type of wholesale change that is only seen once in a generation”.
The messaging component of the proposed new infrastructures is now invariably based on the ISO 20022 standard and the usage of this standard is therefore also being promoted for a range of short-term developments based on the current legacy infrastructures.
In the securities arena, following on the success of projects like DTCC Corporate Actions and Target2-Securities (T2S) there are many initiatives globally that plan to implement, ISO 20022. Typical drivers include new regulation, market integration at a regional level, automation, the provision of new services, and the replacement of legacy systems.
Some of these projects follow a ‘like-for-like’ adoption model, at least as an initial phase, whereby ISO 20022 messages are used to cater to existing business functions. In such cases message-level interoperability is usually possible – participants are able to convert legacy message formats to and from ISO 20022. In other cases, or in later phases, projects take advantage of the full richness of ISO 20022 messaging to offer new or enhanced services that are not available in the legacy system.
Thanks in part to the very flexible nature of ISO 20022, one result of all this activity has been the generation of a wide range of variant forms and versions of many common message types.
In an attempt to reduce fragmentation SWIFT has hosted a series of market infrastructure summits which have worked towards the creation of a global framework (the ISO 20022 Harmonisation Charter). Notwithstanding this, from the point of view of individual financial institutions such as global banks which need to use the services provided by multiple FMIs, the range of ‘flavours’ of ISO 20022 message presents a considerable challenge.
Capabilities of Transformer
Transformer's libraries capture all of the details of an ISO 20022-based standard in a business-friendly way, including user-friendly names and full descriptions for all fields, components, and data range values, and fully supports cross-validation rules.
Take the example of Russia’s National Settlement Depository (NSD). The NSD is the country’s central securities depository and has the long-term goal of offering ISO 20022-compliant messaging for every service it provides. At present the NSD delivers services for its clients using both international and domestic message formats: MT, MX, PARTAD (a Russian domestic format) and other domestic formats. The NSD also offers a service providing on-the-fly conversion of message formats as appropriate for particular clients.
NSD is engaged in a multi-year project to modernise the infrastructure of securities processing based on the ISO 20022 standard. It has recently announced solutions easing the management of Corporate Actions related to Annual General Meetings (AGMs) and other types. These ISO 20022 messages meet local market requirements as well as the needs of the international investment community.
The 20022 standard implemented is based on the SWIFT MX standards and includes extensions (e.g. to support fractional securities) for use by both domestic and international banks.
Corporate actions messages are among the most complex in the ISO 20022 (and ISO 15022) series, approximating 30,000 conversion rules.
The commitment to delivering support for both 15022 and 20022 (MT and MX) standards for corporate actions in a timely manner needed a special messaging solution. This is where the NSD turned to Trace Financial and Transformer.
Transformer was found to offer all the functionality needed by the NSD, as well as complete high quality message definition libraries for the entire range of ISO 15022-based MT and ISO 20022-based MX message standards, along with bi-directional MT-MX mappings.
FMIs and individual institutions alike are turning to Transformer to obtain the capabilities they need – to create, model and work with multiple ISO 20022 based message definitions, and to build transformations between ISO 20022 and other formats.
To find out more or arrange a demonstration either online or in your office, please contact us.