3. Empresa objeto de estudio. Alibaba Group
3.1 Descripción de la compañía
SWIFT’s services and products cover a wide range of business processes in the securities, investment funds, payments and treasury areas of the financial industry.
Transaction cycle Equities Fixed FX, MM Listed Commodities OTC Repos Funds
Income, derivatives Derivatives
Pre-trade / Trade FPP (Funds
trade capture Processing
4.2 Passport) 4.11
FX and securities post trade/pre-settlement: Allocation processing as well as confirmation matching - 4.3 and 4.4 SSIs - 4.6
Post-trade / Securities Securities Securities
pre- pre- Pre-
Pre-settlement settlement settlement settlement
matching matching matching
Clearing Commodities
& Settlement
Portfolio TPV (Total Portfolio Valuation)
Administration
Collateral Collateral management and portfolio reconciliation management
Financing: lending Securities Financing
and borrowing
SWIFT is continually working with the securities industry to bring new products and services to our existing, as well as potentially new, users. The following initiatives are under way to increase our offering across new instruments and to cover more business functions throughout the transaction lifecycle:
4.1 Light connectivity
Alliance Lite is the latest addition to our connectivity products suite. It complements our well known products in the Alliance family, but is fundamentally different. It is a SWIFT Internet-based service that provides direct, secure and low cost access to SWIFT messaging services. New customers do not have to install SWIFT specific connectivity products at their premises, but can access the Alliance Lite web-service using their standard Internet connection with a SWIFT-issued hardware security token.
Alliance Lite will support both manual operations through a standard Internet browser with message data entry and business features, and integration with the back-office through a lightweight auto-client. It is positioned for low volume customers.
Lightconnectivity-4.1
4.2 Trade capture
As part of its intention to capture trades closer to the source, SWIFT has entered into a partnership with Bloomberg to jointly provide a front-to-back office multi-asset class product in full application service provider (ASP) mode.
As part of the agreement, Bloomberg will provide its buy-side clients with direct securities settlement notification services, direct transfer agent access for mutual funds orders and FX messaging, all via SWIFT. In addition, any investment manager using Bloomberg’s OMS will be able to benefit from matching and automatic nostro agents notifications services straight from the Bloomberg terminal through integration with Accord. The results of each of the processing steps will be retrieved and monitored on the Bloomberg terminal.
The service will be rolled out in a series of phases during 2009 and 2010.
4.3 Automating FX Allocations
There is no current standard automated market practice used by investment managers for communicating the allocation to their counterparties. Executing brokers typically have to cope with a mixture of faxes, emails, spreadsheets and phone conversations etc, all of which are manually intensive.
The SWIFT FIN MT 303 is an FX allocation instruction that can be used by the investment manager to instruct its counterparty of the allocation details for a block FX deal.
The MT 303 will be routed by the receiving bank to the relevant system, which can be enhanced to automatically generate the necessary allocated trades and feed them through to the FX back-office processing environment, thereby providing a straight-through process for FX allocations.
Through implementation of a standard process using the MT 303 and replacing faxes, emails and other proprietary communication mechanisms, both the investment management and broker community can improve efficiency, cut costs and reduce risks.
4.4 FX and securities post-trade/pre-settlement
As part of SWIFT’s post-trade/pre-settlement programme, SWIFT is in the process of defining a solution to streamline, automate and standardise messaging flows between brokers and their buy-side clients. The buy-side clients in this context include investment managers, hedge fund managers and hybrids.
The solution will cover all buy-side to broker flows as well as being cross-asset class (ie. FX and securities). These will include confirmations (and associated matching as appropriate), give-up notifications, allocations, payments, statements and custodian notifications sent by the buy-side to their Brokers. This initiative sits amongst a broader portfolio of initiatives to improve processing with the buy-side.
Two key components of this solution offering are envisaged to be lighter connectivity for the buy-side (i.e. “Alliance Lite” supporting relevant message types) and more flexible commercial models to be supported for both brokers and their buy-side clients.
4.5 Securities Pre-settlement Matching: Accord
The new Accord Securities Pre-Settlement Matching Solution will be launched in 2009.
It initially supports two different market segments:
1. Prime Brokers
SWIFT is working with six of the world’s major prime brokers to develop and operate a centralised pre-settlement matching solution. The Accord service will be used to match details of trades originating from the global hedge fund community. These equities and fixed income trades are made between a hedge fund and an executing broker.
The hedge fund manager sends the details to the prime broker who inputs them to Accord to match against the confirmations sent by the counterparty to the trade — the executing broker. SWIFT and the prime brokers are working together to ensure the wider community of brokers worldwide takes advantage of the new solution. The executing broker sends trade and settlement details for each hedge fund allocation in an MT 515 message to Accord to be matched with an MT515 sent by the prime broker. The Accord solution reduces costs in the industry required to manage the numbers of exceptions, provides a single solution for the whole community and improves service to the hedge fund clients.
2. Broker to Broker
The initial release also supports the confirmation matching of over-the-counter (OTC) trades for fixed income and equities made between the brokers themselves, that are not
automatically cleared by an exchange or trading platform. The solution replaces those trade confirmations sent by fax, with electronic confirmations that can be automatically matched.
The specification for Accord has taken these needs into account, so that the solution for prime brokers can also be used for broker-to-broker confirmations, with no impact on functionality or operations. Any type of institution that wants to confirm their trades automatically instead of using fax could potentially use this solution e.g. buy-side,
corporates et cetera. Each trading entity can now send trade and settlement details of their OTC trades in an MT 515 message to Accord to be matched with an MT 515 sent by the counterparty to the trade. The Accord solution here again reduces costs in the industry required to manage the numbers of exceptions, reduces reliance on fax confirmations, removes risk of fraud with electronic confirmations, and opens up the possibility to reduce the trade cycle period.
These two new securities services establish Accord as a multi-asset class matching service, and open up many new opportunities for SWIFT’s community within the securities industry.
4.6 Standing Settlement Instructions (SSI)
In order to progress the standardisation of market practice with regards to SSIs, SWIFT intends to produce a set of ISO 20022 messages for usage in 2009 to enable market participants to notify their counterparties of a change in their SSIs in a standardised manner. These messages will include all asset classes.
4.7 Total Portfolio Valuation
Industry challenges
Currently, staff spend hours reconciling and recalculating portfolio valuations. Cross time-zone issues create significant delays. Nobody goes home until the NAV is done; failure is not an option.
Solution
SWIFT’s Funds service exists and is designed to cater for all funds. The TPV message has significant use among funds players and effectively consolidates a number of existing Funds messages.
Messages within the TPV suite of messages will include:
Request for Statement or Report Total Portfolio Valuation Report
Cancellation of Total Portfolio Valuation Report Accounting Statement of Holdings*
Accounting Statement of Holdings Cancellation*
Cash Account Management Report*
Cash Account Management Report Cancellation General Ledger Report
Cancellation of General Ledger Report
* Asterisk denotes that an ISO 20022 message currently exists or is under final review The official release of this solution is scheduled for Q4 2008.
4.8 Collateral management and portfolio reconciliation
SWIFT continues to follow a separate approach towards bilateral and triparty collateral management due to the distinct requirements of the underlying products and market segments.
Next steps:
Triparty Collateral Management
SWIFT’s Standards department is currently working on the reverse engineering of Triparty messages to ISO 20022. As part of the ongoing EU Securities Harmonisation efforts and Removal of Giovannini Barrier 1 study, Triparty collateral messages have been identified as “core” messages to be reverse engineered to ISO 20022.
SWIFT Standards has created the initial version of the Business Validation Document.
This document will be further discussed with the leading triparty agents and involved parties such as triparty system participants during September 2008. Timelines and deliverables are still in progress.
Bilateral Collateral Management
The differences in communication methods and the content of information exchange between margin requirements and dispute resolution has led SWIFT to focus on the collateral management process and portfolio reconciliation as two distinct projects.
1. Collateral management process:
Due to the existing solution offering and the strength of the organisation, the market sees a role for SWIFT in the following areas:
Priority 1:“agree and process call” – This step contains the issuance of the margin calls to cover different types of exposure and the consecutive negotiation of the margin call (agreement/disagreement of the call amount, proposal of collateral and settlement instructions). All these communications are part of the so-called “margin call workflow”
which are typically performed via non-standard email exchanges.
Priority 2:“provide reporting” – This is indicated to be a secondary priority area due to the lack of content agreement in the market. Although market players indicate the importance of common reporting standards, there is also a strong trend towards providing flexible reporting solutions meeting clients’ needs.
Our aim is to leverage the usage of the existing FIN messages as well as investigating the market appetite for an ISO 20022 based suite of messages.
2. Portfolio reconciliation:
Lack of data standardisation next to the valuation discrepancies is one the main root causes of portfolio discrepancies. Within this scope, SWIFT has been approached to play a role as a standards organisation working together with other standards bodies such as ISDA, for FpML.
As a messaging solution, we will continue to promote MT 506 – Collateral & exposure statement message – as well as actively participate in FpML portfolio reconciliation initiatives.
4.9 Securities Financing
Our securities financing project will cover not only securities lending and borrowing activity but also repo and reverse repo. The project aims to cover trade confirmation and matching, and expand on the reporting and settlement aspect for these product lines – moving closer to the source of the trade.
At a high level, business activity will be evaluated according to three pillars:
Discovery/Query Phase: On the pre-trade trade side SWIFT will collaborate to develop new messages together with FPL (FIX Protocol Limited).
Trade confirmation and matching: SWIFT is at the early stages of investigating the market requirement for securities lending and borrowing trade confirmation and matching. The aim is to leverage the matching functionality of Accord.
Settlement and reporting: there are ongoing initiatives to build MT 54x in ISO 20022 to cover specifically securities financing transactions.
SWIFT is also at the early stages of market consultation on reporting requirements, fees and rebates, recalls and buy-ins.
4.10 Commodities
SWIFT is currently actively contributing to the activities of the FpML Commodities Working Group where structures have already been finished for a Commodity Underlyer, Commodity Swaps (fix/float and float/float) and Commodity Options. The Group is currently looking at physically settled commodity trades.
As SWIFT is already carrying FpML messages on the network. It is the intention to eventually do the same with commodity messages.
The Category 6 MT messages were expanded in the 2008 Standards Release to now cover some base metals, and Standards is investigating possibility of expanding these to be used with other commodities as well.
4.11 Funds distribution
The FPP ( Funds Processing Passport) is a standardised factsheet, containing all the operational information required to correctly initiate a subscription/redemption into an investment fund. The passports are created by the fund promoters and distributed via various channels, including data providers. SWIFT is analysing the creation of a single point of entry for collecting and/or distributing the FPP. These messages are in scope for future release and will become available in the near future.
“It was great to find a product on which we have to do no IT work. SWIFT develops an industry standard for matching, and all we do is plug it in. As it changes, we don’t play a part in the development work; we just get a better solution. In a brokerage house, a software solution that is seamless to management is an absolute godsend.”
Dennis Sweeney, CoTreasurer Europe & Middle East, Newedge Group
5 Applications
5.1 SWIFT’s Accord matching application
Enabling real-time matching and exception handling for foreign exchange, money market and derivative confirmations
SWIFT’s Accord matching application is a fail-safe matching and exception handling solution for your foreign exchange, money market and OTC derivative confirmations also Equities and FI. Deployed on fault tolerant, duplicated hardware, and made accessible through SWIFT’s secure IP network, Accord provides you with the combined benefits of both a central and an in-house system, whether or not your counterparty is also an Accord user.
Accord is unique in that it allows you to have a single window on all your treasury and derivative deals, independent of:
Settlement method: bi-laterally-netted, gross, CLS or SwapClear
Financial instrument: Accord matches confirmations for foreign exchange, money market and derivative deals
Counterparty: Accord does not require your counterparties to be Accord subscribers as well; it can handle all your confirmations sent and received over the SWIFT network. Accord can also process messages that were not exchanged via the SWIFT network like affirmations of brokers.
How does it work?
When a foreign exchange, money market or derivatives deal has been agreed, both parties confirm this deal by sending the appropriate SWIFT confirmation message. If either or both parties are Accord subscribers, SWIFT copies these messages to the central Accord matching service. Accord matches all confirmations in real-time. As confirmations, corrections and cancellations are received, Accord automatically updates the matching status in real-time.
Reduce risk
Reduction in operational risk is a key factor in the organisation of a foreign exchange, money market or derivatives back office. Increased regulatory scrutiny has also
suggested not only that operational risk should be measured, and kept to a minimum, but also that specific amounts of regulatory capital be put aside to mitigate it.
Accord subscribers significantly reduce operational risk through their reliance on a central matching system. Accord safeguards all confirmations, and maintains a historical trace of all matching results. When both parties to a deal are subscribers to Accord, there is 100% certainty that the matching results will be identical for both parties.
Reduce cost
By subscribing to Accord rather than using a local matching system, IMs can save on the resources normally required to keep a local matching system operational, maintain message standard changes, and provide the support it would require internally. A central matching solution also means that your usage of it is scaleable between a few hundred confirmations per month and several thousand per day.
The following instruments with their respective message types are currently matched in Accord:
Message Types FX MM Derivatives EQ/FI Commodities
MT 300
MT 305
MT 306
MT 320
MT 330
MT 340
MT 341
MT 360
MT 361
MT 362
MT 392
MT 515 Q2 2009
MT 600 Planned
The service will be extended to cover the matching of IRS (Accord currently already matches IRS in FIN format) and CDS.
5.2. SWIFT’s Affirmations application
Currently, many buy-side treasury market deals are either confirmed by email or fax or not confirmed at all. The operational and settlement risk introduced by this manual process is unacceptable in today’s market environment. SWIFT’s Affirmations application shows the details of all your trades with all your counterparties on a single screen. Accepting or rejecting them is done by a simple mouse click. As a result, your exposure to risk from unconfirmed trades is eliminated.
How Affirmations works
The above figure illustrates the Affirmations process flow.
1. The trade is executed between two institutions. In the context of the Affirmations service, we refer to the two sides as submitting party (submits the trade confirmation to the service) and affirming party (accepts or rejects the trade), either directly or via a broker.
2. The submitting party generates an MT 3xx confirmation and sends it to the central hub at SWIFT. To indicate that this confirmation is to be affirmed, you can use a code word in field 72 or the Affirmations GUI.
3. The affirming party views all trades in a user-friendly GUI running inside SWIFT’s Alliance WebStation.
4. Specific buttons allow the user to accept or reject every transaction. At any stage, a chaser may also be sent to complement the acceptance or rejection.
5. All actions are recorded in the Affirmations database and can be reviewed at any time.
MT 3xx
Affirming party Submitting party
Central hub
4
or1
2
3
6 6
5 MT 300 or 320
Affirmations process flow
6. The submitting party can see the resulting status of his confirmations in the GUI in real time. Alternatively, a FIN message with the status of a trade can be sent for integration in back office systems. An API is available for even tighter integration.
Benefits of Affirmations Minimise risk
A reduction in the time during which there is uncertainty about a trade enables operational risk to be minimised. Faster error detection prevents delays in processing, allows better management of exposure and reduces settlement risk.
Reduce operational costs and improve efficiency and STP
Using Affirmations means less manual intervention, such as handling faxes. This reduces processing costs. Operational efficiency is improved, enabling higher rates of straight-through processing (STP). No IT staff are required, as the Affirmations application is operated centrally by SWIFT.
Archival and audit trail
An integrated audit trail provides binding evidence of trades which are securely stored at SWIFT. The optional Long Term Archive (LTA) enables you to outsource your data storage to SWIFT. LTA stores all information related to a trade for a period of ten years from maturity date. User friendly search functionality provides easy access to archived data.
Lower response time
Trades appear in real time in the graphical user interface (GUI). You can agree or disagree within seconds. Chasers allow you to communicate instantaneously with counterparties.
Multiple asset class coverage
Affirmations supports multiple asset classes – foreign exchange (FX), FX options, money market instruments and interest rate swaps.
Affirmations caters for the following SWIFT message types:
MT 300 - Foreign Exchange Confirmation
MT 305 - Foreign Currency Option Confirmation (vanilla) MT 306 - Foreign Currency Option Confirmation (exotic) MT 320 - Fixed Loan/Deposit Confirmation
MT 330 - Call/Notice Loan/Deposit Confirmation MT 340 - Forward Rate Agreement Confirmation MT 341 - FRA Settlement Confirmation
MT 360 - Single Currency Interest Rate Swap Confirmation
MT 360 - Single Currency Interest Rate Swap Confirmation