Christine Strandberg, global product manager at SEB Global Transaction Services, reckons Swift has a job to do to convince the market of the benefits of its Bank Identifier Code (BIC) as a legal entity identifier. However, she is confident that due to the experience of the industry network operator in the standards development process, Swift will continue to have a place in the reference data standards development space going forward, as long as it can craft a good business case for any initiatives.
Strandberg believes that Swift has yet to put in a lot of the legwork required in order to enable the BIC to function as a legal entity identifier, but notes that industry consultation is a good first step. “Consultation with the community and ISO on such an important subject is of course necessary,” she contends. “In effect, the BIC is currently often used as the identifier for securities institutions. The move to a legal entity identifier should ensure this is done on a better legal basis.”
There has certainly been some work going on behind the scenes at Swift to clean up the BIC database, as highlighted by Arun Aggarwal, Swift’s managing director for the UK, Ireland and the Nordics, when he spoke to Reference Data Review earlier this month. However, given Strandberg’s reservations about the extent of the work done to this point, Swift has not done a good enough job in communicating the progress made thus far to the market at large. After all, in order to validate the BIC as a legal entity identifier, Swift will have to pull together a suitable industry consultation group made up of entity and counterparty data managers. Relying on a single source of feedback or reference is inadvisable, given the need to gain widespread industry adoption.
Unlike some others in the market (see the MiFID Forum discussions for example), Strandberg is not against the concept of the BIC as an entity identifier, she is just cautious about the development route that Swift is planning for the standard. She is confident that Swift’s position in the standards world and therefore its future role in securities market standardisation: “We believe Swift should be one of the drivers in this process, as a representative of its community of users. Swift’s standards department can provide exceptional staff with extensive experience with securities as well as standardisation. Swift’s efforts regarding securities harmonisation are commendable, and we very much support Swift as a Target2-Securities (T2S) network provider.”
However, she is more cautious on the subject of its role in a reference data utility: “We have not yet formed an opinion on this subject. We await more details, but have no objection in principle if Swift can produce a good business case.” Much like anything in the financial services market, success tends to be predicated on a sound business case, and the world of standards is no different.
Overall, Strandberg is positive about the direction Swift is taking with its new five year strategy. SEB participated in the community consultation Swift organised and she indicates that the firm is pleased with the approved 2015 strategy. She believes the reduction of total cost of ownership (TCO) and increasing the number and volumes of securities market infrastructures on the Swift network are key to the necessary expansion of Swift traffic (and thus the reduction of message fees for users).
Strandberg is also fairly pleased with its progress thus far in spite of a few setbacks: “Swift has met our expectations quite well. The implementation of clearing counterparties (CCPs) over the last year in the Nordic region has significantly reduced the number of custody messages. This has of course had an effect on pricing, but no more than expected. On a global level, the almost unprecedented decrease in FIN traffic during 2009 has been sobering but we believe Swift will meet the challenge.”
She contends that Swift needs to expand in order to be able to keep its continuous traffic growth and fee reduction. “Obviously, this is difficult to do without branching into new territory. As a virtual monopoly provider of financial cross border communication, Swift must to try to avoid a perception of misusing its position. This does not mean Swift should not be allowed to compete in a fair and transparent manner with vendor partners,” she concludes.