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Swift to Build Hosted Reference Data Repository, Explore SSIs and Extend BIC to Hedge Funds

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Swift is developing a hosted reference data repository to be available on Swiftnet. As part of its 2010 strategy, the co-operative has identified reference data as an important “adjacency” to its primary business lines, an activity on which it should focus to support the ongoing improvement of the quality of messages carried on its network.

While a major emphasis will be payments reference data, Swift is exploring a number of securities reference data offerings, including standing settlement instructions (SSIs) for securities. It is also undertaking an effort to extend the BIC to collective investment vehicles (CIVs), to establish a standard entity identifier for funds.

Chuck Wiley, senior product marketing manager in the marketing division at Swift, says the reference data repository will be a “reusable platform” that could over time store any type of reference data. “We will be focusing from day one more on static data, not dynamic data. Types of data that are not on the radar screen today but are interesting would include corporate actions identifiers and securities master data. I can foresee a variety of static data types possibly being added over time.”

Swift is also encouraging the market data vendors that have committed to delivering corporate actions data in ISO 15022 formats and over Swiftnet to extend their use of Swift and Swift formats to other types of reference data.

Swift believes its FileAct ftp-type service could be used to distribute data such as indices, end of day pricing and tax data via Swiftnet, says Linda Bookheim, senior business manager at Swift. While for corporate actions data Swift mandates the use of its own message formats, it could support other formats for reference data distribution, in line with its commitment to facilitate standards co-existence. By extending their use of Swift, data vendors could enable financial institutions to further leverage their investment in Swift connections and rationalise multiple data connections to one.

This is not the first time Swift has considered the provision of an SSI database for securities, and there is disagreement in the industry about what its contribution here should be, given the existence of incumbent solutions such as Omgeo Alert and its obligation not to disintermediate the businesses of its bank owners.

“Quite honestly, the issue (with SSIs) is whether we should do it alone, or work with an existing provider,” says Wiley. “We are in the middle of discussions so I would hesitate to make comments. It is very possible we may make an announcement at Sibos (in Sydney, in October).” (For more on this subject, see A-Team Analysis, page 18)

With BICs, Swift is on safer ground. The existing method of distributing BICs via CD-ROM will be upgraded from January 2007 to a monthly publication cycle with downloads in several different formats. Swift plans to link the BIC data into the new reference data environment, using FileAct as a common distribution channel.

In addition, Swift plans to improve the management of BIC 1s (BICs given to non-Swift member entities); extend BIC coverage to all European banks to meet the requirements of the Single Euro Payments Area (SEPA); expand the BIC Plus directory to cross-reference BICs to the national clearing codes of at least the 43 countries covered by EU regulations and the 30 plus additional markets that adhere to these requirements; and create an IBAN to BIC directory.

The database of CIV identification codes will also be part of the reference data repository. Says Wiley: “There will be an effort to identify funds, unit trusts, even hedge funds, using the BIC syntax, possibly with a slightly different structure in the BIC 4 – the first four characters. In the normal Swift world these are strictly alphabetic characters. For CIVs they might be alphabetic or numeric, because we will need more permutations.”

The lack of a globally recognised legal entity identification code is a matter of growing industry concern, particularly in light of regulatory imposition such as MiFID. Swift, however, is “less convinced that (BIC) is the right syntax for the corporate space”, according to Wiley.

“There is a fundamental issue about whether the BIC code itself has the capacity to support (corporate legal entity information). We can focus on the collective investment vehicles (CIVs) area and get agreement on the best way forward, as from a capacity standpoint, a BIC code based on an alphanumeric BIC 4 base can support the needs of all CIVs out there, even the hedge fund community, and potentially other similar types of pooled investment instruments.

“On the corporate side, it’s a different story. Swift is a very risk-averse company and our headcount is controlled very tightly. There is not an appetite to create a huge new database with the maintenance staff required to codify and maintain the codes for millions of corporate entities. Maybe some day down the road the community will say we need to do this, but until something changes we will focus on CIVs.”

Swift is currently considering the application of its reference data repository to the industry’s need to achieve MiFID compliance, Wiley adds. “We have had some discussions recently around whether the reference data infrastructure could be used as a basis for facilitating compliance with some aspects of MiFID, but despite the limited timeframe between now and MiFID’s introduction, there is still a lack of clarity,” he says.

The area Swift has investigated most closely is the use of Swiftnet for regulatory reporting. “There is certainly a perceived benefit in having standardised communication and reporting flows over Swift from industry participants to the regulators. The question is, are the regulators in a position to connect to Swift, and the answer may be, possibly not today. We need the industry to be much more responsive and open about responsibilities. The regulators will have to step up to the plate to do this.” Wiley says there will be discussions at Sibos and afterwards about the regulators joining Swift, and that Swift will “have a better feel for the reference data which (it) will need to host to support these compliance issues” after that event.

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