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Is the Leopard Changing its Spots?

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Last month saw the approval of the package of proposals that make up the next five year strategic plan for industry network operator Swift, but what has the Brussels-based board approved in Swift 2015 and what does it mean for the industry at large?

It’s early days and not much has been said publically about the strategy thus far, apart from the fact it is aiming to bring down the total cost of ownership (TCO) of the Swift offering overall and it will involve Swift getting more hands on with the community. The recent acquisition of SunGard’s messaging hub Ambit is one such example of an attempt on the part of Swift to bring down connectivity costs. But the deal surely also represents a much more aggressive approach to the market? After all, Swift has not previously been known for being particularly acquisitive in the past.

If, as Swift chief technology office Mike Fish, suggests, the network operator is looking for further “targeted acquisitions” in the market, won’t that also potentially place Swift into direct competition with its vendor partners in some instances? The network operator has been emphasising the importance of these partnerships of late, but by acquiring or teaming up with certain players in the market, Swift surely runs the risk of alienating others within this demographic?

Of course, Fish gave nothing away about what these potential acquisitions may be, but given its interest in the reference data space over the last year or so, perhaps there might be room for an acquisition in this corner of the market?

Securities head Chris Church told me at the start of the year that there are many reference data items on the 2015 list, including standing settlement instructions (SSI) infrastructures, legal entity data, securities identifiers and corporate actions golden copy. There are certainly partnerships to be had in this space and Swift has already opted to team up the Depository Trust & Clearing Corporation (DTCC) for corporate actions standards, for example, but will it go beyond this into actually acquiring a compatible vendor to add more reference data functionality to its overall remit?

In the meantime, Swift is certainly keen for its Bank Identifier Code (BIC) to be adapted and adopted as a legal entity identifier for the market and it has regarded the recent acquisition of entity data specialist vendor Avox by the DTCC with interest. As for how it will respond to this development, Swift is yet to clarify. Richard Young, market manager for the Securities division at Swift, didn’t give anything away when I spoke to him recently on the subject.

“On the Avox purchase, the Swift view is that it shows the importance that the industry is putting on securities reference data, something that we are very pleased to see and which we would endorse. Swift has a very good relationship with both DTCC and with Avox, and looks forward to building further on the existing relationships,” he said. Exactly how the network operator will build on the relationships is yet to be determined, however.

The joke often made at the expense of Swift is that it is anything but swift in its approach to the market. However, it seems with 2015, the network operator is seeking to change this image and ensure that it is more relevant and focused on the market. It has, in the past, struggled to gain a sufficient amount of traction in the securities market, so this will be a key area of focus going forward one would imagine. Especially as it represents the network’s primary driver for growth, according to Swift’s most recent figures.

Figures for year to date traffic growth at the end of May indicate that securities traffic represents more than 50% of the network’s overall growth this year. Swift notes in its most recent Dialogue magazine: “Swift securities volumes are driven by a combination of factors: volatility in the securities and FX markets; economic conditions, company-related activities and events and growth in the fixed fee customer segment within Swift. Funds traffic has doubled in 15 months, suggesting both a return of retail investors to the securities markets and a recognition by market intermediaries that in order to process higher volumes efficiently, a move away from traditional manual processes is now being recognised as imperative.”

Corporate actions messaging volume has also increased on the network (see the diagram, taken from Dialogue Q3 2010, for proof).

It will be interesting to see how Swift will attempt to foster this growth, without alienating its key partners in the market. It will require a fine balancing act indeed.

I’ll be talking to Swift and a number of its key clients in the market over the next month or so for a feature on the subject for the next issue of ATiQ (to be distributed at Sibos) and coverage in Reference Data Review – keep your eyes peeled for updates!

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