ISO 20022 versions of the Swift messages that have been the foundation for much of the industry’s progress in automating corporate actions are to be made available by the end of Q4 2009 at the latest, under plans recently formulated by the co-operative. There will be a period of co-existence of ISO 20022 and the existing ISO 15022 messages, with the latter only being removed from the Swift network at the industry’s request, and not before 2013 (allowing for the 10 year ROI period firms expect, based on the assumption that the current generation of messages began to be adopted in 2003).
That Swift is providing clarity on plans to upgrade the corporate actions messages is likely to be welcomed by financial institutions and the market data vendors providing corporate actions data feeds in ISO formats alike, since they now have a timeframe to work to for accommodating the new standard in their own operations. However there are concerns that an ultimate deadline of no earlier than 2013 will not at this stage act as much of a spur to encourage market participants to take another leap forward with corporate actions automation. On the other hand, some observers suggest the prospect of the ISO 15022 messages being replaced at all will discourage firms that have not yet taken the plunge with the existing messages from attempting to, on the grounds that anything they do will have to be upgraded in a relatively short timeframe.
Swift says the migration will be controlled. The co-operative has also sought to be inclusive in its planning so far: the business justification document for creating the ISO 20022 corporate actions messages submitted on August 16 for voting by the Registration Management Group – the highest UNIFI registration body, reporting to ISO TC68 – contains comments (and Swift’s responses to them) from a range of interested parties including Euroclear, the UK National Market Practice Group (NMPG) and ISITC. Going forward, Swift proposes to involve a number of groups in the development process, including its ISO 15022 Corporate Actions Maintenance Working Group (comprising securities experts from across Europe and the US), the Securities Market Practice Group (SMPG) Corporate Actions Working Group and ISITC North America (representing US global custodians, investment managers and brokers, as well as DTCC and Omgeo).
Until recently, Swift said it would only create ISO 20022 messages for activities where there were no working ISO 15022 solutions. Linda Bookheim, senior manager at Swift, says part of the impetus for the decision to press ahead with ISO 20022 migration for corporate actions has been initiatives by Euroclear and DTCC to create XML-based standards for parts of the corporate actions process (Reference Data Review, March and February 2007 respectively).
When it comes to migration, Swift is committed to supporting its community, she continues. “We will ensure the 20022 messages are mapped to the 15022 messages and we will provide a mapping tool. We will hopefully ensure the same levels of STP as we do today and ensure market practices are well defined by the SMPG.”
While accepting that some participants will “wonder whether they should just wait” rather than adopting ISO 15022 today, Bookheim says: “If they do the development correctly based on the 15022 methodology, they shouldn’t have a difficult time migrating. The 15022 standard is based on the data dictionary of data elements, which are separate from the formats and the business flows. When 20022 was implemented it used the 15022 database as its foundation. As we develop the new XML messages there may be more messages, because the way we implement 20022 is definitely different than the way we implement 15022, but since both are based on the same database, we would still encourage firms to adopt 15022 today.”
While the data vendors that have embraced both the ISO 15022 corporate actions formats and the use of the Swift network for corporate actions data distribution typically report a slightly tepid uptake of both, use of the corporate actions messages on Swift is growing. Bookheim says Swift has added 70 plus new users of CA messages on the Swift network during the past year, and says at the end of this year the network will have carried 63 million corporate actions messages.