Securities reference data is a key area where there are gaps in existing ISO message coverage which will need to be filled if ISO messaging is to provide a complete solution for removing Giovannini Barrier 1, a gap analysis exercise recently completed by Swift has concluded. Barrier 1 refers to the inefficiencies created by the use of multiple protocols for messaging in Europe’s clearing and settlement processes. Swift has been charged with spearheading efforts to eliminate this barrier, and has concluded based on consultation with the industry that ISO messages represent the best option on which to standardise. In late June Swift published its final report on the high-level gaps in ISO messaging, following a year long consultative exercise. It remains on track to deliver the standards to eliminate key high-level gaps by the March 2011 deadline set in the Giovannini Protocol (which seeks to improve Europe’s clearing and settlement efficiency overall), it says.
The outcome of the gap analysis exercise suggests that ISO coverage of clearing and settlement processes is pretty good, Swift reckons. “Feedback indicates that in the majority of cases, clearing and settlement processes are well covered by the ISO standards, and we have clear guidance as to how they need to evolve,” says Jamie Shay, head of securities standards at Swift. “The main gaps in ISO messaging are in clearing, and while the vast majority of core settlement and asset servicing processes are covered by existing ISO messages, high-level gaps exist in a few areas – such as securities reference data,” she adds.
In its gap analysis, Swift says of securities reference data: “There are numerous high-level gaps relating to the absence of ISO messaging in this space. In particular, there are no ISO messages related to the creation of new securities identifiers and the communication of the reference data related to those securities (for example, price).”
Among these high-level gaps in ISO messaging are: issuer security reference data for participant to central securities depository (CSD) communication (enabling users to retrieve details of the securities that currently exist for a specified issuer); new security issuance for issuer/issuer’s agent to CSD communication (a message allowing an issuing agent to communicate the required data to create a new security on a market infrastructure platform, possibly or possibly not including an ISIN code); request for ISIN code reservation for issuer or agent to CSD communication (allowing an issuing agent to request from a CSD a range of ISIN codes for use when issuing new money market instruments); report of ISIN allocation to a national numbering agency (NNA) for CSD to NNA communication (for use in notifying back to the NNA when an ISIN has been allocated to a new security); and security reference data communication for CSD to participant use (for communicating to participants the attributes of a particular security).
Where high-level gaps have been identified, Swift Standards says it will work, together with the Securities Market Practice Group (SMPG), with the market through the ISO process to prioritise them and have market participants submit the required business justifications to develop new messages for the most pressing gaps. Swift Standards will publish a development roadmap for ISO messages, showing the likely availability of new and amended standards.
Swift says it has also been encouraged to involve institutions and market infrastructures outside Europe to ensure that the recommendations for removing Barrier 1 “become recognised and implemented by all markets around the world”.