At the end of last year, Swift threw out a few tantalising titbits about its potential future role in the securities reference data space, including the opportunity for Bank Identifier Codes (BICs) in entity identification and its position on the European Central Bank’s proposed utility. However, Swift is in the midst of its 2015 strategy and some of these may fall by the wayside as it refocuses its efforts on delivering what the industry really wants. Either way, Swift securities head Chris Church is convinced that there is a lot of potential for the industry owned network in the reference data standards space of the future.
“Swift is exploring the reference data space to see what kind of opportunities lie around areas such as standing settlement instructions (SSI) infrastructures, legal entity data, securities identifiers and corporate actions golden copy,” explains Church. “However, we will be taking a ‘less is more’ approach here and trying to focus on the right areas and be able to deliver what the industry needs rather than spreading ourselves too thin.”
The ethos of Swift for its prior 2010 strategy was centred on the idea of Swift’s customer requirements and this will be a recurring theme to 2015. However, given Swift’s former eagerness to extend its fingers into many pies, this customer base is more diverse than ever before and their requirements may produce a conflicting set of requests. It will therefore be a significant challenge for Swift to come up with a comprehensive set of strategies across its business lines over the next few months.
“We need to reconcile the differences of opinion in the industry around which direction to take with our strategy – where some want us to go in different directions and we need to choose the appropriate course to take,” concedes Church. Swift launched its industry consultation on 2015 strategy concepts post-Sibos and is currently working on solidifying the feedback into “tangible work streams”, he explains.
Swift is currently over half of the way through its industry consultation on these strategies and the board is set to discuss some of the feedback during its March retreat. “So far we have conducted more than 120 in depth interviews with our customers as part of the 2015 strategy work. This is all around consultation with these customers about Swift’s strengths, weaknesses and future opportunities,” elaborates Church.
For now, a number of reference data specific plans have been tabled to be included in the future 2015 strategy, ranging from standards development to using the Swift network as a marketplace for the vendor community. In the meantime, work has already begun on the BIC side of things with regards to entity identification and this will therefore likely remain a part of the Swift agenda in the future. The coming months will provide more clarity on the work of Paolo Bernini, head of information products at the industry owned cooperative, and his team. He told Reference Data Review in December that there would be “some sort of conclusion in the next three to six months with regards to progress”.
Corporate actions is another key area in which Swift has put its stake in the ground with the launch of its standards initiative last year in cooperation with XBRL US and the Depository Trust & Clearing Corporation (DTCC). Church explains that Swift is committed to helping to provide a solution to something that represents a billion dollar problem for the industry as a whole. “We are really trying to make some inroads into solving this problem and we are now on this journey. In the US there is a huge amount of work going on to reduce costs via automation and to manage risk more effectively,” he says.
There is a huge data challenge because 40% of corporate actions data comes in during the first 12 hours after an announcement and that puts a lot of pressure of firms to manage a rapid inflow of data, he continues. In the US, Church reckons the signal is clear that the community will be tackling the corporate actions challenge and good momentum has come out of the regulatory community from the Securities and Exchange Commission (SEC). “The largest firms in the US are already using XBRL for financial reporting and it should prove easier for them to move to using this tagging for corporate actions data. However, the appeal for us in getting involved in the XBRL work is that it has global applicability to be able to reduce total cost of ownership (TCO),” he explains.
The rest of the world will be watching the progress of the XBRL initiative in the US with interest. Canadians in particular are watching the space intently, notes Church. “In Europe, the challenge for us is almost like missionary work – market participants don’t need education about the scale of the problem, but we do need to explain the benefits of XBRL and the work we are doing around this,” he continues. “They need to understand how and why this can benefit them. The level of understanding varies across geographies and this means that we need to focus on certain areas more than others.”
Although it has largely been the SEC that has championed XBRL thus far, data tagging has also got the attention of European regulators such as the Committee of European Securities Regulators (CESR), notes Church. “It is not an expensive process to tag data with XBRL and it will provide the transparency that all players in the market want.”
As noted by Reference Data Review in November last year, the regulator is contemplating XBRL tagging as an option for securities issuers across Europe in order to improve automation of reporting at the moment. This would significantly improve the prospects for the Swift initiative in Europe, should it come to pass.
Another potential avenue of expansion for Swift could be in working with the ECB on its proposed reference data utility, which has proved a rather controversial topic over the last six months in particular. At this stage, however, Swift is keeping rather tight lipped about its possible involvement. “In terms of the ECB’s reference data utility, Swift is waiting to hear more before we can get more heavily engaged,” says Church. “We are well placed in the market to be involved but it is too early at the moment to determine our role.”
Perhaps once the 2015 strategy is finalised, this opportunity may become clearer, but for now Swift has more than enough to be getting on with.