A year in Standards

October 2012
Produced by For more information, contact us: standards.forum@swift.com Follow us on Twitter: @standardsforum #SFOsaka Join us on LinkedIn: Standards Forum group www.linkedin.com/groups/Standards-Forum-3808100

MARCH 2012

We know how standards can practically contribute to not only enabling automation and reducing costs but also fostering innovation, by doing things in a simpler and more ecient way.
Juliette Kennel, head of standards, Swift

Going beyond standards

The past few years have seen a surge in interest in standards across the nancial services sector as eciency and cost pressures have increased. In the rst of a regular series of features on the topic, David Bannister says that 2012 is likely to see this trend accelerate as dierent organisations start to collaborate more closely.
Embracing my inner geek, I have become involved in a number of standards-related events and conferences over the past few years, generally around the Standards Forum activities of Swift. But that has rekindled a passing interest that goes back to my days as a reporter on Electronics Weekly in the late 1970s, where the annual mil-spec report was pored over by everyone in the UK defence technology sector not standard? no sale ... As what we now call IT started to take shape as a completely separate industry, standards were also where the news was the announcement by Digital Equipment, Intel and Xerox of a standard called Ethernet has had a profound and lasting eect on the world we live in. Similarly, when the FIX Protocol was rst announced in London, I toddled along with a sharp pencil and was rewarded by walking into a room containing 200 bank technologists all wanting to talk about this new thing. And I have to admit that some of the most interesting and fun things Ive been involved in since joining Banking Technology have revolved around standards. Looking back, I see that all of those have involved collaboration between organisations that might otherwise have been competitors, and that is what I see most at the moment: Swift, DTCC, Sifma, and others, working through the Legal Entity Identier specication, for instance. Over the rest of this year, therefore, we plan to carry a regular series of features tracking activities and issues in this area, reporting on the many initiatives that are starting to bear fruit and on new ideas bubbling under the surface. Along the way, well be introducing the many characters that inhabit the world of standards development importantly, we will also be looking at how standards are deployed in the real world, and how they are of practical importance in improving the way the industry operates. Of these, one of the rst on the radar will be the Legal Entity Identier. This, says Tim Lind, global head of strategy, enterprise content, at Thomson Reuters, has the potential to create new

Standards: the inventory

One of the most common things said of the standards world is we love standards thats why we have so many of them. This is true, but inevitable as dierent processes and operations require dierent denitions. A short guide to the alphabet soup of the standards world would probably include the following though purists will argue that some of these, like FIX, arent standards in the true sense, and there are some omissions that others might want to have included. AMQP Advanced Message Queuing Protocol: an open middleware approach that allows applications to send and receive messages, but also to intelligently handle messages through dynamically altering parameters such as performance and security. Deutsche Brse uses AMPQ as the transport mechanism for its FIXML messages in the Eurex system. JPMorgan sends 1 billion AMQP messages every day. BIAN Banking Industry Architecture Network: A collaboration between vendors and banks to set a common framework for banking interoperability using a Service Oriented Architecture approach. It is working with the Object Management Group and the International Financial eXchange Forum and, most recently, The Open Group. FIBO Financial Industry Business Ontology: a standardisation, by the OMG, of the content of the Enterprise Data Management Council Semantics Repository, which is a repository of ontologies of nancial instruments primarily securities instruments. The goal is to standardise the terms and denitions of all reference data attributes stored in the master les of nancial institutions and passed among supply chain partners. FIX Protocol Financial Information eXchange Protocol: a messaging standard developed for the real-time exchange of securities information, widely used in trading systems. It has spawned a number of oshoots, including the FAST Protocol FIX Adapted for Streaming used to support high-throughput, low-latency data communications between nancial institutions, particularly for the transport of highvolume market data feeds and ultra low latency applications.

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opportunities, as well as increase operational eciencies. But rst there are some details to be sorted out. The priorities follow the original objective, which it to increase transparency of Credit Default and Interest Rate Swaps trades, therefore it makes sense to use the DTCC Trade Information Warehouse, which is where that is collected. Many of the entities are actually funds, and a fund is really a relationship between a trustee and a trustor, so the SIFMA working groups are bringing clarity in how funds will be identied, says Lind, adding that the fact that the work is being done in Europe and the US is a delaying factor. SIFMA is working on the concerns, and the Financial Stability Board is working on it in Europe, but the bottom line is that there is no formal mechanism to co-ordinate across the Atlantic, so the LEI is a microcosm of that challenge and highlights the need for communication and patience. Does this mean that the project is on hold in some way? Not at all, he says: In terms of the ISO 17442, without formal FSB endorsement it might be imprudent to formally ratify the standard until the FSB draws its own conclusion, but we are moving forward with LEI as though it were a foregone conclusion. For Thomson Reuters, LEI is a key that we use to not just identify an entity but link it with value-added information, so it will be much more precise to map and join data sets instead of relying on textual descriptions. Also making headway is the Banking Industry Architecture Network, which recently announced a partnership with The Open Group to integrate their individual industry frameworks for specic use in the banking industry. Mapping together these frameworks will accelerate project delivery, while dramatically reducing IT integration costs. The pair have collaborated to produce a white paper, in which the core elements of the two individual frameworks have been projected onto each other. Hans Tesselaar, executive director of BIAN, said: The Open Group is a serious heavyweight in architectural standards. With its project approach and ability to deliver not to mention its reputation as the anchor point of the standards industry The Open Group adds much value to the BIAN open standards mission. We expect banks, which have already adopted TOGAF, will also adopt the BIAN standard, and the banking industry can take another step towards interoperability. BIAN originally started as a vendor group you could argue that it really started as a SAP project, though it now has a number of bank people in key positions (Tesselaar works for ING). On the bank front, BIAN has ABN Amro, Banco Galicia, Commonwealth Bank of Australia, Credit Suisse, Deutsche Bank, Deutsche Postbank, ING, Kutxa, Rabobank, Scotiabank

FPmL Financial products Markup Language: Managed by ISDA, FpML was developed for the OTC derivatives market by JP Morgan. Like FIX, it is a very widely used de facto standard. ISO 20022 As the ISO puts it: A universal nancial industry message scheme is the international standard that denes the ISO platform for the development of nancial message standards. Its business modelling approach allows users and developers to represent nancial business processes and underlying transactions in a formal but syntax-independent notation. These business transaction models are the real business standards. They can be converted into physical messages in the desired syntax. At the time ISO 20022 was developed, XML (eXtensible Mark-up Language) was already the preferred syntax for e-communication. Therefore, the rst edition of ISO 20022 proposes a standardized XML-based syntax for messages. LEI Legal Entity Identier: Under post-crisis pressure from regulators, international industry bodies including Swift, Sifma, the DTCC and others are working to create a useable standard to identify parties in trades. It is expected that this will become an ISO standard ISO 17442, in fact. MDDL Market Data Denition Language: is an XML-based messaging format for exchanging information related to Financial Instruments, corporate actions and market-related data. MDDL was developed by the Financial Information Services Division of the Software & Information Industry Association. XBRL eXtensible Business Reporting Language: an XML-based standard that tags information in business documents such as annual reports in such a way that they can be processed automatically.

Group, Standard Bank of South Africa, UniCredit Group, and Zrcher Kantonalbank as members. On the supplier side, it currently lists Callata & Wouters, Capital Banking Solutions, CGI, Coretransform, Fernbach, HCL Axon, IBM, IFB group, IKOR, Infosys, Innobis, Microsoft, SAB, SAP, SunGard, Swift, and Temenos. One vendor that isnt a member of BIAN is Misys. Barry Kislingbury, global solutions manager for payments and messaging at the vendor, says that Misys is indeed interested and monitors progress Ive been to a few BIAN meetings, he says but membership is not inexpensive and to gain the full benets considerable time needs to be committed. Kislingbury also questions where the boundaries are to be drawn in the competition/collaboration debate. Swift is a great standards body: the Standards Developers Kit is extremely good and we completely support what they are trying to do with it, but in many areas now Swift are actively competing with their partners, he says. Swift itself has a broad range of Standards related announcements up its sleeve, which we will be returning to in the next issue and following in the run-up to Sibos in October. As an organisation that both develops and deploys standards, we know how they can practically contribute to not only enabling automation and reducing costs but also fostering innovation, by doing things in a simpler and more ecient way, says Juliette Kennel, head of standards at Swift. I am convinced that standards and innovation go hand in hand, so am looking forward to reading the articles that Banking Technology has planned in future issues.

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MARCH 2012

Why standards matter

At the Swift Standards Forum event in Paris at the end of last year, Banking Technology caught up with John Murphy, managing director of Trace Financial, to discuss why the company was involved in the event and what issues it is addressing through the use of standards.
Q. Why do standards matter to you as a supplier? Our business is built on implementing message standards. This means applying message standards to solve a business problem. Since a message standard only has meaning when implemented, and only delivers value when part of an integrated ow, then a given published standard has to be integrated with client systems and that area causes pain for most organisations. Q. Why? Where are the pain points? Traditionally this integration has been viewed as a technical task and wrapped up with general middleware issues such as protocols, connectivity and monitoring. This means purchasing decisions for solutions that work with standards have been taken by sta whose primary focus is technical and who, in many cases, are unaware of the challenges presented by implementing standards. This has resulted in many organisations evolving ever more complex infrastructures that have become dicult to change and dicult to test. We have spent many years assisting customers with their messaging. Connectivity has become more and more a standard commodity (FTP, MQ, TCP and so forth) and subject to infrequent change; whereas message standards have become more complex and ubiquitous. More business services rely on messaging and involve more and more parties. As the needs of more parties are accommodated then the complexity of the standard and hence implementation gets more involved. Add in year-on-year change driven by business needs, regulatory requirement or standards revisions, and organisations start to struggle with their complex infrastructures. This is the problem space we address. Historically the move to middleware and associated messaging mushroomed in the mid-1990s. Before that payments had been automated but securities automation lagged behind. In the UK the Crest initiative (lets ignore the scarring experience of Taurus) forced messaging as a settlement method and moved nancial institutions to consider the general issue of middleware solutions. The technology was already addressed in the US healthcare market where the need was established to link up giving someone an aspirin with sending an invoice and making an insurance claim. Hence many of these solutions were migrated from the US healthcare market to the nance industry. Q. How do standards help you address the needs of your clients? For our clients agreeing to use a particular standard is akin to agreeing which language to use; it enables communication and standards become the language of business. Markets have become international and the adoption of standards facilitates trading and settling any instrument, in any market anywhere. Of course, this also means things can get out of control more quickly, as in the recent scenario with sub-prime debt being packaged and sold and leaving organisations unsure of precise exposure. There again, it is standards that will be the tool used by regulators to establish central reporting and monitoring of trading activities. It doesnt matter whether our clients are looking to trade internationally, seamlessly and quickly or comply with regulatory authorities; all these functions require a language and communication and hence a standard. The challenge for the client is uency how quickly can it adapt, implement and integrate standards? An organisation with a high level of uency will be able to support new services with minimum eort; integrate them with existing processes and systems as well as deal with on-going change as standards and processes evolve. Q. Quite a complex relationship, then? As time passes no standard gets simpler. They involve more messages, each message involves more data and the data items get more complex. Compare, for example, the number of messages in FIX 4.1 with FIX 4.4; look at the number of parties on, say, the Notice of Execution message in each version and nally compare the complexity of denition of a party. At every level complexity has increased as the needs of more and more parties are accommodated. This helps clients with a more functionally complete, and viable, solution but presents a challenge in coping with the complexity. It results in a love-hate relationship between clients and standards but it is not one that is going away. Q. Are there particular standards or issues around standards that are currently of concern? Every standard has its issues but they vary greatly from one to the next. They also cover dierent ground. For example Swift is a message standard but it is also a network and generally client issues are how to create the message, how to test it complies

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with all standards in the User Handbook and how to transport the message to and from the Swift network. For Crest there is a message standard and a network but also a business service for settlement and clearing; so the client issues are how to create the message, test it complies with the DEX, transport it on the relevant network and then track the ongoing status of transactions by requesting status updates and responding accordingly. With FpML there are multiple standards, no network and clients mutually agree how to adapt standards for their own needs no one uses a vanilla version of any of the FpML standards. There are also numerous standards without any critical mass of users that would lend credibility in spite of lots of committed often voluntary eort by intelligent people to dene the standard. If it is dicult to see the connection between the spend on implementing a standard and an associated business benet, the project will never get to the top of the pile and attract focus and funding. In the Swift world it is not surprising that established users resist migrating from ISO15022 because it is doing a good job for them; meanwhile new users would prefer an ISO20022 and XML-based standard. Q. There are also perception issues, arent there? There are some myths or general misconceptions around standards and these generally come down to an expectation that standards should simplify messaging. The fact is that a complex transaction implies any message model also has to be complex. And if that model tries to accommodate the needs of multiple parties to allow widespread usefulness then the level of complexity will increase. We call this the Standards Paradox: as you accommodate more needs complexity grows. This is neither good nor bad just a fact of messaging life. Another common misconception is that XML is in some way a strategy for messaging and that XML will also simplify messaging neither is true. Try representing Einsteins Theory of Relativity or James Joyces Ulysses in XML and they will not suddenly become simple. Of course there are many tools to facilitate working with XML but standard open tools working with complex structures and rules combined with the need to integrate with lots of non-XML in-house systems does not lead to messaging uency. Testing is another signicant issue area. To test that a message is consistent with a given standard in a development environment is beyond the majority of nancial institutions. It is impossible to look at a message instance and determine whether all mandatory elds, data formats, options and market practice rules have been adhered to. Standards bodies vary greatly in terms of testing facilities that are available and they tend to vary from none at all to being available at certain times subject to booking etc. From a project perspective eciency

is greatest when testing is integrated with the development cycle and for that an electronic version of the standards that encapsulates all rules is required. There are numerous other issues like the way standards are dened, documented and published; how changes (delta) are tracked and documented, how one assesses the areas of an implementation aected by a given change. The way that rules are dened and local market practice encapsulated. The way some standards are imprecise or vague and cannot be precisely implemented electronically i.e. they are guidelines rather than anything more specic. But the above is probably sucient for now. Q. What are your current areas of focus and how do you see that changing in the medium- to long-term? Our current area of focus remains providing Transformer that makes the implementation of standards faster, cheaper, higher quality and more adaptable. We do also provide targeted messaging solutions where a message standard is integrated with a set of business rules and transaction ows to deliver a targeted messaging solution for a specic business process. There is huge room for improvement in the level of uency with messaging standards in most nancial organisations and recent history suggests this situation will persist so we see lots of opportunities to solve client issues and improve existing infrastructures.

View from a bank: Ian Chittick, Lloyds Banking Group

In one of the Swift Standards Forum sessions at Sibos in Toronto last year, one session addressed the question of why the technical plumbing issues of messaging standards should be of any interest to senior people working on the business side of the institution. The answer of one participant was straightforward: They help us to make money. Its a view that is echoed by Ian Chittick of Lloyds Banking Group. The reason that it is so important to a non-technical business person is that once you get into the exchange of nancial information, the standards facilitate the business. Chittick says: the problem with standards is the second s there are too many of them. This is true across technology, he adds the proliferation of browser versions complicates the provision of internet banking services, for instance. He adds that the provenance of standards is important. Swift has done a great job, but is has always been a bank approach. We dont even have to think about how we have to talk to another bank, but when it comes to corporates, the situation is dierent and we need to be more exible. Ultimately, however, standards are there to facilitate the business. One of the interesting things is the value of bureaux: as a bank, it is not our core business to map and translate between data formats we dont want to dierentiate on the ability to accept le-based transactions; we want to dierentiate on the quality of our services and products. Chittick distances himself from the standards making process. Intellectually, some people do get a buzz out of it. But for me it is about getting interoperability to the point where you are facilitating the interesting parts of the business. Ian Chittick is head of the Global Channels team within the Transaction Banking division of Lloyds Banking Group.

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APRIL 2012

Swift gears up for NY launch of MyStandards in May

The online standards management and customer service tool from Swift is ready to go live. David Bannister reports on why it has been attracting so much attention.
MyStandards, the new web-based management and communications tool developed jointly between Swift and a group of pilot users will ocially be launched in New York at the beginning of next month. The service is intended to provide a comprehensive mechanism for nancial institutions to communicate service information with their customers, as well as improve internal management of standards and market practices. Bank of New York Mellon, Citi, Clearstream, JP Morgan, RBC Dexia, SIX, T2S and the UK Payments Council, have been collaborating on MyStandards in a closed pilot, and are now expected to be joined by others as the launch date approaches. Initial reports from the closed trial emerged in a session at the Sibos event in Toronto last year, where it became clear that it will go beyond its original brief of being a simple management tool, thanks in large part to the interactive rapid development methodology that was used to develop it. Speaking at a session in the Standards Forum part of Sibos, Bernard Lenelle, senior vice-president, product management for core products and business strategy at Clearstream, said the process had meant that we have been very close and had a constant interaction with the developers. Veronique Peters, project manager at Bank of New York Mellon, agreed: It has been really comfortable Swift has been asking for feedback all through, and weve been getting the results of that come back to us. The success of the development methodology has already seen it adopted in a number of other projects, observed Brian Crabtree, director of market practices standards and Swift at Citi, who described it as a very eective, collaborative, iterative approach. Essentially, MyStandards is a wiki, a web-based method of collaborating on the creation and sharing of information, the most famous example of which is Wikipedia. Financial institutions can use MyStandards to capture information about their use of standards and their business and market practices. Internally this improves documentation of this kind of information, and addresses the problems of change management. Typically, within Citi, for example, this is done manually using Excel spreadsheets to capture the information, and the spreadsheets have to be transformed into actionable change requirement projects as new products and services are added. This can be a very heavy process, said Crabtree. For Citi, the main direction is to make that eort easier to manage, and to improve sales and implementation with new customers as well as for internal dissemination of all information. Lenelle said MyStandards acts as a single repository of all data, which is something we have been looking for for a long time. The ease of contribution means that there is a risk that the database could become cluttered by some users adding or amending data, so it will still require a disciplined management approach. Asked if this meant that there was a danger that the standards approach could itself be debased by users adding endless work-arounds and quick-xes of their own, BNY Mellons Peeters said: Within the boundaries of the standard, there is freedom in terms of the information you are propagating that is part of your business process and it is important to know about that. Lenelle, who is co-chair of the corporate actions sub-group of the Securities Market Practice Group, said capturing of market practice is also greatly facilitated by the MyStandards tool. By collaborating on this, institutions will be able to concentrate on more competitive issues. We should not be competing on standards we should compete on services and MyStandards can communicate what those services are to customers. The launch of MyStandards has been a classic soft launch as well as the trails at Sibos last year, the Swift Standards people have been actively promoting it and seeking participation ahead of the ocial launch. Before the May launch event in New York, there will be an opportunity to discuss the service at the Swift London Business Day at the end of April, a repeat of last years sucessful event. In the meantime, interested parties can sign up to look at the service for themselves at www.swift.com/MyStandards where free trials are available till the end of April.
Banking Technology and Swift have teamed up to host a

roundtable event with some of the initial pilot participants and other interested parties. This will appear online to coincide with the New York launch event, as well as in a later issue of Banking Technology. To make sure that you are registered to receive a complimentary issue go to www.bankingtech.com/register.

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MAY 2012

As more organisations seek to collaborate in order to increase capability in terms of eciency, cost-saving and exibility, increased emphasis is placed on the importance of communication

Why standards bodies need to stick together

Prior to 2009, there was seemingly little need for standards within nancial services. Continued high turnovers ensured there was little, or no, talk of eciency, transparency or passing savings on to customers, and reducing the vast investment on IT integration was a non-issue. This was the case until the banking crisis, which resulted in $1.5 trillion in bank write-downs being realised from 2007 to 2009 (IMG Global Financial Stability Report, April 2010). The nancial crisis of 2008 is a term now used to discuss a wide range of ills. Yet there is little doubt of the impact it has had on nancial services. Not only are banks now scrutinising expenditure a lot more closely, but they must also provide evidence of eciency and cost-cutting if they are to regain public trust. This increased focus on expenditure naturally brought about a period of change within the industry. In parallel to the scrutiny of balance sheets, banks made the stark realisation that they cannot compete on back-oce systems the battleground for innovation and customer acquisition and retention lies in front-oce customisation. This discovery opened the door to nancial services standards and collaboration. Financial services: the next frontier Standards bodies have long played a part in other industries; the International Organisation for Standardisation has been publishing standards since 1947, across industries ranging from agriculture and construction, through mechanical engineering to information technology. Yet the nancial services industry has lagged behind. However, in light of the ongoing economic stagnation being experienced across Europe, the nancial services industry continues to look to

Banks cannot complete on back-oce functions. This opens the door to collaboration on standards, says Hans Tesselaar.
improve eciency, and the employment of standards has been recognised as essential to achieving this. The importance of standards is clear when we consider the signicance of interoperability. Interoperability is the key to ensuring that dierent systems can communicate eectively. In the context of software implementation, the integration costs both in terms of time and nance are prohibitive. Integration costs are often as much as triple the purchase cost of the original software and, as a result, many banks are opting to replace specic parts of their existing IT, which have either become obsolete or are dicult to maintain, with o-the-shelf software. The common use of standards could ensure that a banks systems, semantics and expectations are in-line, reducing the cost, time and risk associated with the communication process between dierent IT systems. Undertaking a core banking system renewal, for example, if both bank and vendor are fully interoperable and working from the same set of standards, would not only reduce the cost of integration (which can be tens of millions of pounds), but the business case would be improved, allowing banks to bring new and improved functionality to market at a greater speed. This is good news for banks, for which innovation is the key to staying ahead of competitors, but it is also good news for software vendors, as banks are then increasingly willing to invest in IT. Standards bodies truly practicing what they preach are increasingly looking to collaborate with each other. Integrating individual industry frameworks allows all parties to leverage their standards, for greater reach to banks and software vendors. BIAN, for example, works with Swift, the Object Management Group, the International Financial eXchange Forum and The Open

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Group. The Object Management Group works with a number of other standards bodies, across dierent industries, such as the Healthcare Information and Management Systems Society, with which they collaborate on the creation of healthcare standards. Inter-organisational collaboration occurs for a number of reasons and has great potential for verticals such as nancial services. The Open Group and BIAN partnership came about after The Open Group identied a need within their member base for more thorough standards, specically around banking. When applying The Open Group Architecture Framework in a banking environment, the BIAN content speeds up the work by providing banking-specic architecture content. BIAN benets from such a partnership as TOGAF provides a structured approach and adds value to the BIAN deliverables for the project approach and capability to perform. The point is that standards bodies focus on dierent standardisation layers, and working together allows bodies to oer broader and further reaching sets of standards. Furthermore, in an age of overlapping industries and spaces, oering a collaborative approach to standards, in which already dened standards are reused, allows organisations already invested in an existing standard to safeguard this investment whilst adopting alternative frameworks on a dierent level. Naturally each body has its own roadmap and timelines set by their members; it is the alignment of these roadmaps which presents the greatest challenge. Why are standards bodies aligning? The issue of collaboration among standards bodies has really only come onto the agenda in recent years. This may be for a number of reasons. Firstly, technological advances have resulted in ever more generic underlying technology across industries. The price of hardware has dropped considerably and data and memory capacities have improved, resulting in a more level playing eld between the industries. This has, in turn, allowed these industries to adopt common best practices in non-value add, non-dierentiating, back-oce systems and processes. Secondly, and this is certainly true for the nancial services sector in recent years, regulatory pressure is on the increase. The heavy hand of the regulators can be felt across all industries, especially where data is involved, and this has further increased awareness of the possibilities of cross-industry standards collaboration. The need for collaboration between standards bodies Swift, BIAN, OMG, IFX and others is clear for both banks and software vendors. Rather than aligning with just one standard in the hope that it will become the de facto, they can be sure that there will be no competition between

bodies, and therefore can avoid the potential risks this would involve. Banks need to retain the exibility to design their own roadmap, knowing there is no risk from aligning the technology with a certain standard. Standards where next? The increasing complexity associated with IT architecture means standards have never been more important. Furthermore, as more organisations seek to collaborate in order to increase capability in terms of eciency, costsaving and exibility, increased emphasis is placed on the importance of communication. As a result, organisations and systems that can converse with one another will increasingly lead the pack. It is no surprise, therefore, that a number of standards bodies have emerged, seeking to encourage further inter-organisational collaboration. The standards landscape is an evolving one and, although the existing bodies are likely to stay separate for at least another couple of years, it is probable that we will see ever more alignment and collaboration as the standards mature and technologies enable a more seamless integration of the dierent layers of standardisation. Within the next ve years, there is the possibility that we will see one generic nancial services industry standard emerge. Likewise, it is not dicult to imagine standards crafted for the retail banking space crossing into other spaces, for example insurance. Despite the accelerated uptake of standards within nancial services, it is unlikely that we will see any new players entering the market for one thing, existing bodies cover the whole landscape, from application-application, business-business, messaging and semantics, all standardisation levels are represented. Nevertheless, it would be premature to declare the death of internal standards, such as IBMs Information FrameWork. Proprietary standards hold vast amounts of value in terms of nancial property, and as such their importance is unlikely to be diminished; although they will face increasing pressure to become more aligned with open standards. This is demonstrated by IBM recently joining BIAN as a member, and taking a seat on the board of directors. A fundamental principle of open standards is to not reinvent the wheel, so it is encouraging to see standards bodies taking their own advice, and collaborating to repurpose existing frameworks. There exists a demand from the industry for further cooperation; it is no longer enough in this ever-integrated market for a standards body to cover just one area. Hans Tesselaar is executive director at BIAN, the Banking Industry Architecture Network

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JULY/AUGUST 2012

From something that has been taken for granted, people are now seeing standards as fundamental in how they take their business forward.

Taking care of business

Its 20 years since the Financial Information eXchange protocol rst took the trading world by storm. David Bannister spoke to FIX Protocol Limiteds Stuart Adams about its role for the future.
Twenty years ago several hundred dealing room IT and market data specialists gathered at Salomon Brothers premises in Buckingham Palace Road. Representatives of Goldman Sachs, JP Morgan, Merrill Lynch, NatWest Markets, Nomura, Schroders the whole of Londons trading and investment management community, pretty much, was there. Theyd come to hear about the Financial Information eXchange Protocol, developed by Salomon Brothers and Fidelity Investments as a simple means of sending equity trade data between institutions. I was there reporting for the newsletter Dealing with Technology. Taken aback by the turnout, I asked the head of market data at one of the broking rms what everybody doing there. He gave me a withering look and said: Because if we want to trade with Sallys, which we do, then we have to format our messages this way. Soon. In the intervening 20 years, FIX, managed by FIX Protocol Ltd, has become the dominant pre-trade messaging and execution protocol, spawning variants that encompass High Frequency Trading and allow the protocol to be embedded in silicon and incorporated into routers that allow for intelligent order routing, low latency and other applications. Hardline standards people sometimes dont like FIX being referred to as such, but if youre looking for an example of a de facto standard, youd be hard pushed to nd a better one. Which, in part, explains why FIX is a fundamental part of the Standards Investment Roadmap. First produced in 2008 at Sibos in Vienna, the Roadmap brings together FIX, the Financial Products Mark-up Language, Swift messages and the eXtensible Business Reporting Language, showing where each could perhaps should be used. Also involved are implementation specialists the International Securities Association for Institutional Trade Communications ISITC and market data specialists the Financial Information Securities Division, which has been instrumental in the development of the new Legal Entity Identier standard. With the exception of Swift, all of these groups were largely the vision of small groups of like-minded individuals, which have grown by accretion into larger groups: how all of these are now coming together shows how important it has become to improve information ow across the industry, for many reasons including cost, eciency and transparency. What is really interesting is that over the past few years what we have seen is a realisation that standards, in general, have become something that is important rather than something that is just taken for granted, says Stuart Adams, EMEA regional director at FPL. In the past people looked at the evolution of FIX in the pre-trade space, initially for equities and then into other asset classes, and they are realising that while the protocol is free, the infrastructure that you put in place to run it is not, so it is becoming even more important to follow the use of those standards. For example, in regulation: how can we use standards to address regulatory requirements? Adams says that in the regulatory world this is working in the opposite direction too, with recent proposed US legislation referring to the need to have non-proprietary, free and open standards in place for the processing of information not in nancial services, but in areas such as child protection welfare.

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How do we get the regulations into being without burdening the industry with a lot of additional cost? That is where standardisation is starting to come forward.
Some of the politicians in the US who are behind that legislation also understand that the exchange of information between agencies and between countries throughout the whole nancial lifecycle can be facilitated in such a way that you have transparency and you mitigate systemic risk if you are using the right types of standards, says Adams. It comes out of left eld, but it makes sense. From something that has been taken for granted, people are now seeing standards as fundamental in how they take their business forward. In one sense, standards like FIX have become intrinsic and robust to such an extent that they are make it easy to address more complex issues, and have laid the ground work for much of the current debate on business processes, market practices and regulatory frameworks. We are working very closely with Swift, and others, and it is very much a united face that we take forward, says Adams. On the roadmap, we have done joint meetings in Washington, we have done joint meetings in Brussels, where we have gone as Swift, FIX, FpML and XBRL and what we are talking about is the business process. The common factor is that we are trying to make sure we have interoperability in the business process under ISO 20022, not just an ISO standard. Again it comes back to protecting the business investment that people that have already made. As the dust slowly settles from the nancial crisis that began in 2007/8, it is becoming clear that standards and common business practices need to combine with a workable regulatory framework for the nancial services industry to move forward. It really is roll up your sleeves time, says Adams. Politicians talk holistically about what they want to achieve but what it comes down to is the delegated powers that are going to the European Securities Markets Authority, and then ESMA taking guidance from the industry on how to address the practical implications. How do we get the regulations into being without burdening the industry with a lot of additional cost? That is where standardisation is starting to come forward and we are nding a greater level of engagement. As the Standards Roadmap has evolved, most recently with the inclusion of XBRL, so the range of people involved has had to broaden. XBRL is mandated by the US Securities and Exchange Commission for company accounts and reporting, which is is all very good in itself from the point of view of having machine readable company accounts, but, Adams says, for it to be truly useful, the involvement of issuers is essential, and FPL has been working with XBRL on this to add the appropriate workows to the roadmap. While all of the good work that is being done by those toiling at the coal-face to align standards, business processes and market practice, regulators are focusing with some urgency on over-the-counter derivatives trading, and this is the focus of a lot of work right now, says Adams. It is ongoing and the regulation is changing quicker in that space, so there is a lot of activity. Also high on the agenda is the adoption of the Legal Entity Identier. Though people have been working on denitions and structures for more than a decade, the LEI comes all the way from the G20 governments: down through the Financial Stability Board, through the International Organisation of Securities Commissions to regulators, to the standards bodies, starting with the International Standards Organisation. Without oversimplifying it, from an FPL perspective, essentially it is data that is going to be included in a FIX eld and transmitted, says Adams. We have actually taken it a little further than that in terms of looking at the party details, the relationships between parties, and the hierarchies of those relationships, but in essence it is data that is going to be transmitted. What is important behind that is that at the ISOCO level, a lot of the things that are talked about are about transparency, which is about information, and when it comes down to it, those are the same principles that are behind a lot of our initiatives. Adams says that there is currently a lot of interest in the standards roadmap from the regulators. The good thing is, because we are not a trade association lobbying from a particular position, it is much easier for us to have conversations with them, as we are completely neutral, he says. FPL is also about implementation, he says, not just talking about the issues. A good example is the risk management guidelines we have just published. That was from a coming together of various market participants, and identifying what information was being passed as part of an electronic transaction, and what checks and balances should be in place. It meant some tweaks to individual tags in the data that was being transmitted, but overall it was about looking at the business process and putting best practices in place.

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MAY 2012

PARTICIPANTS
Marc Delbaere, head of research & development, SWIFT Standards Stew Cofer, SWIFT product manager, JPMorgan Treasury Services David Broadway, senior technical adviser, Investment Management Association, and cochair of the Securities Market Practice Group Investment Funds Working Group

A tool for change

To coincide with the launch of the MyStandards product, SWIFT and Banking Technology combined to bring together some of the people involved in the pilot development to discuss how the product has evolved and where they see it going post-launch.
MyStandards, ocially launched this month, is a development that goes to the heart of what SWIFT is doing to reduce the cost of managing the implementation of standards, according to no less a person than SWIFT chief executive Lzaro Campos. He may well have been understating the case: initial reports from pilot users at Sibos in Toronto last year were very positive, and as the launch takes place in New York, a momentum is gathering behind the initiative. So what is MyStandards? The service is intended to provide a comprehensive mechanism for nancial institutions to communicate service information with their customers, as well as improve internal management of standards and market practices. According to Marc Delbaere, the initiator and business owner of MyStandards, the original product idea started some two years ago. It started towards the end of 2009 when we did a full analysis of all of the pain-points in the industry around standards, he says. We were looking at the complete end-toend chain of what was happening, from dening standards through to implementation, and we realised that SWIFT had a somewhat restricted view of what was happening. Delbaere says that SWIFT identied two issues that needed to be addressed. One of the early things we recognised was that harmonising global market practices was the tip of the iceberg and the reality was that the industry, in dealing with all of these specications and standards, had all sorts of other constraints, such as local regulation or limitations of back-end systems. That was one of the things we wanted to x, he says. The other was change management. These standards change over time and every time something changes, since we dont have fully integrated change management from the source of the standards to integration in systems, this causes massive costs across the industry. We wanted to treat change as something more consumable all the way down from when business people decide to change something, to where you need to implement the change in your systems. Really, those were the main two drivers to the project. A central part of the development was the involvement of the user with a the range of banks and other interested parties brought in from the beginning and others joining as development progressed to the open pilot stage. Bank of New York Mellon, Citi, Clearstream, JP Morgan, RBC Dexia, SIX, Bundesbank and the UK Payments Council all contributed to the project, as did the Securities Market Practice Groups. Stew Cofer, SWIFT product manager, JPMorgan Treasury Services: We were approached early 2011 to participate in the pilot. We had some queries about its scope and ambition, but immediately recognised the value and had some ideas for initial use. Our customers increasingly purchase services from multiple nancial institutions as they grow; it follows that they increasingly benet from better standards management. These multi-banked clients are honest and share with us the pain they experience from variations generated from dierent interpretations of standards by their service providers; they are a driving reason we are so involved in standards creation and enrichment across many business areas. MyStandards seemed a natural step in the right direction. Initially, we sponsored content into MyStandards from a cash management and a securities perspective. One of the things that is clear is that MyStandards will address dierent needs for dierent groups, and for many the attraction is less to do with the change management issue than with the ability to communicate standards information quickly and uniformly to clients. For JP Morgan it was less to do with the rst problem and more with the second. For an organisation of our size, annual standards changes are well tended. The communication element was attractive because we are part of a community that recognises the current process

CHAIRMAN
David Bannister, editor, Banking Technology (moderator)

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could improve, specically in getting the standards into applied business language in a uniform way, says Cofer. For us the appetite for being involved was based on our clients need to understand applied use across their service providers. Like many institutions we have robust documentation, on boarding processes, and interfaces with the industry. JPMorgan is probably like a lot of institutions in that when we write documentation, standards are the starting point. The result after we, competitors included, all strive for the best way to apply these is some good documentation; yet our customers still feel the inconsistency. Ill claim some small bragging rights here being the rst to contribute a practice/usage guideline to MyStandards in the pilot has put us in a great position on this point. We were very impressed at the output and were able to give SWIFT requirements that would directly benet our customers in very specic use cases. To be fair, most of what an institution might need was part of the plan from day one.

This, he says, will allow easier management and dissemination of that documentation. The involvement of potential users early in the process was a departure for SWIFT, and crucial to the development in fact, collaboration changed the direction of the development substantially. In the beginning we had a fairly good idea of the problem we were trying to solve, but if you look at the evolution of the product from what we thought we would build to what we ended up building, there is quite a signicant dierence theres perhaps a 30% dierence between the feature set that we planned and what has turned out, says Delbaere. The way that happened was that we were sharing stories and screen mock-ups with the customers from the start and there was a lot of interaction. They were telling us, we will have more of that and less of that and this continuous feedback was invaluable. SWIFT, like most IT-centric operations, uses Agile development methodologies internally. But what was unusual was the amount of

customer inclusion, very, very early in the process, he says. The rst things we showed were sometimes very sketchy, but it showed where it might go. That was the deal, to be able to set up expectations at the right level and make sure that we were going in the right direction. Cofer says that it worked from his perspective: We really have seen SWIFT address almost everything that we asked them to do. David Broadway, senior technical adviser at the Investment Management Association, and co-chair of the SMPGs Investment Funds Working Group, was one of those who came to the development later, and he agrees that the iterative development has been central. The rst time I saw MyStandards was at an SMPG meeting a year ago when it was introduced informally. We started using an early version of the editor component to capture the discussions around the messages we were working on at the time, he says. At that stage we were doing it as part of the beta test and in that that process we identied bugs which the facilitators took back to their colleagues at Swift. It was the rst step, but we actually did use it and the work we captured at that stage we were then able to use. Broadway says that while the service isnt yet fully mature, this constant redevelopment gives him condence that it will develop further. It has a little way to go in terms of what I have seen, but I already know that there are future developments coming along, which is part of the iterative approach. For example, I joined the process in November and was on a conference call in January and

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We used to compare national market practices manually on a spreadsheet, lining up the countries and doing a gap analysis manually but in MyStandards it pulls it up and in 10 seconds or whatever, it does the analysis.
David Broadway, IMA all of the things Id come up with had already been dealt with. Broadway says that his funds market practice group currently has PDFs describing market processes, supported by spreadsheets describing the component usage. What we want to do next is to replace those spreadsheets with MyStandards representations of them, and that will be a massive improvement on what we have today in terms of what we see when we try to capture market practice and the consistency of whats presented as output. This immediately eases the task faced by national market practice groups when it comes to comparing their processes. Currently each group will have captured the processes slightly dierently and formatted the spreadsheets dierently. The consistent MyStandards approach will ease this The tools are there within MyStandards to do it all on screen and that delivers extra capabilities that we dont have today, he says. Cofer adds that by taking this approach there are benets for the wider industry. This is where Swift did a great job youre in the funds space, and Im in the treasury services space, but those suggestions really benet every other business area that might use MyStandards, he says. Swift has taken that perspective across the standards landscape, so we got a lot of benet that we hadnt asked for. These benets will only be fully realised when there is a greater uptake, These benets will only be fully realised when there is a greater uptake, however. The information has to be in there, of course, says Broadway. Swift has been working to load existing SMPG and NMPG documentation into MyStandards we still need to do some validation at this stage but although it wont be in the public domain until we validate it, there is an existing body of work. In the early days this implementation will be at dierent speeds as dierent stakeholders are at dierent stages of adoption of standards most of the SMPG and NMPG working groups date back to the move from older standards to ISO15022, for instance, and are just starting the transition to ISO 20022, while the more recently formed funds group was set up with ISO 20022 in mind. We came from a slightly dierent starting place, says Broadway. The people that have been doing market practice in 15022 will see a very dierent representation in MyStandards to what they are used to its more hierarchical, and in my experience you can visualise the message far more easily than with at tables. Weve had the hierarchical presentation with ISO 20022 on the investment funds side, but without the ability to capture processes in the same place and amend them to create your own specications to make an optional component mandatory, for instance for the purposes of market practices. It is about doing what you want to do in context, far better than weve ever been able to do. Cofer agrees: You cant compliment the interactive nature and visual presentation of MyStandards enough. Theres just nothing like it. Competition versus collaboration is something that is talked a lot about, but MyStandards could raise issues in some minds about where the boundaries are: surely if you have more ecient processes than the bank next door, it is a competitive advantage that youll want to protect? Cofer says that this might once have been the case, but no more. Eciency is always an advantage but what if everyone was equally ecient in a agreed way? he says. I think a gap did perhaps exist for best practice documentation, but MyStandards will change that forever. No matter what the adoption rate is, there has already emerged a good way to describe standards. Im very pro MyStandards at the moment, especially for an institution since the content that is in there now generates, with a click, your own client documentation in a variety of formats. The existence of a central source of information will be one of the drivers to wider adoption that will also remove this as a competitive issue. The information is being used by one consumer, but contributed by many, and no institution is going to want to not be one of the many, though there is no motivation to be the only one on MyStandards, he adds. Broadway says that this is already the case in other areas. In the securities world it is a many-to-many relationship between institutions. You can compete on services, but the way you want information to ow is to everyone each institution, such as a custodian or an investment manager, is connected to many counterparties, and the more standardised the messages are between them, the better for everyone. Delbaere says that the diversity of the industry was something that SWIFT was aware of right at the beginning. When we started, we realised we were looking at a very diverse environment, and there would be dierent needs as dierent business areas were dealing with standards in very dierent ways. At the end, when you abstract it, the fundamental problems are all the same. Can you describe what you are doing today? Thats not easy, and everyone does it dierently, so just providing that capability is helpful, he says. From a product point of view, what do people care about? They care about what they do today, and what the drivers for change are, and that is what we started with. Best practice groups are one way to address these needs but the other way is just to create a community, says Cofer. MyStandards is very good at taking one part of the process and uploading it, which is the

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You cant compliment the interactive nature and visual presentation of MyStandards enough. Theres just nothing like it.
Stew Cofer, JP Morgan My part of MyStandards. But you will only get more engagement where people have an input on the reasons for the changes. Cofer divides the potential users of MyStandards into three groups. The rst are those who consume the standards that already exist and we have seen immediate value from that: instead of looking at a handbook, we interact with a click and see the standards instead of digging through user handbooks, he says. The second group are those who are adding their information; contributors such as large institutions, market practice groups, and SWIFT itself. Cofer says there are challenges here as you are see actual use and interpretation versus the standards in the cold light of day. The third group, the wider community can examine the dynamic that exists between standards and interpretations. It allows them to understand what one institution does in relationship to a standard as opposed to another institution or how one market behaves dierently than another from the same base standard, he said. Previously, when a multi-banked client wanted one way of doing things with all of its banks, they often chose to meeting with all of their banking providers at once to realise their goal; in-person, real-time co-opetition. With MyStandards youd have the results of that meeting on your screen without the meeting at all. Delbaere agrees: It also allows you to say: this is what we do today and if you want to communicate with us you have to do it like this. As a community we can evolve standard practices over time. We see it as a way of bridging the gap between all of the organisations dening standards and usage (typically the big nancial institutions, market practice groups and market infrastructures) and the ones that need to consume these specications eciently. For Broadway, the ability to extract data in consistent format is a plus. It allows you to pull the information out in a format that you can distribute in a way that suits you for that particular purpose, he says. We used to compare national market practices manually in spreadsheets, lining up the countries and doing a gap analysis manually but in MyStandards you can pulls them up together and in 10 seconds or whatever, it will do the analysis for you. Cofer is equally enthusiastic about this functionality. The export of XML schemas that we can get is very useful, he says. Only recently were we able to pull up schemas and, with the help of Swift, put them into one of several formats that our clients might prefer. We communicate today using spreadsheets and PDFs, but our creation time is much shorter using MyStandards. And lets not forget that a JPMorgan MyStandards spec is then in the same format as one of our competitors MyStandards specs. Its all about consistency for our clients when we know they have other providers. In terms of large-scale deployment, Cofer says there remain questions for a large organisation in terms of the administration that will be required and in terms of the boundaries of who can see what, but he says that if history teaches us anything, it is that people will move on with this and administration will become a focus after key requirements are met. Delbaere says that SWIFT has been addressing this. It is a dicult problem, he says. We have tried to keep administration and privacy features as simple as possible but I am sure we will continue to get requirements in this area. The boundaries issue goes to the heart of the matter, it is at heart a system for sharing information. We have to be happy about what we are sharing, and perhaps even more important is a grasp on and control of who sees what we share, says Cofer For us, the MyStandards push is really about what it can do for our clients. Often when a client moves into the standards space for banking, there is a natural knowledge exchange between that client and their experienced provider(s). We signed up for the pilot as we believed it would aid this conversation, provided MyStandards was executed properly. He elaborates on this theme. Largely what MyStandards is enabling and again we are pushing the client benet is that the people uploading market practices are part of the same community as people who are consuming them. The challenge is still business applicability so the consumers can put the standards into practice in an easily understood, consistent manner. Even though this is a role SWIFT cant play, they have provided a fantastic platform to advance and simplify the conversation. With the launch of MyStandards this month, SWIFT is introducing a powerful tool that has a number of roles to play in the future harmonisation of the industry, while also improving eciency and reducing costs for the users. It is clear from the pilot work that it also has a role to play in the relationships between nancial institutions. But it is also just the beginning: as the contributors to this article have pointed out, there is still work to be done in populating and validating the service, and in drawing in the wider community. As a cloud-based service, MyStandards will always have one production version, as it were, but it will continue to evolve to become still better, says Delbaere. We will continue to develop in the same mode, iteratively and interactively. We have monthly checkpoints with users to determine where we are and where we can go. We expect that to turn into a sort of user group to drive it forward. From my point of view it is very important to continue doing it as we have with the pilots, because that has been one of the success factors of the initiative.

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