SWIFT for Investment Managers. End-to-end solutions for asset management and funds business processes

Transcription

1 End-to-end solutions for asset management and funds business processes

2 Table of contents Section Introduction Section SWIFT s value proposition for investment managers Section Business areas of an investment manager and SWIFT s solutions Section Initiatives and solutions Section Value added services: applications Section Standards and industry guidance Section Messaging Section Connectivity Section Service Section About SWIFT Appendix A. Details of standardised messaging B.What is in it for you? Calculating your business case for SWIFT C. Roadmap by Asset class and business function 177 D. Glossary Index

3 Asset Class Translation cycle Equities, FI Forex Money Markets Listed derivatives OTC derivatives Commodities Repos Syndicated Loans Cash Pre-trade / trade Post-trade / presettlement Trading (FIX and FIN) 27 Trade confirms Trade notification Trade Capture New! 66 Trade confirms Trade notification, Affirmation Trade confirms Trade notification, Affirmation Pre-settlement matching Trading (FIX and FIN) 27 Trade confirms Trade notification 29 Trade confirms Trade notification (FIN+FpML), Trade confirms Trade confirms Affirmation and and 67 Credit agreement (FpML) 33 Clearing & Settlement Settlement & Recon 39 and 42 Allocation processing as well as confirmation matching, SSI - New! Settlement & Recon CLS 3rd Party service Settlement & Recon Settlement & Recon (FIN+FpML) and and 67 Settlement & Recon 39 Settlement & Recon 39 Payments 50 Cash management Asset servicing & administration Portfolio Administration Collateral management Cash Reporting 52 Data distribution 44 Cash Settlement Cash Reporting Cash Settlement Cash Reporting Data distribution 44 Cash Reporting Cash Reporting Cash Reporting Cash Reporting Corporate Actions Corporate Actions (Corporate Actions) Proxy voting 47 Securities Financing Securities Financing New! 69 Transaction Regulatory Reporting Reporting Transaction Reporting Total Portfolio Valuation (TPV) - New! Collateral Management Collateral Management - New! Portfolio reconciliation - New! 59 Transaction Reporting Transaction Reporting 59 Securities Financing New! 69 Agent notices (FpML) Exception Management and Planned solutions Available solutions The numbers refer to the page number in this binder

4 1 Dear investment manager, You are at the forefront of every securities transaction. Multiple communication flows, many counterparties, a wide range of asset classes and continuously increasing volumes are putting a strain on your business environment and increasing operational risk. By using SWIFT you benefit from secure and resilient electronic messaging, gaining access to a single, low cost way of communicating with all your counterparties. You also participate in the creation of industry standards and market practices. Leveraging SWIFT enables you to automate your processing environment by supporting straight-through processing for internal and external communication. Automation with SWIFT enables you to achieve three key benefits: Gain competitive advantage Improve risk control Improve your bottom line In the following pages, you will find a description of how these benefits can be realised: the SWIFT value proposition for your institution. We know that every investment manager is different, so we will work with you to determine how SWIFT can best help you achieve these benefits. This book is designed to let you know why one of SWIFT s investment manager clients has said: SWIFT has really changed the business. Please contact us to discuss how your institution can best benefit from SWIFT. Yours faithfully, The SWIFT Markets team If you also manage hedge funds, a specific value proposition is available to complement this document.

5 Section 1 Introduction The scalability we get through SWIFT automation is huge. We would not have been able to support our growth and stay in this business without it. Investment Manager on SWIFT

6 3 1 Executive summary The SWIFT guide for Investment Managers (IMs) is designed to provide existing and potential users with an overview of our product and service offering. This guide focuses on IMs, highlighting their specific business needs and requirements, and offers suggestions of ways in which IMs can use SWIFT to gain operational efficiencies, improve STP and reduce risks and costs. 1.1 Investment Manager (IM) The term IM within this guide also applies to asset managers, fund managers, portfolio managers and hedge funds managers. 1.2 SWIFT SWIFT is an industry-owned co-operative supplying secure, standardised messaging services and connectivity to more than 8,700 financial institutions in 209 markets. Collectively, these institutions, active in payments, securities (equities, fixed income and derivatives), treasury (foreign exchange, money markets and derivatives) and trade services markets, exchange millions of messages valued in trillions of dollars every business day. SWIFT consistently delivers quantifiable value and proven technical excellence to its users through its comprehensive messaging standards, the security, reliability and availability of its messaging platform and its role in advancing STP. 1.3 SWIFT in the investment management market Over the course of our history, more and more securities institutions have joined SWIFT. Today, investment managers, broker/dealers, custodians, securities depositories, clearing organisations, exchanges, central counterparties, matching utilities, electronic trade confirmation providers, proxy voting service providers, distributors, transfer agents and fund administrators, rely on SWIFT to reduce the complexity, risk and cost of their domestic and international transactions. SWIFT facilitates standardised communications and processing at all levels of the lifecycle: for equities, fixed income, OTC and listed derivatives, FX and money markets, commodities, repos, syndicated loans and investment funds transactions. from trade order through to settlement and asset servicing, including payment, portfolio administration and cash management. SWIFT also facilitates standardised communication for securities financing and collateral management. For the purposes of this guide, an investment manager (IM) is defined as an institution responsible for making decisions to buy, hold or sell financial instruments. IMs include insurance companies, hedge fund managers and government institutions which also have this responsibility

7 4 SWIFT s support for asset management and investment funds processing lifecycles Payments, Cash Management, Asset Servicing... Collateral Management Payments Portfolio Administration Cash Management Asset Servicing Regulatory reporting Reconciliation Account Management Funds processing Asset Classes covered: equities, fixed income, forex, money markets, cash, listed derivatives, commodities, OTC derivatives, repos, syndicated loans Funds covered: investment, money market, hedge funds, alternative funds and pension funds. SWIFT messages, based on ISO standards, provide enhanced straight-through processing and risk management in a consistent, coherent and uniform way. New messages are being designed in XML for use on SWIFTNet, our advanced IP-based messaging platform. SWIFT s priority is to drive standards convergence of alternative messaging protocols, the ISO business models, and harmonise market practices to enhance STP at an industry level.

8 5 1.4 Investment managers needs and how SWIFT can help Introduction Gain competitive advantage Improve your bottom line Mitigate risk Investment managers are dealing with an expanding range of asset types, a growing number of counterparties and escalating transaction volumes. They are also carrying an increased risk and compliance burden. There is a need to deploy innovative investment strategies to compete but also to control operational risks and costs, and ensure scalability, perhaps through operational outsourcing. SWIFT can help investment managers meet these challenges by providing a single, low cost way of communicating across all counterparties - including broker/dealers, custodians and fund distributors - in an automated way, and supporting a large range of asset classes across the funds, equity, fixed income and alternative spaces. Leveraging SWIFT s services enables an investment manager to eliminate costly and error-prone manual processes and multiple communications protocols, and to increase international reach. As new regulation such as MiFID and Basel II impacts operating and investment practices, SWIFT s solutions for collateral and risk exposure management and standards for transaction reporting can help investment managers cope with regulatory and compliance demands in a cost-effective way.

9 6 By automating the operations processes, operations staff can focus on more challenging tasks. Job satisfaction increases and staff turnover drops. Investment Manager on SWIFT Operational efficiency Business drivers Market needs How SWIFT can help High straight through processing (STP) rates are expected, and scalable processing platforms are becoming crucial to support growth. The obligation to reduce costs must also be met. There is a need to reduce fax and other proprietary communications and to achieve high STP rates. This drives a need for scalable processing platforms to support growth. SWIFT offers standards for the entire lifecycle of a transaction to eliminate costs associated with supporting multiple formats and connections to clients, service providers and peers across products. Risk management and compliance Business drivers Market needs How SWIFT can help Risk management and compliance have become a critical part of your core business as regulation drives new operating and investment practices. To cope with a shift of business emphasis towards derivatives products, handle the additional burden of new regulations and reporting requirements, and make management of exposure across asset classes a priority. By providing a consistent industry solution for collateral and risk exposure management and standards for transaction reporting and regulatory compliance. New instruments and more counterparts Business drivers Market needs How SWIFT can help You are investing more widely in derivatives and exotic financial products. You are also interacting with an ever-more diverse community of counterparts, many of which you have not directly chosen to have business relationships with, but which have been acquired as counterparts as a result of investment mandates you have won. Your back office needs to become more flexible to handle new, more complex, asset classes. Time to market becomes a critical element in order to ensure you are supporting the competitive needs of your front office. SWIFT supports a broad range of asset classes across equity, fixed income and alternative investments and provides connectivity to a wide array of counterparties for standardised messaging.

10 7 Operational outsourcing Business drivers Market needs How SWIFT can help Focus on your specific areas of expertise and reduce your operational costs by outsourcing areas of the business that fall outside your core competencies to specialised providers. Accurate, timely and consistent reporting becomes crucial in order to maximise the benefits of the outsourcing. We can ensure consistency of communication connectivity and messaging standards to all counterparts. This enables maximum efficiency, reduced risk and optimum timeliness of information. Data management and reporting requirements Business drivers Market needs How SWIFT can help You are required to prove best execution in response to regulation imposing new levels of transparency on the market, so you need a solid strategy for managing the variety of data you handle, including client and counterparty data and market data. To prevent further proliferation of isolated databases and ensure a seamless integration of different data sources as a prerequisite for efficient risk management and operational efficiency. To improve consistency of data. Standardised messaging ensures the consistency in data management which can readily be provided directly to regulators.

11 8 1.5 The Value of SWIFT to Investment Managers SWIFT s portfolio allows industry players to automate their business processes and communications, thereby achieving STP. The true benefits of automation and STP to IMs are lower costs and lower risks. Through SWIFT, IMs are able to conduct their business in a value for money, secure, standardised and automated fashion. Provide solutions: Whether your business is payments, treasury, trade or securities; whether you work for a small local brokerage or a global multi-service bank; SWIFT enables you to automate and standardise your transactions end-to-end. Our solutions can help lower your costs, mitigate your risk and increase your service levels. Refer to section 3 New initiatives: SWIFT is continuously working with the industry to understand the need of its customers and enhance or develop new solutions accordingly. Refer to section 4 Provide applications: Whether provided by SWIFT or a third party, your SWIFT connection offers access to a wealth of applications. 1. Accord Enabling real-time matching and exception handling for foreign exchange, money market and derivative confirmations. 2. Affirmation application. 3. Industry applications Banking Market Infrastructures: In payments, more than 60 clearing systems, carrying from 500 to over 300,000 payments a day, rely on SWIFT for the secure messaging connectivity and common message standards essential to their smooth operation. Securities Market Infrastructures: Today, SWIFT is the messaging hub for many clearing and settlement systems in payments, securities, foreign exchange and derivatives. Refer to section 5 Facilitate standards and market practice: in co-operation with the securities, payments and treasury industries, facilitate the development of standards and practices used in the aforementioned messaging. Refer to section 6

12 9 Provide messaging: allowing IMs and their counterparties to automate the delivery and receipt of information required to conduct their business, ranging from equity trade execution and settlement through to foreign exchange and money movements. Refer to section 7 Provide connectivity: allowing IMs and their counterparties (e.g. Broker / Dealers, Custodians, Electronic Trade Confirmation Providers, Banks, (International) Central Securities Depositories, Transfer Agents, Fund Administrators and others) to communicate with each other over a single network. Refer to section 8 Provide services: Partner programme As a SWIFT customer, how can you be sure that you are buying a solution from a third-party supplier that is compliant with SWIFT? How do you choose a company to help you with your SWIFT-related integration, implementation and training and be certain that they have the expertise to perform the job? SWIFT s certification programmes and partnerships help you to answer these questions. Business Assessment programme The Business Assessment Programme provides dedicated teams of experienced consultants to analyse your business flows or your infrastructure, or both. Their recommendations help you reduce your total cost of ownership, lower your operational and reputational risk and identify opportunities for business growth. Industry initiatives SWIFT supports the community by contributing to various industry-wide initiatives that are key to investment managers. These include: Giovannini Barriers. In its 2003 report, the Giovannini Group, as advisor to the European Commission, published a report identifying 15 barriers to efficient EU cross-border clearing and settlement. The Giovannini Group, under the chairmanship of Dr. Alberto Giovannini, CEO of Unifortune SGR SpA, stated that SWIFT, through the Securities Market Practice Group (SMPG), should define a solution to eliminate Barrier 1, which cites national differences in information technology and interfaces used by clearing and settlement providers MiFID. The Markets in Financial Instruments Directive (MiFID or Directive 2004/39/EC) was implemented on 1 November MiFID gives investment firms an effective single passport, allowing them to operate throughout the EU on the basis of authorisation in their home Member State. MiFID s objective is to remove crossborder trading barriers and increase competition, leading to the creation of a single market in investment services throughout the EU. MiFID will have an impact on the trading of all asset classes including cash equities, fixed income and derivatives. The financial institutions that are directly impacted are investment managers (when providing portfolio management services collective investment schemes are out of scope), stock exchanges and broker/dealers. SWIFT analysed the impact of MiFID on the relevant ISO and ISO financial message standards that it supports. The resulting changes are now available for use. Refer to section 9

13 Section 2 SWIFT s value proposition for investment managers

14 11 2 SWIFT s value proposition for investment managers Gain competitive advantage By relieving operational burden, SWIFT allows investment managers to focus on their core business of performance. Because SWIFT s solutions for investment managers span multiple asset classes and provide reach to counterparts globally, SWIFT also enables investment managers to pursue innovative investment strategies, while effectively managing risk, in order to maximise gains. Improve risk control SWIFT enables investment managers to achieve higher rates of STP directly reducing operational risk. SWIFT also supports investment managers in improving operational processes around higher-risk instruments, and in achieving compliance with regulations i.e. meeting more stringent requirements through improvement of STP. Improve your bottom line SWIFT supports investment managers in improving STP. This empowers investment managers to maximise their profitability by reducing their operational costs. Gain competitive advantage Improve operational efficiency We started using SWIFT about a year ago. Efficiency-wise it has been unbelievable. Now we are able to reach about 90% straight through processing (STP) for outgoing messages. Investment manager using SWIFT Increase automation and STP SWIFT provides a single communication platform enabling seamless integration across your front, middle and back-office systems + Reduce risk and cost Automation via SWIFT leads to a reduction in manual processing, errors and failed trades. This reduces risk and cost + Improve operational control Automation enables you to focus on exception processing. Problems that do arise are identified and can be acted upon immediately. The result is an improvement in operational control. A benefit of automation is facilitated management of internal and external regulatory compliance = Increased operational efficiency

15 12 Gain competitive advantage Reduce cost and time to market Before we had SWIFT, we had proprietary terminals all over the place. Staff needed to be trained on all the different systems and data was rekeyed all day long. Now, we simply have one system. Investment manager using SWIFT Improve scalability By automating your business processing environment, through the use of message standards and a single method of communication, you will reduce the impact of volatility in transaction volumes. Automation provides you with a scalable processing environment. + Increase reusability SWIFT messages enable standardisation across all asset classes, even alternatives. With SWIFT you can communicate with all your counterparties (8,500 institutions in 209 markets) SWIFT s solutions can be reused as you expand your business focus into new and different areas. + Reduce cost and time New business expansion is easily undertaken in an automated environment. This is due to reduced costs and time needed to bring new business products to market. = Reduced cost and time to market

16 13 Gain competitive advantage Improve customer service If we were to report everything over fax, we would probably need twice as many people to do this. We have increased our traffic tenfold without really increasing the headcount. Investment manager using SWIFT Increase service monitoring An increase in the automation of your processing environment allows you to focus on exception processing. This provides you with the opportunity to increase the monitoring of the transactions you carry out on behalf of your clients. You will be able to improve your reporting on positions and activity to your clients. + Reduce errors and An automated environment reduces the risk of manual processing errors and you will discover errors that do occur much sooner. You will be in a better position to provide problem resolution to customers. Ultimately, the quantity and associated cost of errors and failed trades will be reduced. + Reduce cost and time With a higher level of service monitoring and a reduction in errors and failed trades, you will be better able to focus on your customers investment needs. = Improved customer service

17 14 Improve risk control Reduce processing risks Without SWIFT, we would certainly need to double the number of operations staff and maybe even more. Fluctuations in the business cycles would cause problems because we would have to pull in temporary staff. This would increase the risk and further reduce efficiency. Investment manager using SWIFT Reduce misinterpretation The use of standards to exchange information ensures that you talk to your counterparties in one language. This reduces the potential for misinterpreting information through translation issues and rekeying errors. + Assured communication By using SWIFT as a communication channel, you are assured of the identity of the sender of the information as all messages are authenticated. You are also assured that information you have sent to your counterparties has been safely received because delivery is guaranteed. + Reduce errors and failed trades Automating the exchange of information with your counterparties eliminates the possibility of rekeying errors and misinterpreting trade details. = Reduced processing risks This reduces the risk of errors and failed trades

18 15 Improve risk control Reduce operational uncertainties Security and reliability are the cornerstones of SWIFT. They will always remain SWIFT s key values. SWIFT Board Member Increase resilience With a resilient communication platform, you can conduct your business in the certainty that you will always be able to communicate with your counterparties, as and when required. + Increase control and compliance Automation, reach, trust of sender and guaranteed delivery mean that you are in control of your operational and processing environments. + Assured settlement Automating the communication flow with your counterparties eliminates errors and the risk of misinterpreting transaction details. You and your clients can be assured of the settlement of transactions. = Reduced operational uncertainties

19 16 Improve risk control Reduce capital requirements Operational risk is the risk resulting from inadequate or failed internal processes, people and systems or from external events. Basel II Increase security and resilience Conduct your business with certainty that you can communicate with your counterparties, as and when required. The SWIFT network is highly secure and trusted, and is used by major financial institutions in 209 markets around the world. + Reduce operational risk A controlled processing environment with the right level of security will contribute to reducing your operational risk. + Lower reserve requirements The Basel II framework will impact a significant number of financial institutions. For those affected, reducing your operational risk by using the most secure messaging infrastructure will enable you to lower your capital reserve requirements when using advanced measurement approaches. = Reduced capital requirements

20 17 Improve your bottom line Reduce processing costs The SWIFT model allows for better cost control and financial predictability over competitive networks. Investment manager using SWIFT Increase standardisation The use of message standards ensures that you talk to your counterparties in one language. Standardisation is the first logical step to take if you want to automate communication flows. + Simplify communication Using standardised electronic communication and a single communication channel, your flows will be greatly simplified, leading to efficiency gains and ultimately a reduction in overall processing costs. + Increase automation Increased automation allows you to focus on exception processing, and ultimately, spend more time servicing your customers. = Reduced processing costs

21 18 Improve your bottom line Reduce the cost of change Our transaction volumes can vary significantly from one day to the next. However, the effort involved in generating our SWIFT based settlement instructions sent to custodians is very limited, given the high levels of automation we have achieved in this area. Investment manager using SWIFT Increase standardisation You can communicate with your counterparties in one language, using standards that cover the entire business process chain, including orders, instructions, reporting, corporate events, payments, foreign exchange and treasury. Standardisation gives you the means to safeguard your operational efficiency in an ever-changing environment. + Increase reusability With one communication platform and one set of message standards you can talk to all of your counterparties (including brokers, custodians, exchanges and central securities depositories). These message standards are suitable for multiple asset classes including equities, fixed income, investment funds, money market instruments, foreign exchange, derivatives and financial payments. This significantly lowers the cost of making changes to your operational and processing environments. + Increase scalability With increased business from new or existing clients, your volumes will increase. An automated processing environment reduces the impact of an increase in volumes, providing you with scalability. New business can be easily absorbed into your existing environment with minimal increase in cost. = Reduced cost of change

22 19 Improve your bottom line Reduce business expansion cost SWIFT is definitely a scalable solution. We could double our volumes without noticing. Investment manager using SWIFT Increase reach SWIFT is used by more than 8,500 financial institutions (including investment managers, broker/dealers, custodians, banks, securities depositories, exchanges, fund administrators and market data providers), in 209 markets. This extensive reach enables you to communicate with your counterparties in a secure, low cost and automated way, 24 hours a day, 7 days a week. + Increase reusability You can reduce cost and complexity through automated communication with multiple counterparties across multiple asset classes by using one communication platform and one set of message standards. Reusing your operations and processing environment significantly lowers the cost of expanding your business. + Increase scalability Automation provides you with a scalable processing environment, meaning you can easily absorb new business into your existing environment. You can focus your attention on what really matters: growing your business and providing excellent customer service. = Reduced business expansion cost

23 Section 3 Business areas of an investment manager and SWIFT s solutions The cost of SWIFT is insignificant compared to the cost of other more manual messaging means. Investment Manager on SWIFT

24 21 3 Business areas of an investment manager and SWIFT s solutions 3.1 Overview IMs are typically involved from the very beginning of the traditional equities and fixed income transaction lifecycle (e.g. trading), through to settlement and custody related processes. Many of an IM s securities related business processes lead them to be involved in payment, foreign exchange, money market and derivative related functions. Additionally, IMs can also be involved in all aspects of investment funds distribution. Within this section the applicable SWIFT solutions for each business area are indicated in the SWIFT Solutions per business activity diagrams. The intention is to simply highlight what SWIFT solutions are available. This section also highlights (where applicable) the typical spaces (e.g. pre-trade / trade), players involved and flows between players for each of the business areas. Insurance

25 SWIFT solutions per business activities Within the investment management industry, there are nine main business activities covering pre-trade / trade to asset servicing, reporting and cash management. This chapter will provide a high level description of the SWIFT solutions per business activity: Pre-Trade / Trade Post-Trade / Pre-settlement Clearing and settlement Securities reporting Asset servicing Portfolio administration Payments and cash management Collateral Management Financing: securities lending and borrowing Regulatory reporting Pre-Trade /Trade IOI / Quotes Trade Trade execution, Pre-allocation FIN, FIX FIN, FIX FIN, FIX Equities, Fixed Income, Listed derivatives Equities, Fixed Income, Listed derivatives Equities, Fixed Income, Listed derivatives Post-Trade Pre-settement Trade Allocation FIN, FIX Trade affirmation, confirmation, notification and matching FIN, FIX, FpML Transaction reporting FIN, FIX, FpML Equities, Fixed Income, Listed derivatives FX, MM and FX options Syndicated Loans Commodities OTC Derivatives

26 23 Clearing and settlement Settlement instructions FIN Equities, Fixed income, Listed derivatives Settlement confirmation FIN Equities, Fixed income, Listed derivatives Securities reporting Statements of holdings FIN Equities, Fixed income, Listed derivatives Statements of pending settlements FIN Equities, Fixed income, Listed derivatives Statements of movements FIN Equities, Fixed income, Listed derivatives Asset servicing Data Distribution FIN Equities, Fixed Income, Listed derivatives Corporate Actions FIN Equities, Fixed Income, Listed derivatives Proxy Voting XML Equities, Fixed Income, Listed derivatives Cash management Payments initiation FIN, XML Cash Cash reporting FIN, FpML Cash Exceptions and investigation XML Cash