Asset Servicing Strategy for the CSD Community AMEDA

Asset Servicing Strategy for the CSD Community AMEDA Lut Buntinx Marrakech, 21 -23 October 2009

Contents • SWIFT’s Asset Servicing Strategy • Corporate Actions • STa. QS for Corporate Actions • ISO 20022 for Corporate Actions • Data Distribution • Proxy Voting Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 2

Developing an Asset Servicing Strategy Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 3

Standardising and automating asset servicing: drivers, challenges and solutions • Why standardise and automate asset servicing? – Meet increased requirement for better corporate governance and operational risk management – Address staffing challenges – Align with clearing and settlement harmonisation efforts • What are the challenges? – Inconsistent data quality leads to interpretation risk – Lack of automation, manual processing dependency create operational risk – Complexity of cross-border processing adds costs and risks • What are the solutions? – Standards, market practices and tools supporting automation Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 4

SWIFT’s new asset servicing strategy – targeting the major painpoints • Our asset servicing customers feel the most pain in the areas of corporate actions and corporate actions related reference data. • There is also a need for efficiency improvements in the area of meeting services (proxy voting) and tax services • Consultation with our members has convinced us that we are ideally positioned to take the lead and drive resolution of these issues Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 5

SWIFT’s new asset servicing strategy – key goals • We aim to: • Replace text with data standards • Enforce and support market practices • Increase automation and use of standards • We will: – Work with issuers and agents to standardize and automate the announcement process – Work jointly with large infrastructures to move from proprietary to ISO standards, including ISO 20022 – Support the adoption of a Corporate Actions unique identifier – Support ISO 20022 implementation and coexistence with ISO 15022. – Develop easy access to SWIFT for smaller cients (e. g. , LITE) – Standardise tax processes and engage tax authorities – Improve transparency and efficiency of shareholders meeting services and proxy voting processes Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 6

SWIFT’s new asset servicing strategy – plan of action • Identify key milestones for each action to facilitate progress review • Prepare detailed roll-out plans: action, deliverables, milestones, community, involvement of industry groups (SMPG, ISMAG, ISSA) • Complete roadmap by December 2009 • Start executing! Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 7

Corporate Actions Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 8

Adoption continues to grow for CA messages Monthly Traffic Evolution – MT 56 x messages sent Scalability to handle peak flow is a growing concern YEAR msg %change 2008 2007 2006 2005 2004 2003 2002 2001 74 M 14. 3% 65 M 21% 53 M 18% 45 M 26% 35 M 18% 30 M 22% 25 M 36% 18 M 2009 traffic growth YTD is about 7% in spite of flat or negative growth in other messaging Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 9

The risks associated with corporate actions are very high and although this is not a new issue for the industry, more and more participants are realising the need to address these risks as a matter of urgency. Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 10

A corporate action transaction can last for months, with significant risks Host System not Updated No Notification from counterpart Positions not protected Pre-Decision Processing (Pre) Notification Record Date? or this Record Date? Research Trading shares not available Missed Deadlines Ex Date Post-Decision Processing Instruction Deadline Decision Deadline Acceptance Registration Stock Available Unconditional Pari Passu Decision Processing Incorrect Information No Diary Entry Positions Disagree Position Taken Late Host system(s) not updated/updated incorrectly Trading shares not Incorrect decision owned applied Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 Courtesy Checkfree & Celent 11

SWIFT is working with the industry to address their needs for Corporate Actions Challenges Drivers • Significant shortfall in message quality and market practice compliance • Minimise risks/ reduce losses • Limitations of software vendor solutions • Comply with regulatory requirements • Difficult business case – management buy-in for improvement projects • Improve customer service • Enhance operational efficiency • Reduce costs • Maximise portfolio performance • Achieve scalability The Drive for STP • Standards • Market practice and tools Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 • Best practices 12

Working with partners to help ensure quality software capability for corporate actions “As firms seek to reduce risk from corporate actions, expect to see more emphasis and funding given to solutions that are able to increase productivity and reduce risk. ” ~Phillip R. Silitschanu, Aite Group • Four SWIFTReady applications products demonstrated compliance with market practices and got rewarded in 2009: Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 13

STa. QS for Corporate Actions Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 14

STa. QS for Corporate Actions • Simulation Testing and Qualification Service (STa. QS) • Tests MT 564 Notification and MT 566 Confirmation messages for compliance to market practice … a health check for Corporate Actions messages • What can you do with this service? – – Measure conformance Identify improvement areas Benchmark progress Improve counterparty automation Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 15

Benefits & status – STa. QS for CA • Benefits of STa. QS for Corporate Actions – Addresses biggest community-wide issue: formatting of notifications and compliance to market practice – Improves consistency, boosts STP via ad hoc testing, self-policing – Consistency in market practice prepares for the process of migration to, and translation with, ISO 20022 messages for CA • Version 2. 3 features – EIG 2009; Dv. E data element test ahead of SR 2010 enforcement – New detailed Error Report, support for multi-listed securities • Pricing – Parent BIC level annual subscription, 2 to 16 KEUR per traffic tier • Future – alignment with SMPG, easier use, instruction testing Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 16

ISO 20022 for Corporate Actions Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 17

What is driving the move to ISO 20022? • New initiatives – Global harmonisation – Giovannini (barrier one) and SEPA in Europe – Market infrastructures – Automation in the ‘funds’ market • New players – Corporates, fund managers • New technology – XML, SOA, web services • www. iso 20022. org Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 18

Advantages of ISO 20022 over ISO 15022 • Builds on the ISO 15022 data dictionary concept and registration infrastructure, but strengthens the monitoring by the industry • Uses a more robust, syntax independent development methodology based on UML modelling of business processes and transactions (business modelling) • Uses XML as the syntax for the actual physical messages (Many current ISO 15022 users are requesting ISO 20022 XML equivalent messages because their communication interface is already XML based. ) • Has a wider scope than ISO 15022 which is for securities only • Allows for extension mechanism to include market specifics Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 19

Data Distribution Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 20

The Event Notification Dilemma • Different data formats, communication means & Data Providers’ release schedules • Operational Staff to maintain systems and software • Headcount for data discrepancies resolution • Manual checking of inconsistencies • Risk of misinterpretation or misskeying Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 21

The Market Data Provider Landscape Quality securities reference data • Data Distribution Solution – FIN or File. Act – Securities Market Data Providers (SMDP) • Interactive Data, Telekurs, and WM Datenservice, Fidelity Actions. Xchange • London Stock Exchange, Singapore Stock Exchange, Australian Stock Exchange, Canadian Depository, KSEI (Indonesia), Bombay Stock Exchange and DTCC Global Corporate Actions Validation Service (GCA VS) – Types of information • Corporate Actions (ISO 15022), Pricing, Reference Data, Indices, Foreign Exchange, Proxy voting material, Tax rates, Prospectus – Market Data Provider User Group (MDPUG) – Providers agree to compliance with MDPUG principals and SMPG guidelines Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 22

SWIFT Data Distribution How can the subscribers benefit? • Enables STP through ISO 15022 standards • Centralises maintenance of data feeds • Minimises risk and compliance concerns; secure, reliable delivery • Defines mandatory roles & responsibilities; SWIFT Service Description • Enables flexibility in obtaining feeds from different providers • Reduces manual data normalisation • Simplifies resolution of any data issues Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 23

SWIFT Proxy V oting Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 24

ISO 20022 Proxy Messages Providing a higher level of automation and efficiency • ISO 20022 Proxy Voting messages will standardise and automate the proxy voting process, reducing risk, increasing voting levels, and strengthening regulatory compliance capabilities. • Minimise risks associated with errors • Reduce costs and errors due to less manual intervention • Streamline and standardise deadlines • Help eliminate ‘under’/’over’ voting with increased precision in vote execution • Accommodate funds voting Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 • • Maintain audit trails Provide transparency Increase voting levels Comply with regulatory requirements • Integrate new customers/agents rapidly • Standardise with ISO 20022 messaging 25

Current Status of SWIFT Proxy Voting • • • Available in Live & Test/Pilot environments New Release 1. 1 available for testing 24 July, Live Nov. 2009 Smart Test Messages available Strong Proxy Agent support Encouraging global cross-border and local market adoption Will support emerging regulatory attention in EU, UK, US and corporate governance concerns in Asia Pacific Third-party application vendors/partners demonstrating readiness to handle the ISO 20022 proxy voting messages No competing standard Allows for audit trail of all activity Promoting implementation with seasonal awareness Asset Servicing Solutions – AMEDA - Marrakech 21 -23 October 2009 26

Thank you