ISO 20022 Introduction to ISO 20022 Universal financial

ISO 20022 Introduction to ISO 20022 – Universal financial industry message scheme 1 ISO_20022_LV_v 184

Agenda § ISO 20022: § § § § § Value proposition The standard The actors The registration process The Repository ISO 20022 registration platform Cross industry harmonization Interoperability within the financial industry Q&A 2 ISO_20022_LV_v 184

The ISO 20022 value proposition (1/5) Objective To enable communication interoperability between financial institutions , their market infrastructures and their end-user communities Major obstacle Numerous overlapping standardization initiatives looking at XML financial messages: MDDL, FIX, Fin. XML, VRXML, RIXML, XBRL, Fp. ML, IFX, TWIST, Rosetta. Net, OAGi, ACORD, etc. 3 ISO_20022_LV_v 184

The ISO 20022 value proposition (2/5) Proposed solution A single standardisation approach (methodology, process, repository) to be used by all financial standards initiatives ISO 20022 4 ISO_20022_LV_v 184

The ISO 20022 value proposition (3/5) Convergence into ONE standard is the long term objective… … but in the interim several standards need to coexist to enable quick response to competitive pressures and regulatory demands 5 ISO_20022_LV_v 184

The ISO 20022 value proposition (4/5) Growth adds exponential complexity and expense… EDIFACT IFX OAGi TWIST Rosetta. Net Without common building blocks: SWIFT § Point-to-point connection § Data is mapped directly from one application to another Proprietary § Costly, unsalable and difficult format to implement and maintain § Process, routing, rules logic needs to be coded to specific message types 42 interfaces = n * (n-1) 6 ISO_20022_LV_v 184 Source: John Mersberg, IBM Corporation

The ISO 20022 value proposition (5/5) Standardized implementation reduces cost, time to effect change and improves overall performance… Rosetta. Net EDIFACT IFX OAGi TWIST Canonical message model = § True process integration SWIFT § Reduced brittleness, faster to respond to change Canonical Proprietary § Shared message services – Message Model format single/shared parser, message (i. e. ISO 20022) independent rules engine, etc. § Unified monitoring / audit trail 14 interfaces = n * 2 ISO aims at long term convergence, while facilitating short term coexistence… 7 ISO_20022_LV_v 184

ISO 20022 Illustrating business modelling Date nt u Acco All institutions have their own sets of data objects r Orde r Date Orde Date ISO standardizes common data objects… …and groups them into ‘syntaxneutral’ message models, which. . . … can be ‘transformed’ in message formats in the desired syntax ASN. 1 XML ISO 15022 FIX ISO_20022_LV_v 184 8

The ISO 20022 recipe Main ingredients (1/2) § Modelling-based standards development § Syntax-independent business standard § Validated by the industry § Syntax-specific design rules for XML and ASN. 1 § Predictable and ‘automatable’ § Protect standard from technology evolution § Reverse engineering approach § Protect industry investment and ease interoperability § Prepare for future migration 9 ISO_20022_LV_v 184

The ISO 20022 recipe Main ingredients (2/2) § Development / registration process § Clearly identified activities and roles § Business experts and future users involved upfront § Technical experts involved when required § Repository on the ISO 20022 website § Business Process Catalogue & Data Dictionary § Outside of official standard (maintained by registration bodies) www. iso 20022. org 10 ISO_20022_LV_v 184

The eight parts of ISO 20022 Part 1: Metamodel Part 2: UML profile Part 3: Modelling Part 4: XML schema generation Part 5: Reverse engineering Part 6: Message transport characteristics Part 7: Registration Part 8: ASN. 1 generation Copies can be obtained from www. iso. org 11 ISO_20022_LV_v 184

ISO 20022: The actors (1/3) Submitting organizations Communities of users or organizations that want to develop ISO 20022 compliant messages to support their financial transactions Could be ANBIMA ASF ASX Banco de España Bank of England Banque de France Banca d’Italia Berlin Group BIAN CBI Consortium CFETS CFTC China Union. Pay Clearstream CLS Danish Bankers Association ISO_20022_LV_v 184 Deutsche Bundesbank DTCC Early Warning Services EPC ESMA Euroclear European Central Bank FED FFI FISD FPL Fp. ML IFX Forum ISITC nexo A. I. S. B. L. OAGi Omgeo Payments UK PBOC RU-CMPG SABS SMPG SPRING SWIFT Target TC 68/SC 7/TG 1 Tieto Corporation TWIST T 2 S UN/CEFACT etc. 12

ISO 20022: The actors (2/3) § Registration Management Group, RMG § Overall governance, court of appeal § Approve business justifications for new message standards § Approve new member entities § Create Standard Evaluation Groups (SEGs) and Sub. SEGs § Standards Evaluation Groups, SEGs and Sub. SEGs § Represent future users in specific financial areas § Validate new candidate messages and change requests 13 ISO_20022_LV_v 184

ISO 20022: The actors (3/3) § Registration Authority, RA § Ensure compliance § Maintain and publish ISO 20022 Repository § Technical Support Group, TSG § Assist RMG, SEGs, RA and submitting organisations 14 ISO_20022_LV_v 184

ISO 20022 The registration process (1/3) R M G m o n i t o r s Submitting organisation Financial industry group or standards body Business justification RMG Submitting organisation & RA SEG RA Submitting organisation & users Project approval & allocation to a SEG Development & provisional registration Business validation Official registration and publication Repository Dictionary Catalogue Optional pilot testing or first implementers www. iso 20022. org 15 ISO_20022_LV_v 184

ISO 20022 The registration process (2/3) R M G m o n i t o r s Submitting organisation Financial industry group or standards body Business justification RMG Submitting organisation & RA Project approval & allocation to a SEG Candidate ISO 20022 messages Development & provisional registration SEG Business validation RA Official registration and publication Submitting organisation & users Optional pilot testing or first implementers ISO 20022 messages Repository Dictionary Catalogue www. iso 20022. org 16 ISO_20022_LV_v 184

ISO 20022 registration process (3/3) Yearly maintenance process Timing By June 1 Users CRs SEG screens Change Requests (CRs) By July 7 By August 21 Submitting organisation By October 1 SEG By December 1 By February - May ISO_20022_LV_v 184 Users introduce Change Requests to the RA Submitting organisation & RA SEG RA Submitting organisation & users Submitting organisation prepares ‘Maintenance Change Request’ with each CR implementation SEG approval/rejection Development of candidate new versions Provisional publication Validation of new versions Registration and publication First implementers www. iso 20022. org 17

ISO 20022 - The Financial Repository § Data Dictionary § Business Concepts § Message Concepts § Data Types § Business Process Catalogue § Financial business process models § Financial business transactions, including messages § XML or ASN. 1 message schemas www. iso 20022. org 18 ISO_20022_LV_v 184

Continuing with today’s agenda… ISO 20022 Registration Platform 19 ISO_20022_LV_v 184

ISO 20022 - The Deployment § Approval of the international standard § Selection of the Registration Authority and set-up of the www. iso 20022. org § Creation of Registration Management Group § Creation of Standards Evaluation Groups § Registration and publication of first ‘ISO 20022 messages’ § Approval of a new edition of the international standard in 2013 Ongoing: promotion to developers (standardizers, industry bodies) and users (market infrastructures, end-users, vendors) 20 ISO_20022_LV_v 184

ISO 20022 Registration Management Group (RMG) § Members : § 21 countries: AT, AU, BR, CA, CH, CN, DE, DK, FI, FR, GB, IN, IT, JP, KR, NL, NO, SE, SG, US, ZA. § 18 organisations: ACTUS, Bank of England, CFTC, Clearstream, DTCC, ECB, EPC, Euroclear, FPL, ISDA/Fp. ML, ISITC, Master. Card, NACHA/IFX, nexo, OMG, SWIFT, Ripple. Net, VISA § Convenor: James Whittle (GB); Vice-convenor: Mike Tagai (JP); Secretary: David Heron (GB) § Meetings: twice a year § Key decisions: § Creation of six SEGs: Payments and Securities in 2005, Trade Services and Forex in 2006, Cards & Related Retail Financial Services in 2008, Derivatives Sub. SEG in 2016 § Approval of ISO 20022 message development projects § Approval of new ISO 20022 Member Entities 21 ISO_20022_LV_v 184

ISO 20022 – The Payments SEG (1/3) § Members: § 19 countries: AU, AT, BR, CA, CH, CN, DE, DK, FI, FR, GB, IT, JP, NL, NO, SE, SG, US, ZA § 10 organisations: Bank of England, ECB, Euroclear, ISITC, Master. Card, NACHA/IFX, nexo, STET, SWIFT, EBA Clearing § Convenor: Peter Hoogervorst (SG); Vice-convenors: Charlie Clarke/Neil Buchan; Secretary: Aurelie Steeno, SWIFT § Approved: C 2 B payment initiation (SWIFT/ISTH), Interbank credit transfers and direct debits (SWIFT, EPC), Exceptions and investigations (SWIFT), B 2 C cash management (SWIFT/ISTH), Mandates (SWIFT, SABS) , Change/verify account identification (GUF), Bank account management (SWIFT), Creditor payment activation request (CBI Consortium), Cash account reporting request and notification (SWIFT), Bank Services Billing (TWIST/SWIFT), Authorities financial investigations (FFI), Stand-alone remittance advice (IFX/OAGi), Cross-border Transactions Currency Control Reporting (RU-CMPG), Account switching (Payments UK), Cash management (SWIFT) § Under evaluation: EIPP (EPC) § Next: Payment pre-authorization (Early Warning Services), Proxy for bank account numbers (SPRING), EMIP (Deutsche Bundesbank, Banca D’Italia & SWIFT), Tracking Business Transactions (SWIFT), Cheques & Charges (SWIFT) 22 ISO_20022_LV_v 184

ISO 20022 – The Payments SEG (2/3) Covering instruments such as: Payments Covering actors such as: Credit transfers Cheques Direct debits Financial institutions Private & corporate customers Clearing houses & RTG systems Central banks 23 ISO_20022_LV_v 184

ISO 20022 – The Payments SEG (3/3) Including business areas such as: Clearing & settlement Payment initiation Communications between the ordering customer and its bank, etc. Payments Interbank transfers via correspondent banking or ACHs, high value payments, low value bulk payments, RTGS, etc. Cash Management between various actors: Account opening, standing orders, transaction and account information, advices & statements from … . . . the account servicing institutions to account owners, including reporting from the financial institution… …to the ordering & beneficiary customers, reconciliation, exceptions & investigations handling. 24 ISO_20022_LV_v 184

ISO 20022 – The Securities SEG (1/3) § Members: § § § 17 countries: AU, BR, CH, DE, DK, FI, FR, GB, IE, IT, JP, NL, NO, SE, SG, US, ZA § 10 organisations: ACTUS, CFTC, Clearstream, DTCC, ECB, Euroclear, FPL, ISITC, SWIFT Convenor: Axelle Wurmser (FR); Vice-convenor: Charles-Raymond Boniver, SWIFT; Secretary: Benoit Vandaele, SWIFT Approved: Investment funds (SWIFT), Proxy voting (SWIFT), Issuer’s agents communication (Euroclear), Corporate actions (SWIFT), Settlement & reconciliation (SWIFT), Post-trade (SWIFT/Omgeo), Total portfolio valuation report (ISITC, SWIFT), CCP Clearing (FPL, SWIFT), Collateral Management (FPL, Fp. ML, ISITC, SWIFT), Money Market Statistical Reporting (ECB/3 CB), Transparency of Holdings (Clearstream), SSI for Securities, Payments & FX (ISITC, Omgeo, FPL), Financial instruments and transactions regulatory reporting - Mi. FID II/Mi. FIR v 1 and v 2 (ESMA), CSDR-Settlement Internaliser Report (ESMA), Target 2 -Securities (SWIFT/4 CB), Securities Markets Regulatory Reporting – Benchmark Reporting (ESMA), Shareholder Identity Disclosure (SMPG/SWIFT), CCP supervisory reporting (Bo. E), Securities Financing Transactions Regulatory Reporting – SFTR (ESMA), CSDR (ESMA), Target 2 -Securities (SWIFT/4 CB), Mi. FID II/Mi. FIR Fast-track (ESMA) Under evaluation: CSDR Buy In Reporting (KDPW/SWIFT) Next: ASX CHESS Replacement (ASX), Triparty Collateral Management (Banco de Espana/SWIFT), Market Claims (SMPG/SWIFT) 25 ISO_20022_LV_v 184

ISO 20022 – The Securities SEG (2/3) Covering instruments such as: Securities Covering actors such as: Equities Fixed income Funds Investment managers, distributors, transfer agents, fund administrators Market Data Providers Stock exchanges , ETC providers Service bureaux Broker / dealers Custodians Regulators Clearing houses, CCPs CSDs, ICSDs 26 ISO_20022_LV_v 184

ISO 20022 – The Securities SEG (3/3) Including business areas such as: Securities Issuance Account opening, standing orders, transaction and account information, advices & statements, queries & investigations Trade Initiation, pre-trade Trade, posttrade Securities Clearing & settlement Custody Collateral management Collateral, repos, securities lending & borrowing Income, corporate actions, market data, proxy voting 27 ISO_20022_LV_v 184

Looking at the advantages ISO 20022 brings over ISO 15022 ISO 20022: § 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 modelling of business processes and transactions § Uses XML or ASN. 1 as the syntax for the actual physical messages § Has a wider scope than ISO 15022, which is only for securities messages Syntax independent business modelling is key to the ISO 20022 standard ! 28 ISO_20022_LV_v 184

ISO 20022 – Derivatives Sub. SEG (1/3) § Members: § 8 countries: BR, CN, DE, DK, FR, GB, JP, US § 10 organisations: ACTUS, CFTC, Clearstream, DTCC, ECB, Euroclear, FPL, ISDA/Fp. ML, ISITC, SWIFT § Convenor: Karel Engelen, ISDA/Fp. ML; Vice-convenor: Joe Halberstadt, SWIFT; Secretary: Courtney Mc. Guinn, FPL § Approved: Financial instruments and transactions regulatory reporting – Trade Repository Reporting (ESMA) § Under evaluation: none 29 ISO_20022_LV_v 184

ISO 20022 – Derivatives Sub. SEG (2/3) Covering instruments such as: Listed Derivatives OTC Derivatives Covering actors such as: Investment managers, distributors, transfer agents, fund administrators Market Data Providers Broker / dealers Market Infrastructures Custodians Regulators CSDs, ICSDs Confirmation, Execution platforms Clearing houses, CCPs 30 ISO_20022_LV_v 184

ISO 20022 – Derivatives Sub. SEG (3/3) Including business areas such as: Initiation, pre-trade including RFQ and credit limit check, clearing eligibility, margin quote Trade, post-trade, including post-trade events such as novation, termination, increase, amendment, option events, and external events such as index and basket changes. Derivatives Clearing & settlement Collateral management Regulatory reporting including real -time and snapshot reporting 31 ISO_20022_LV_v 184

ISO 20022 – The FX SEG (1/3) § Members: § 8 countries: CA, CH, CN, FR, GB, NO, US, ZA § 3 organisations: FPL, ISITC, SWIFT § Convenor: Zaiye XU (CN); Vice-convenor: Howard Middleton (UK); Secretary: Joe Halberstadt (SWIFT) § Kick-off meeting: in September 2006 § Approved: Forex notifications (CLS), Post Trade Foreign Exchange Messages (CLS), FX Post-Trade Capture and FX Post-Trade Confirmation (CFETS) § Under evaluation: none § Next: none 32 ISO_20022_LV_v 184

ISO 20022 – The FX SEG (2/3) Covering instruments such as: Foreign e. Xchange Covering actors such as: Spot Swaps Forward Currency Options Money brokers ISO_20022_LV_v 184 Investment managers Hedge funds Trading portals, matching services providers Custodians Dealers CLS and CLS settlement members Industry associations (ISDA) Application providers 33

ISO 20022 – The FX SEG (3/3) Including business areas such as: Pre-trade: IOI, quotes, etc. Trade: order, execution, allocation, affirmation, etc. Post-trade: confirmation, matching, assignment, novation, etc. Foreign e. Xchange Notification of trades to third parties Trigger events, option exercises Clearing and Settlement, including netting and related reporting 34 ISO_20022_LV_v 184

ISO 20022 - The Trade Services SEG (1/3) § Members: § 10 countries: CA, CH, DE, DK, FR, IS, IT, JP, NL, US § 1 organisation: SWIFT § Convenor: Open Vice-convenor: Open Secretary: David Dobbing (SWIFT) § Kick-off meeting: in September 2006 § Approved: Invoice Financing Request (CBI Consortium), Trade Services Management (SWIFT), Demand Guarantees and Standby Letters of Credit (SWIFT), Factoring Services (ASF), Invoice Tax Report (FFI & Tieto) § Under evaluation: none § Next: none 35 ISO_20022_LV_v 184

ISO 20022 - The Trade Services SEG (2/3) Covering products… Trade Services …and services such as: Collection Reconciliation (A/R, A/P), remittance data Documentary credit Letter of credit Guarantee Open Account Trading e-Invoicing Purchase order, transport documents EBPP Invoice financing 36 ISO_20022_LV_v 184

ISO 20022 The Trade Services SEG (3/3) Including actors such as: Private and corporate customers (treasurers) Financial Institutions Trade Services Risk management entities Application providers Associations providing rules and master agreements (eg IFSA, ICC) Trade facilitators: chambers of commerce, insurance co, freight forwarders, carriers, customs, factoring co 37 ISO_20022_LV_v 184

ISO 20022 – The Cards & Related Retail Financial Services SEG (1/3) § Members: § 16 countries: AT, CA, CH, CN, DE, DK, FI, FR, GB, JP, KR, NL, SE, SG, US, ZA § 5 organisations: Mastercard, NACHA, nexo, SWIFT, VISA § Convenor: William Vanobberghen (FR); Vice-convenor: Ian Groves (GB); Secretary: Reinhard Herwig (DE) § Kick-off meeting: on 23 -24 October 2008 § Approved: CAPE – Acceptor to Acquirer and Terminal Management (nexo), ATM interface for transaction processing and ATM management (IFX Forum/nexo), Acquirer to Issuer Card Messages – version 1 (TC 68/SC 7/TG 1), Card Sale to POI ISO 20022 Protocol, Acquirer to Issuer Card Messages – version 2 (TC 68/SC 7/TG 1) § Under evaluation: None § Next: Payment Tokens Management Exchanges (nexo, TC 68/SC 7/TG 1) 38 ISO_20022_LV_v 184

ISO 20022 – The Cards & Related Retail Financial Services SEG (2/3) Covering instruments… Debit card Cards and Retail …and actors such as: Charge and credit card Card holder Prepaid card Acceptor (merchant, retailer) Card issuer Hard- and Software providers Acquirer Card scheme Intermediary agent 39 ISO_20022_LV_v 184

ISO 20022 – The Cards & Related Retail Financial Services SEG (3/3) Including business areas such as: Transactions between acquirers and card issuers ATM processes such as authorization, processing, ATM management and inventory ISO_20022_LV_v 184 Transactions between merchants and acquirers, and cardholders and issuers that support authorization, clearing, reversal, chargeback, dispute processing, etc. Similar messages transacted on internet or from mobiles or other personal devices POI messages for payments, administrativ e and device related services 40

ISO 20022 – Technical Support Group § Members: § 8 countries: BR, CA, CN, CH, DK, GB, JP, KR § 10 organisations: ACTUS, CFTC, DTCC, Euroclear, FPL, ISITC, NACHA, nexo, SWIFT, VISA § Convenor: Martin Walder (CH); Vice-convenor: Jason Polis; Secretary: Li Jie, SWIFT § Kick-off meeting: on 23 -24 October 2008 § Mission: help RMG, RA, SEGs and Submitting Organisations with technical matters 41 ISO_20022_LV_v 184

Continuing with today’s agenda… ISO 20022 Interoperability within the financial industry 42 ISO_20022_LV_v 184

Using ISO 20022 modelling to reach interoperability Date nt u Acco All institutions have their own sets of data objects r Orde r Date ISO standardizes common data objects… Orde Date …and groups them into ‘syntaxneutral’ message models, which. . . … can be ‘transformed’ in message formats in the desired syntax XML ASN. 1 ISO_20022_LV_v 184 Fp. ML FIX 43

ISO 20022 compliance at model level Repository ISO 20022 Dictionary Catalogue ISO 20022 message models Card payments Payments clearing & settlement physical message representation ISO 20022 ASN. 1 syntax ISO 20022 XML syntaxx 44 ISO_20022_LV_v 184

ISO 20022 compliance at model level Repository ISO 20022 Dictionary ISO 20022 compliant Catalogue ISO 20022 message models Card payments Payments clearing & settlement physical message representation other syntax ISO 20022 compliant using a domain specific syntax ISO 20022 compliant 45 ISO_20022_LV_v 184

“Investment Roadmap” for ISO, FIX, XBRL and Fp. ML syntaxes The Investment Roadmap is maintained by the Standards Coordination Group including the following organisations: Download the Investment Roadmap and related FAQ 46 ISO_20022_LV_v 184

Interoperability in the customerto-bank payment domain IF X format Proprietary format Bank A Bank B Customer A SWIFT MT 101 Bank C Let us look at a concrete example from payments area: a customer may need to adapt to the format of the banks… 47 ISO_20022_LV_v 184

Interoperability in the customer-to-bank payment domain Customer A IFX format Proprietary format Bank A Customer B SWIFT MT 101 Customer C …or banks may need to accept many formats… 48 ISO_20022_LV_v 184

Interoperability in the customer-tobank payment domain Proprietary TWIST ISO 20022 Core Payment Kernel model SWIFT MT OAGi IFX The reverse engineering produces a canonical ISO 20022 message model ISO_20022_LV_v 184 49

Interoperability in the customer-tobank payment domain IFX Core Payment Kernel MT MT 1 01 IS 101 IFX O 20 02 2 Core Payment Kernel Adopting ISO 20022 facilitates convergence and co-existence 50 ISO_20022_LV_v 184

www. iso 20022. org uestions A & nswers iso 20022 ra@iso 20022. org 51 ISO_20022_LV_v 184